Swimming against the tide?

Lost in the midst of headline-grabbing lines -- such as Angela Merkel's claudication on multiculturalism --, one of the most intriguing political declarations of the last few days, with potential implications for the whole EU, has been wildly overlooked by the international media.

Last week, Germany's Industry and Economy Secretary, Rainer Bruederle, echoing recent declarations by several other German politicians, said that it was time to substantially raise industrial salaries in Germany. According to Mr. Bruederle, German workers should reap the benefits the country's relatively fast drive away from recession, citing a 3.6 percent hike for the steel industry as a suitable benchmark. Thanks to its strong, export-led economy, Germany is exiting the downturn at a much higher speed than most European countries, at a 2.2 percent rate for the last quarter -- and rising. 

In the same week that the prestigious German magazine Der Spiegel ran an article on looming protectionism and trade wars, the words of Mr. Bruerdele -- a business-friendly liberal, no less -- seem to be, apparently, out of step with reality. It would hurt Germany's industries, leading to higher costs and loss of competitivity, right? Isn't that unfortunate that, in the midst of a strong, export-led recovery, a highly influential Government figure puts such pressure on German employers?

Let's stop for a moment and think about what's behind this affirmation and what these wage increases could really mean. First, German workers have largely held back on demands for pay rises over the past two years in an effort to protect jobs during the recession, even accepting reduced shifts -- in a very successful plan coordinated with the German Government. However, productivity levels have constantly been on the rise, and not only since the world financial crisis struck: German labour productivity has increased much faster than salaries for the past 10+ years, turning Germany from a country beleaguered by competitivity problems (in part due to high salaries) to an export powerhouse, known for its extremely reliable, well-crafted machinery and industrial products.

The German export model can not be compared to the Chinese: down in the Pearl river delta, entrepreneurs survive with extremely tight margins (sometimes, of just 2-3%), making any sudden shift in labour costs -- or even the looming strengthening of the yuan -- potentially disastrous. German export-oriented, family-run businesses and big industrial conglomerates (think Siemens or Volkswagen, among others) can withhold modest, controlled salary raises. Productivity costs would obviously rise, but that would not substantially dent profit margins. In fact, one can argue that the surplus cost could be passed on the final customers, as many German industrial products have no real rivals anywhere in the world, be it for their uniqueness and specialisation or for their extraordinary craftmanship, reliability and durability.

Therefore, generalized pay raises would not really hurt Germany's export capacity. However, they would effectively help offset trade imbalances by boosting internal consumption. Historically lacking, Germany's consumption share of the GDP has always been low by European standards, helping fuel gaping intereuropean trade imbalances. A mere 3% raise in salaries would surely mean that at least half this increase would go to internal consumption, thus helping revitalize the internal consumer market, which drives imports from the U.S., Asia and other EU countries. Therefore, although a modest move, it would not only be fair for German workers, who have been losing purchasing power for years and accepted to work for reduced hours when the crisis hit, but also towards Germany's neighbours, as the current stark trade imbalance within EU countries is hurting European economy as a whole -- by putting a brake or even halting recovery prospects in other economies which rely on the 82-million strong German internal market.

Although Bundesbank President Axel Weber -- a financial hawk who was also against a permanent European 'safety net' for troubled countries and who is currently pushing for an increase in European interest rates, although many eurozone economies are not yet out of the recession -- has warned against actively propping up domestic demand and fuelling inflationary pressures by encouraging higher wage deals, this is a move Germany could afford and should promptly do. As many in the U.S. are now realizing, perpetual trade imbalances are bad for the global economy. Germany is not China, and its trade balance won't revert overnight after some modest wage increases. However, as the saying goes, small changes can be powerful.

In the mood for love?

I recently found a very peculiar article on FP's website. It is called Bad Exes and it points out five former heads of state who, in the author's opinion, have devoted their post-spotlight time to mess around in an unhelpful manner. Although the inclusion of figures such as former Spanish Prime Minister José María Aznar is more than justified, I was shocked to see that the list is headed by Germany's former Chancellor, Gerhard Schröder.

Always an advocate of the European Union and relatively pro-Russia as a Chancellor, Schröder did not hesitate to publicly display his respect for his Russian friends and, of course, to accept their money: his dealings with Russian businessmen (read oligarchs) and authorities are well documented and have led him to the chair of the Gazprom's Nord Stream pipeline project

So, the criticism seems to be fair enough. Or isn't it? Of course, one can argue that Schröder might be into it just for the money. However, let's take a longer view: maybe the European Union should show more receptiveness towards Russia if it wants to regain its clout in global affairs.

The issue is clear: neither Russia nor the EU can keep ignoring each other in a globalized world, where power is rapidly shifting East. Russia needs to modernize and diversify its economy with Western technology and know-how, and the EU needs access to the energy sources and raw materials Russia possesses in abudance. However, the EU is obviously reluctant to having closer ties to Russia because of its undemocratic regime and constant violations of human rights: this would go against the very principles of the Union, at least in the short term... but what if we think mid- or long-term?

In the face of the global financial crisis and the return of gas and oil prices to normal, pre-bubble prices, Russia has made clear it badly needs the transfer of advanced technology to create a more modern society. Russian officials hope that this would drive the country away from its current dependence on energy exports.

If the country does indeed move forward towards the modernization path, it would obviously lead to more white collar jobs, not directly linked to the extraction and exportation of raw materials and energy resources. This would, in turn, create a bigger, more educated middle-class that would push for political opening and freedom of speech. In other words, we could see what we have seen in the past in Western societies: what Russia lacks today is an effective civil society, able to push for its civil rights and freedoms. Russian society is a highly polarized one, where almost all middle- and upper-class citizens owe their well-being to the state or a big state-sponsored or company. 

Thus, a technologically-boosted Russia could lead, in the mid term, to a growing respect of democratic values and human rights in this country -- which is precisely what Europe would like to see. And who is readier than the West to provide Russia with the technology it wants? The answer is clear: the U.S., Japan and, obviously, the EU countries. What we see here is, in short, a win-win situation: Russia modernizes and maybe ends up opening up freedom-wise, while advanced European companies get a boost to their exports with a new, big market.

Of course, as foreign investors claim, Russia suffers from rampant corruption, untrustworthy courts, stifling bureaucracy and poor protection for property rights. This should effectively and immediately be dealt with by the Russian government. However, the EU could substantially help via a very juicy incentive: the prompt establisment of a privileged partnership with Russia -- and, of course, also with the rest of the countries in Eastern Europe not yet part of the EU, including Ukraine and Belarus.

Now is also the right moment to act. Although Russia continues to develop its commercial and strategic relationship with China, it does so reluctantly. Russia is also aware of growing Chinese influence in the greater Asia, including its own underpopulated -- but extremely resource-rich -- region of Siberia and, of course, the Central Asian countries, long seen by Russia as its backyard. This explains, for instance, the recent sale of Russian armament to the Vietnamese army (underlining the continuation and intensification of a trend), which is looking to protect its interests in the face of Chinese expansionism in the East Sea. 

After a confidential report calling for a rapprochement to the West was leaked last May, it is undeniable that, under President Medvedev, Russia's foreign policy has clearly moved from ideology and invective towards pragmatism and profit. 

Therefore, the race is on: both China and the EU are worried about Russia's moves towards the other, and wish to have it by its side -- with Chinese top foreign policy experts such as Yang Jiemian openly vying for a closer relationship with Russia. China has its SOEs, which can pay hefty, above-market rates for energy resources and raw materials, but the EU has the technological edge, and what Russia really needs is to modernize its economy, not perpetuating its dependence on energy exports.

It's about time that both Russia and the EU do something to regain their lost relevance. They should just seriously consider acting together.

Radically inverted logic

Two Spanish aid workers who had been kidnapped in Mali by Al-Qaeda of the Islamic Maghreb members were freed earlier this week after more than 9 months in capture.

Immediately after some details about the negotiation with the kidnappers were released, French President Nicolas Sarkozy criticized the Spanish negotiators, as they seemingly paid a ransom and released an imprisoned terrorist, maybe the mastermind behind many more kidnappings, in exchange for the lives of those two people. Although the French Foreign Minister pressed personally for the liberation of four terrorists in 2009 to save the life of a French national, allegedly a spy, France chose a different path when confronted with a similar dilemma in 2010: Paris, probably pushed to do so by the Algerian secret services, sent elite army units to Mauritania to try to liberate a kidnapped French engineer, Michel Germaneau, who was ultimately killed by the islamists in retaliation for the six dead left after the combined Franco-Mauritanian raid.

Is Sarkozy right to criticize the Spanish negotiators? Have they been too soft? Will this have consequences, i.e. further kidnappings? Our Western mind tends to think so: nobody wants seeing people die, but we might be tempted to assume that accepting some of the conditions imposed by the kidnappers, including the release of a dangerous terrorist, might be counterproductive and make things even more dangerous for Westerners working or helping people in those countries. It could fuel further kidnappings, further unrest. We can also tend to think that those same Al-Qaeda men will have second thoughts about kidnapping or assaulting a French national, as they already saw how Paris answers to that. Of course, in the light of recent events, they might now be tempted to kidnap Spanish nationals and wait for a hefty ransom to come.

However, this is just how our Western logic operates: we should learn to see more than that. Sarkozy should go just one step further to see how things can turn against him quickly and easily. We are not talking about men in a conventional negotiation setting, where rational logic rules: we are talking about religious fanatics, brainwashed people who have next to nothing to lose. People ready and willing to die for their cause, their hate, expecting a better life on the other side. And this changes everything.

France's violent response may well mean that these islamists now hate, more than ever before, French nationals and everything smelling of French laicism (including the recent law banning Islamic face veils from public areas). Maybe they won't kidnap any Frenchmen because they know they will not get much of a ransom, but rather plan bombings to kill people or hurt French interests, a beloved Al-Qaeda tactic which coud be much more deadly. 

Maybe they will try to kidnap Spanish citizens again, who knows. However, their 'spiritual' leaders will not have the same leverage again, they will not be able to justify their actions against Spaniards with hate, this hate that fuels Al-Qaeda terrorism. Spain came up as more tolerant country, willing to negotiate and surrender a dangerous prisoner, caring about the lives of the two kidnapped human beings at all times, even knowing the political and diplomatic consequences such moves could have.

We could even link this episode with the more recent events in Afghanistan, where two Spanish soldiers and their interpreter were killed by an Afghan driver. Shouldn't it be interpreted in the light of what Sarkozy said? Doesn't that attest that Spain is seen as a weaker country among Islamic radicals? Not necessarily: this attack is just an extreme demonstration of dissent in a war-like context, of hate against someone seen as an invader in your home country. The fact that the victims were Spanish is secondary: what matters is that they were Westerners in Afghanistan, and this alone creates resent among a portion of the Afghan population. The same resent French retaliation can cause among Maghrebi islamists. And we see the consequences resent can have.

Western leaders should learn that dealing with Al-Qaeda is not like dealing with a traditional hostile foe. Rational logic is not what fuels its members: hate and fanaticism do. And even though there are lots of examples of evil states and leaders, all those people have much to lose: many privileges, many riches, many valued lives (even if just the ones of those on top) that Western nations use as leverage in negotiations or retaliations. Not with Al-Qaeda. Just think about their iconic leader, Osama Bin Laden: if his actions were purely rational in a Western classical way, wouldn't he rather be living in a big mansion, filled with concubines, in Saudi Arabia?

Rational logic does not match well with fanaticism, and Western leaders and diplomats are just starting to grasp it, even if some seem to be readier than others.

The KPA: An army in disarray?

One more incident involving the North Korean military has added extra confusion to the already obscure developments in the socialist country. China’s official news agency reported on Wednesday that a fighter jet, probably coming from North Korea, had crashed in the northeast of the country. Pictures of the wrecked plane seem to confirm its procedence, and speculation abounds that the pilot was a defector trying to reach Russia, as China has a deal in place with Pyongyang to repatriate all Korean defectors.

At first sight, such incident looks like the result of the individual actions of a disgruntled air force pilot who risked and lost his life to abandon his crumbling nation. However, such a blunt act, coupled with the recent violent actions carried out by the Korean People's Army (KPA), can raise several questions about what might be happening inside the world’s fourth largest army.

One such doubts would be if the sinking of the Cheonan, a South Korean navy corvette, last March, was orchestrated from above or not. In spite of several conspiracy theories and the vociferous claims of innocence from Pyongyang, it seems clear that a North Korean torpedo shattered the boat, killing 46 sailors. However, it is still unclear who decided the attack should be perpetrated. Assuming that the top brass of the North Korean regime ordered the sinking of the Cheonan, perhaps to bolster their image among the populace, one has to wonder why they haven't been crowing about it in public instead of issuing denials. In fact, the only (unproved) hint at claiming veiled responsibility for the sinking can be found in an (allegedly) recently published propaganda poster depicting a small navy ship being smashed by a North Korean fist (see image and related link).
 

There is a widespread assumption that the mastermind behind the attack was the younger Kim, the mysterious youngster soon to be named successor to the Dear Leader. Such defiant and violent acts are not unheard of in the North Korean hereditary regime: while preparing to succeed his own father, Kim Jong-il orchestrated two bloody attacks against South Korean interests. The first notorious incident was the 1983 Burma Bombing, in which 4 South Korean ministers and 13 top officials were killed when a bomb, aimed at then-South Korean President Chun Doo-hwan, exploded in Rangoo. And later came the 1987 bombing of the Korean Air Flight 858, which killed all 115 on board.

While Kim Jong-un's destructive role makes historical sense, and given the lack of information and knowledge about the real internal situation in the Hermit Kingdom, we can not rule out that the army might be in disarray, uncontrolled and unhappy about its role or the political future of the country. Although prestigious analysts such as A. Lankov sustain that 'he will be an obedient puppet in the hands of the people who lobbied for him', the recent disastrous currency reform, the reported reappearance of widespread hunger and the recent political moves to pave the way for the succession might have rattled some in the military.

China is not amused at this last incident. For an up-and-coming power that craves stability both home and abroad, increased turmoil in its own backyard is not welcome at all. Beijing will probably take this issue very seriously, demanding assurances that the army of the nuclear-armed regime is under control. However, it is also possible that Kim Jong-il, always an extremely shrewd negotiator, takes this opportunity to plead for even more Chinese aid. Paradigmatic experts in negotiating on the edge, the North Koreans might even have orchestrated this chaotic defection attempt --aiming at combining it with another, lesser known bargaining chip they keep up their sleeve--, in order to obtain further concessions in exchange for stability pledges.

Among all this mess of disinformation and theories, we at least know one thing for sure: North Korean minds are so complicated that no theory can be dismissed.

Pakistan’s image problem

Day after day, we are hit by ever more somber news on Pakistan. If just a month ago it was a bunch of leaked documents on the Afghan war, which clearly demonstrated the role of Pakistan’s army and secret services in protecting and helping Al-Qaeda and Taliban fighters, now it is a major natural disaster.

After the devastating floods that have already caused more than a thousand deaths and uncountable human suffering, now the UN is warning about a wave of epidemic diseases that could skyrocket the number of casualties, blaming the international community of being too slow and not committed enough to helping the devastated nation. UN Secretary General Ban Ki-moon just visited Pakistan, where local authorities claim 20 million have made been homeless by the floods, 6 million of them being at risk of starving or exposed to contaminated water. UN experts have also warned that 3,5 million children are among the affected. At the same time, the American press is warning that the floods can be an opportunity for the Taliban to solidify their grip on the region, thus hindering US efforts in Afghanistan and further destabilizing the troublesome AfPak conundrum.

While the claims made by the UN and are hard to rebate, we should stop for a minute to think why things are going this way. Of course, a key reason is the lack of total media spotlight that former humanitarian crises have enjoyed. Although information about floods and deaths in Pakistan has been constant –and the stakes are being raised right now, with the sickening numbers of affected people–, it has shared the spotlight with similar natural disasters in India and China (and even Central Europe), and also with the raging wildfires in Russia.  Moreover, international public opinion is only truly shaken when casualties are in the high thousands: floods or fires where “only” hundreds die are seen as second-rate tragedies, obviously not taking into account that the ensuing destruction is far worse than the most immediate and impactful effects.

However, there’s a second reason that explains the lack of international interest in helping out: the perceived futility of and distrust towards the Pakistani army and government. Indeed, Pakistan has a deep problem of bad reputation and a startling lack of true allies in the international theater, starting with its more immediate neighbors and top regional powers, India and China. While it is obvious that India won’t rush to help its archrival –specially since they are also facing serious floods in the disputed Kashmir area–, China is also uninterested in helping a country that it perceives as unreliable and unstable –something that really worries the Chinese, who crave stability and preservation of the status quo, both home and abroad–, one that poses a threat to the Chinese grand view of a pan-Asian sphere of prosperity under Beijing's tutelage. Enter China’s own floods, affecting the central provinces of Henan and Sichuan, and you get the full picture.

What about the US, the strongest ally of the Pakistani government, which offers aid to the tune of $1.5 billion a year –not including military cooperation– to the troubled nation? Here’s what: although the US’ has been the largest humanitarian response from any single country, it has only meant an extra $10 million and a bunch of rescue personnel and Chinook helicopters to boot. As a recent Examiner header said, what’s $10 million more between friends? Well, the answer is clear: maybe the US is not such a good friend of Pakistan, at least not for all that matters.

Once again, it is clear that the US is handing massive amounts of aid to the Pakistani authorities in order to ensure the nuclear-armed regime will not descend into chaos and will cooperate in the struggle against Al-Qaeda and the Taliban. Although progress in both respects can be labeled of moderate at best, the US has strong interests in preserving stability in Pakistan, although it sees the Pakistani ruling and military elite with suspicion and even despair. Of course, now the US is rushing to mollify its image: in a classic public diplomacy move, the US has pledged further aid in order to avoid fueling even further disapproval among Pakistanis. However, although the US image problem in Pakistan is deeply troubling, it looks like Pakistan’s own image problems might be far worse.

A further example is provided by the next in line of helping hands: the EU, a confederation of states whose statutes, the Lisbon Treaty, clearly specify that it will actively engage in humanitarian causes whenever needed. So where’s the European help? Nowhere to be seen. Too busy with internal economic problems, and too unwilling to get further muddled in the AfPak swamp, the EU has clearly ceded all initiative in the area to the regional powers and the US. In other words, don't count on Europe, either.

Finally, we can’t help but thinking about fellow Muslim states, which could be seen as natural allies for Pakistan. Unfortunately, they are not helping, either. The powerful and resource-rich Gulf States see Pakistan, a fellow Sunny country, as a threat to regional stability and a sponsor of radical, violent islamism, which they strongly condemn (of course, also to please its American and Chinese allies/customers). What about Iran, Egypt or Turkey? Same answer: these states, chiefly Iran and Turkey, sponsor themselves as leaders of the Muslim world, as trustful power poles that should pave the way towards greater regional development and cooperation. In this context, Pakistan is once again seen as a nuclear-armed focus of instability, a deeply unreliable regional power that sponsors disruptive forces in Afghanistan, preventing this greater pan-Muslim goal.

While there is no doubt that increased media focus and public diplomacy goals will translate into a higher level of international commitment to help Pakistan, the horrible image its government and military leaders enjoy throughout the world has turned against its own citizens, who have been literally and unfairly abandoned to their fate in the midst of a serious natural disaster. As the saying goes, humans are the only animals able to trip over the same stone twice: Pakistan's leaders should be more clever than that, learning from their public diplomacy mistakes in order to avoid this isolation to happen again.