The economic impact of “brain gain” has and will continue to be profound, but the political and social implications are still to be determined.  Chinese citizens educated abroad have had significant exposure to Western liberal ideas and could serve as a catalyst for political change in China. As more Chinese return from their education abroad and gain influence in business and politics, they could lead the charge for democratic change.  The prospects for change, however, are ultimately determined by the motives of those who seek to study and work away from China.

The Impact of Returnees

In his recent book Borderless Economics, Robert Guest argues that young Chinese college students who study at American universities eagerly absorb democratic ideals alongside technical training. According to Guest, as returnees assume leadership positions in Chinese government and business, they will use their influence to push for democratic change. Recent developments lend support to this argument. Cheng Li, a fellow at the Brookings Institution, contends that returnees have had a huge impact on Chinese higher education. This is particularly true of think tanks that advise the government.

At the same time, foreign returnees are gaining influence in the Communist Party. Li estimates that they will make up 15 to 17 percent of the Central Committee next year, up from six percent in 2002.  Vivek Wadhwa, a research fellow at Stanford University, told the HPR that China’s real strength lies in this rising generation of leaders, “They don’t hesitate to think outside the box, to take risks, or to have ambition,” he says. “Unlike their parents, this new generation can innovate.”

Their Limits

It is not clear, however, that foreign returnees will use their growing influence to promote democratization.  Andrew Scott Conning, a researcher at Harvard’s Graduate School of Education, tells the HPR that Chinese students who choose to study abroad “are less likely than those who stay home to end up working in the public sector.”  He admits that “although government agencies and the Communist Party do attempt to draw talent from among returnees,” such positions actually represent a small share of China’s returnees.

The extent to which sea turtles bring democratic values to Chinese education may also be exaggerated.  According to Conning, the influence of foreign returnees on education is strongest at the university level, where their qualifications are in high demand.  By contrast, their influence fails to reach the majority of Chinese citizens who do not attend higher education because they serve a minimal role in primary and secondary education.

Returnees are far more likely than their Chinese-educated counterparts to find job opportunities at high-paying international firms operating in China, Richard Freeman, a professor of economics at Harvard University who studies labor markets, told the HPR that economic opportunity drives most returnees’ decision to return home. In fact, most Chinese students choose to study at American universities simply to increase their career opportunities, without a mind to bring liberal democracy home with them.

Who are the Sea Turtles?

Chinese families have learned that a diploma from the U.S. can give their child a competitive edge in the job market.  Moreover, studying abroad in the U.S. is expensive, so most Chinese families will not invest in an overseas education unless they feel that it will pay off financially in the long term.  As Jiang Xueqin, a director at Peking University High School, stated in a recent article in The Diplomat, Chinese students are seeking American academic credentials “primarily to advance their careers, with little interest in learning more about the West.”

Because most Chinese students do not come to the U.S. for political reasons, it is wrong to assume that they all return home with a more liberal outlook.  Xueqin explains that most sea turtles come from wealthy and powerful families. Accordingly, some of China’s strongest anti-Western critics and nationalists have emerged from this group of returnees. Overall, despite the exposure to democratic norms and values, many of the sea turtles may have no desire to significantly speed up democratization in China any time soon.

Iraq’s parliamentary elections in March prompted a 62 percent voter turnout, with 12 million Iraqis voting for the next leaders of their fledgling democracy. For a country that has recently been dominated by sectarian conflict, the sight of millions of Iraqis going to the polls in spite of insurgent efforts is a promising sign. Iraq’s chance for unification under a stable government seems more feasible than ever because of its citizens’ calls for change and the U.S. timetable for withdrawal.

While the candidates of the five major coalitions represented significant political, religious, and ethnic differences, such a vast array of electoral choice points to a democratizing trend, an improvement over the one-party rule of Saddam Hussein’s Baath party. The fact that no candidate or party received a majority indicates that Iraq is on the path to becoming a vibrant democracy, or at least it will be if the parties are able to come together this summer to form a government. And if that happens, the Iraqi democracy’s success story could ultimately threaten the legitimacy of authoritarian regimes in the region.

A Competitive Race

Iraqis have widely embraced democracy over the last five years, showing their preference for unified nationalism over the sectarianism that the 2005 elections embodied. The 2010 parliamentary elections were the most contested in Iraqi history, as hundreds of parties fielded more than 6,000 candidates to compete for 325 seats. While there were difficulties in the process, including the barring of some Sunni candidates (a decision that was ultimately reversed), Western observers and Iraqi officials agree that the election results were legitimate and indicative of the country’s progress.

In an interview with the HPR, Ahmed Ali, an analyst at the Washington Institute for Near East Policy, said that “the Independent High Electoral Commission, which executed the elections, demonstrated an increased and developed organizational capacity.” Compared to the 2005 elections, in which a closed-list party system was used, the 2010 elections were governed by “an open-list system, which gave the voters an opportunity to elect their representatives,” Ali said.

In addition, prominent candidates, such as former Prime Minister Ayad Allawi and current Prime Minister Nuri Kamal al-Maliki, moved their campaigns away from sectarian undertones and towards secular positions on national security, resource allocation, and  infrastructure. An open discussion about the need for unity and electoral participation indicates that Iraqis believe the democratic process is worth their effort and sacrifice.

A Long Road Ahead

With a narrow plurality voting for Allawi and his Shiite Iraqiya coalition, the responsibility falls on him to forge a coalition government. Iraqiya received 91 seats and al-Maliki’s State of Law coalition came in a close second, gaining 89 seats. The Iraqi National Alliance, dominated by Shiite parties and led by the anti-American cleric Muqtada al-Sadr, got 70 seats, and the Kurdistan alliance took 43. No party won the 163 seats needed to independently create a government.

Iraq’s leaders must now “bring the country back together and form a government that is capable of governing and striking compromises,” Kenneth Pollack, a foreign policy fellow at the Brookings Institution, told the HPR. But some fear that recent gains could be squandered by a constitutional framework that requires long deadlines and a lot of bureaucratic red tape before governments can be formed. It is a complicated process in which authority is transferred slowly, and there are multiple opportunities for the opposition to contest decisions.

Pollack explained, “The longer political parties bicker and negotiate, the more opportunities for militias, thugs, and purveyors of violence—all of which have been sidelined by the American security effort—to break the political wrangling on their own.” Roger Owen, a Harvard history professor, said that “the danger will come if certain groups of people feel they are excluded from the government formation.” Of particular concern are the Kurds, the most autonomous group within the Iraqi population. In the absence of compromises with the Kurds, violence could erupt again and derail the formation of a government.

American Withdrawal

Since sectarian conflict continues to divide political parties and citizens alike, the government formation process will last well into the summer of 2010, which challenges the Obama administration’s plan to withdraw the majority of combat troops by August 2010. Whether Iraq is capable of democratic sovereignty once American military troops are partially withdrawn is yet to be determined, but Ali said that the Iraqis “have demonstrated they want to be in the lead politically and militarily.”

Pollack acknowledged that “most Iraqis would like to see Americans out as quickly as possible, but are also terrified because they recognize all the fragilities and potential explosiveness of the political situation.” Their fear is due in part to the fact that the United States provides much more than just military assistance. Myriam Benraad, an analyst at the Washington Institute for Near East Policy, told the HPR that “people do not really realize what happens behind-the-scenes, such as the Americans supporting economic reform, rebuilding institutions, training magistrates and judges, and establishing the rule of law.” Still, the bulk of American troops are scheduled to leave in August. Whether the Iraqis form a government or not, U.S. troops will only be able to play a minor role in helping them recover from any deadlock or setback.

Keeping Up with the Iraqis

Another concern (or perhaps hope) is that Iraq’s neighbors, like Syria, Saudi Arabia, and Iran, may be destabilized by a flourishing Iraqi democracy. Benraad suggested that “a more strongly democratic Iraq poses a threat to these authoritarian regimes because the progress of democracy weakens their legitimacy and interests.” For Iran in particular, Pollack noted that “as Iraq moves towards stability, democracy, and more prosperity, Iran will seem to be backwards as a police state, causing disgruntlement among Iranians.” Though it will take many years for Iraq to solidify its democratic political system, its progress will not go unnoticed by the region’s dictators.

Democratizing trends also promote economic reconstruction and efficient resource allocation. Owen said that Iraq’s oil production will benefit greatly from increased political stability. According to Pollack, “even most conservative estimates say Iraq can double their oil output in less than five years, going from two million barrels to four million barrels per day.” This growth will have a great impact on the global oil market and will only strengthen Iraq’s economy and give the nascent democracy some valuable revenue.

There is much at stake politically and economically in the Iraqi government’s formation process. It will be a messy, drawn-out process of dialogue, compromise, and, most likely and unfortunately, some continued violence. While the timeframe is painfully protracted, its very existence is a testament to the progress that Iraq has made and a promising indicator that Iraqis are moving towards a more stable and permanent democratic government. And it is no longer completely in vain to hope that Iraq might become a model and catalyst for change in the Middle East.

Victoria Hargis ’11 is a Staff Writer

Photo Credit: flickr (DVIDSHUB)

Since President Felipe Calderon took office in 2006 promising to end Mexico’s illicit drug trade, more than 18,000 people have been killed, and the death toll rises every month. In Ciudad Juarez, a border city and a primary smuggling point to the United States, 2,600 people were killed last year, making it a more dangerous city than Baghdad. The ferocity of violence in Juarez underscores the urgent need to shift the Calderon government’s strategy from one of drug-cartel decapitation, to one of strengthening law enforcement and building civil society with the aim of cutting off local support for cartels.

Drugs, Violence, and Fear

The Calderon government faces the daunting task of eliminating one of the most lucrative and entrenched drug networks in the world. The profitability of the Mexican drug trade is a result of both the insatiable American demand for illegal drugs and the cheap cost of producing marijuana and heroin in Mexico. And, though cocaine is not produced in Mexico, Viridiana Rios, a doctoral fellow in the Inequality and Social Justice Program at Harvard, explained, “As Colombian drug traffickers fled from law enforcement in Colombia, they reestablished themselves in Mexico.” Today, 90 percent of the cocaine entering the U.S. market is shipped through Mexico.

Calderon has relied heavily on the military to supplement police forces, given the military’s reputation for low levels of corruption. Since 2006, over 45,000 soldiers have been deployed into Mexico’s streets, but violence continues to increase. The Calderon government has used the troops to pursue a strategy of decapitation, targeting high-value cartel leaders. But this strategy seems to have failed. Vanda Felbab-Brown, a fellow at the Brookings Institution, told the HPR that “the current violence is partly a backlash to the decapitation policy, which actually generated new turf wars for smuggling routes of recently ‘decapitated’ rivals.”

Even though most of the violence is between drug traffickers and law enforcement officers, civilians are all too frequently killed. In March, an American consulate worker and her husband were murdered in Juarez. “People are scared to death,” said Rios. “By seven o’clock in the evening the city shuts down and everyone stays indoors.” And the economy of Juarez has been devastated because of plummeting rates of American tourism.

Calderon’s New Strategy

The perception of a failed war on drugs has sapped Mexicans’ patience for Calderon’s efforts. There are serious doubts that the Mexican government has the capacity to defeat the cartels. According to Steven Shavell, professor of law and economics at Harvard Law School, “the drug business is so lucrative that there is no way that the Mexican government can raise the level of deterrence high enough to stop the drug trade.” Shavell predicted that unless the government can seriously retool its strategy to move away from simple deterrence, “the Mexican government will likely make deals with the drug kingpins.”

But there is some hope in the revised Mexican drug policy that Calderon recently introduced. It looks holistically at entire trafficking networks, not just their leaders. New emphasis is being placed on properly training and vetting investigative police teams rather than relying solely on military forces. However, U.S. assistance is vital to execute the new strategy. Felbab-Brown explained, “Such a policy requires law-enforcement and intelligence apparatuses that have a robust investigative capacity and are reasonably free of corruption. While Mexico currently has neither, American assistance can help.”

Trafficking in Expertise

The United States has already provided Mexico with $700 million since 2008 through the Merida Initiative, a joint-security cooperative agreement. In a major policy reversal, the Obama administration has encouraged the Mexican government to use the Merida funds for institution-building rather than for arming the military. To that end, Calderon has announced a new set of social programs to strengthen civil society in Juarez by bringing jobs and education to marginalized communities.

But time is running out; it seems unlikely that the Mexican people will much longer tolerate a government that cannot provide basic security. Unless Calderon can implement his new strategy quickly and commit to it seriously for the next few years, he may have to cut deals with the cartels. That is, he might have to accept the Mexican drug trade in exchange for fewer deaths in the streets.

Taylor Lane ’11 and Mason Pesek ’12 are Staff Writers.

Photo Credit: Flickr (tiffa130)

In Will’s article, William Gale, senior fellow at the Brookings Institution and co-director of the Tax Policy Center, opines that the anti-tax movement, in which he includes Americans for Tax Reform and the various Tea Parties, “just hate all taxes,” and will therefore oppose any tax increase. But it’s not entirely that simple. I don’t presume to speak for ATR or the Tea Parties per se, but fiscal conservatives generally recognize what Chief Justice John Marshall observed in McCulloch v. Maryland, that “The power to tax involves the power to destroy.” Government should not use the tax code to pick winners and losers, so to speak, since it can effectively outlaw activities through excessive taxation, hindering a given industry to the point that it can no longer operate profitably. In the next section of the article, Will notes that the gas tax “raises a thorny issue of fairness,” since some citizens drive more than others; this fairness question in fact applies to all excise taxes, and places government in the position of arbitrarily redistributing income from one group of citizens to another in the name of what it considers the general welfare. Citizens and politicians, moreover, frequently disagree as to just what constitutes the “general welfare,” and therefore differ as to which industries and activities should be promoted and which discouraged. Given these facts, it is better in most cases to allow the market to answer this question, and to confine federal tax policy to either a flat income tax or a consumption tax.

Carbon consumption is a very rare instance in which a corrective tax is warranted, given the broad bipartisan consensus that America must wean itself from dependence on oil: even citizens who reject the notion—or the urgency—of climate change would generally agree on the need to curb the massive wealth transfer to rogue oil-producing countries. Will is correct in his implication that what he calls the “anti-tax establishment” thinks taxes in general are too high and would oppose any tax increase. What he appears to overlook is that it is not necessary to raise the overall tax rate in order to discourage gas consumption through the tax code. He briefly mentions that rebates might be used to “correct the regressive elements of the tax,” but why not simply return the entirety of the gas tax revenue through a rebate? Better yet, why not use the extra revenue from the gas tax increase as a means to cut the income tax rate to both encourage energy conservation and alternatives and spur economic growth at the same time? I’ll confess I don’t know how the “anti-tax establishment” would respond to such a proposal, but I find it hard to believe that a revenue-neutral proposal that reduces our dependence on sponsors of terrorism and involves an income tax rate cut would elicit significant opposition from the Right.

Parenthetically, a gas tax is not the only way to reduce oil consumption, and probably not the best. As I have noted in the Harvard Salient (though I am by no means the first to do so), a revenue-neutral carbon tax would be more comprehensive, and probably cheaper to collect. I have also explained in the HPR that urban traffic congestion could be substantially reduced through congestion pricing, which has been used with great success abroad.

All that said, Will is absolutely right that government should take action to reduce gas consumption, that the tax code is probably the best way to do this, and that the American political environment makes this extraordinarily difficult. But it’s not fair to blame the “anti-tax establishment” as an obstacle to reform when what he is talking about could easily be achieved without a net tax increase.

Photo Credit: Wikipedia.

In 1993, President Bill Clinton pushed the last bill through Congress to increase the gas tax. Even this, however, was watered-down reform; the tax was not indexed to inflation and increased the price of gas by only 4.3 cents per gallon. The modesty of the increase should not be surprising: since 1993, no prominent American politician has seriously supported a major increase in the gas tax. Virtually everyone agrees that supporting the gas tax is political suicide. As Michael Cragg, an energy consultant at The Brattle Group, told the HPR, “It’s hard to see in this political environment how you’d get a gas tax passed.”

A similar consensus exists among economists, but on a different issue. According to a study in the Journal of Economic Literature, the vast majority of economists support a gas tax in order to make the private cost of driving a car reflect its actual social costs: global warming, air pollution, traffic congestion, and highway maintenance. Economists from across the political spectrum—Freakonomics author Steven Levitt, Nobel laureate and New York Times columnist Paul Krugman, and even the chairman of George W. Bush’s Council of Economic Advisors, N. Gregory Mankiw—have come out in support of raising the gas tax.

How can a policy make so much economic sense and garner so little political support? Significant obstacles, including the anti-tax movement, vested interests in low energy prices, regional differences, and America’s short election cycle, have historically made the gas tax unpopular and unfeasible. Our energy future and climate security depend on either tweaking the tax to make it more politically palatable, or exploring creative alternatives.

The Anti-Tax Establishment

Perhaps the most fundamental reason why a higher gas tax is so controversial is because it hits everybody, and hits them in a very public way. William Gale, senior fellow at the Brookings Institution and co-director of the Tax Policy Center, told the HPR that the anti-tax movement “will seize on every tax,” and the gas tax is an easy target. Represented by vocal advocacy groups such as Americans for Tax Reform and the various Tea Parties, the anti-tax movement “does not make a distinction between distortionary and distortionary-correcting taxes,” Gale said.

“They just hate all taxes,” he continued, “and every attempt at an increase in taxes becomes an opportunity for [their] political gain.”

Looking closer at the particulars of the gas tax raises an equally problematic obstacle: the culture of low energy prices. According to Henry Lee, director of the Environment and Natural Resources Program at Harvard’s Belfer Center for Science and International Affairs, America’s energy policy has been governed by a single goal for the last 40 years. “Americans for almost two generations have lived under the idea of cheap energy,” he explained, making it almost impossible to pass laws involving price increases. At this point, such laws could seem almost un-American.

Democratic Divisions

The gas tax also raises a thorny question of fairness. Rural inhabitants, who drive farther and more often than do urban residents, would face steeper costs if the federal gas tax went up. Politicians that represent rural districts are simply responding to their constituents’ concerns by opposing the gas tax.

Gale identified this “urban-rural divide” as one of the two most salient obstacles to the gas tax, in addition to the anti-tax movement. Recognizing these regional disparities raises questions about institutional problems in American democracy. To say, as many do, that lack of progress on the gas tax is part of a Big Oil conspiracy ignores the ways in which representative democracy can often forestall consensus.

America’s short, two-year election cycle is a major barrier to passing a higher gas tax. Politicians tend to ignore proposals that involve an immediate, perceivable cost and provide less tangible, long-term benefits. Thomas Sterner, former president of the European Association of Environmental and Resource Economists, told the HPR that this is the “big problem” of gas tax politics. In countries with short electoral cycles of two to four years, attempts to increase the gas tax “will only cause protests,” Sterner said. It can be very difficult to promote farsighted, technocratic solutions in a political environment defined by short-term gratification.

Tweaking the Gas Tax

Recognizing that political barriers will make increasing the gas tax difficult, policymakers need to start thinking outside the box. One possibility, Sterner proposed, is the “fuel price escalator,” raising the tax gradually over the course of many years. Sterner said that this is “the only workable model.”

By making the price increases less immediate, the fuel price escalator resolves some of the difficulty posed by an electoral system focused on short-term gain. This explains, in part, how the United Kingdom under Margaret Thatcher was able to move from a relatively low gas tax to one that charges over 300 percent of the retail price, the highest in Europe.

Efficient use of revenue from the gas tax, Sterner said, is also important. The careful use of rebates can correct the regressive elements of the tax and can also make the increase in fuel prices more palatable to rural residents. Furthermore, the gas tax is essential for deficit reduction. “It’s becoming abundantly evident that we need the money,” Gale said.

The current gas tax can no longer keep up with escalating road and highway spending; this year’s highway appropriations were made possible only by siphoning funds from the general budget, which, according to Lee, has never been done before. Lee noted, “You’re going to have to have a change in the system in the next five years,” because there is “no way” Congress can continue propping up the transportation budget with general funds.

A final component of a revised gas tax might be a price floor, which would keep the price of gas relatively stable by taxing the difference if the price dipped below a certain mark. This would create a predictable environment for long-term investment in new-energy technologies that hold the key to a low-carbon economy. As Lee explained, “[Oil price] volatility gets people to under-invest.” By giving investors a stable price they can use to gauge the cost-effectiveness of future energy sources, a price floor could contribute to innovation.

The disconnect between good policy and good politics is one of the most frustrating dilemmas of American democracy. Absent substantive change in the near future, the United States risks heightened fuel price volatility, decreased economic competitiveness, and the negative effects of climate change.

Policymakers will need to search for creative solutions that are both true to the spirit of economic efficiency and more palatable to constituents focused on short-term interests. If they are able to do this with the gas tax, they might learn lessons that can be applied in other difficult and thorny areas of public policy, like immigration and entitlement reform.

Will Rafey ‘13 is a Staff Writer.

Infographic: Neil Patel

Photo Credit: Flickr (Indy Charlie)

In the 2002 Kenyan presidential campaign, Mwai Kibaki promised his countrymen an end to the corruption that had defined Kenyan leadership for decades. The messageresonated with voters and earned Kibaki an astonishing 62% of the vote. But after eight years, corruption in Kibaki’s Kenya seems only to have worsened.

As Maina Kiai, former head of the Kenyan National Human Rights Commission, told the HPR, “It is now a free-for-all, no accountability.” Kenya’s experience with corruption is not unique; indeed, the problem of African corruption has become a cliché. Of course, it would be wrong to sweep too broadly with generalizations. As Daniel Kaufmann, an anticorruption expert with the Brookings Institution, told the HPR, “there are 53 countries in Africa, and the extent of corruption and the quality of governance varies greatly.”

Nonetheless, Kenya’s experience offers insight into the predominant causes of African corruption: excessive tribalism, as well as what Kiai calls a “personalization” of public goods and public services. These problems are home-grown and must be home-solved. Western nations can assist the struggle through smarter direction of foreign aid and innovative new forms of assistance. But to truly reduce corruption, Africans, and Kenyans in particular, will need to confront the salience of ethnicity in politics, and reshape civil society from the ground up, emphasizing political education and empowerment.

Tribal ism and Sources of Corruption

In Kenya, tribalism creates and defines governmental corruption. Michaela Wrong, author of It’s Our Turn to Eat: The Story of a Kenyan Whistle-Blower, told the HPR that corruption in Kenya, as in other African nations, “takes a shape which is extremely ethnic.” Politicians routinely operate as ethnic patrons, doling out favors and benefits to members of their own ethnic communities. But this behavior does not strike leaders or their constituents as improper.

According to Wrong, “they only mind about corruption when they’re excluded from it. It’s only bad as long as it doesn’t benefit your own community.” Chantal Uwimana, the regional director for Africa and the Middle East at Transparency International, echoed Wrong. She told the HPR that in many African nations, “people think that corruption is a way of life,” rather than a harmful process to which they all contribute. Few individual actors perceive the broader consequences of a political system based on patronage.

Ethnic politics in Kenya thus consists of a reciprocal relationship between politicians and voters, which makes the problem extremely difficult to remedy. “In a sense,” said Kiai, “the leadership question in this country is a chicken and egg story.” Ethnicity pervades all aspects of politics, including “the psychology of elections.” An  aspiring leader can gain no political traction, and negotiate no political deals, without gaining local support, which inevitably entails appealing to his ethnic community. Voters, in turn, come to expect and solicit bribes from their candidates. As Harvard political scientist Robert Bates explained, “The way the political game is played makes it almost impossible not to have politics that we would interpret as being ethnically driven.”

The Impact of International Aid

Some commentators, notably the Zambian economist Dambisa Moyo, argue that international aid may actually be fomenting corruption throughout Africa because of these ethnically-based motivations. According to Moyo, aid money makes African politics a high-stakes playing field and thus contributes to the corruption it seeks to eliminate. The structure of foreign aid may even exacerbate the problem if it diminishes a government’s accountability to and reliance on the people.

Still, if all that is true, international aid only aggravates the problems already inherent in the patronage system of politics. Kiai questioned the existence of any direct causal link between aid and corruption. “What [aid] has done,” Kiai said, “is freed up taxpayer resources for the personalization by public officials.” Wrong, too, emphasized that while “aid itself may not be stolen,” the simple fact that more money is coming into the government’s coffers “does make it possible for the government to steal elsewhere with impunity.” Problems of accountability arise not because of aid per se but because of where aid frequently goes. “The waste,” Kaufmann said, “can be dire among those official donor agencies that channel the bulk of their assistance through the central government.”

If international aid does not inherently cause corruption, the international community can indeed help the anti-corruption cause, both by giving more responsibly and by refusing to cooperate with corrupt leaders. Instead of channeling aid through governments, anticorruption organizations such as Transparency International advocate donations through citizens or local groups. Assistance can come in non-monetary forms.

Kiai praised one international effort to recognize honest officials and said that “the international community [should] continue white-listing, rather than black-listing, these people.” Kenyans are well attuned to their leaders’ international reputations, and when a leader is forbidden entry to the United Kingdom or the United States, domestic condemnation inevitably follows.

Solutions from Below

Ultimately, the Kenyan experience shows that government-led efforts are most successful in curtailing corruption when they fundamentally change the way funds are allocated at the grassroots. As Kaufmann argued, governments must “work on improving governance across the board, which is hard both in terms of politics and institutional capacity.” Progress requires governments to demonstrate a real commitment to the enforcement of otherwise theoretical advances.

Kenya provides a positive example of such changes: its Constituency Development Fund. The CDF impartially provides money to parliament members for development projects among their constituencies, which has created, according to Kiai, “a direct link between members of parliament and their constituents directly around resources.”

This link, in turn, means “a lot more people who are conscious of anti-corruption … and becoming anti-corruption watchdogs in their own way.” As the success of the CDF suggests, the most effective movements to end corruption will be those that engage the citizenry directly. “A lot more emphasis on a bottom-up approach, of empowerment of the community, understanding and taking action against corruption, is critical,” Kiai said.

The mere passing of laws that formally protect citizens’ rights will do nothing to change the civic culture. Through programs that encourage education and civic engagement, the populace can learn to challenge leaders and hold them to their promises. While government reforms can help curb corruption, ultimately, according to Bates, “you have to have a civil society group that says no más, this has got to stop.”

Isabelle Glimcher ‘13 and Timothy Lambert ‘11 are Contributing Writers.

Photo Credit: Flickr Stream of futureatlascom

After decades of one-party rule, the Liberal Democratic Party falters

In the United States last year, “change we can believe in” became a national catchphrase. In Japan this past August, the slogan of the victorious opposition party was seiken kotai, meaning “political change.” The triumph of the Democratic Party of Japan (DPJ), which won 308 of 480 seats in the powerful lower house of Parliament, marked the end of over 50 years of nearly uninterrupted rule by the center-right Liberal Democratic Party (LDP).

Observers in the West heralded the change as a landmark in Japanese politics, but were skeptical about the DPJ’s commitment to reform. The Washington Post, for instance, applauded the end of one-party domination while lamenting that the DPJ had “bought the votes of farmers with money and protection.” In addition to ushering in an era of increased political competition, however, the party has begun to push for substantial, long-awaited reforms in the Japanese political system and a new, more independent approach in relations with the United States, promising signs that the DPJ may substantiate its promises.

Bureaucracy, Technocracy, and One-Party Rule

Japanese politics has historically been dominated by a massive civil service bureaucracy, with over a million employees in various government ministries today. The bureaucrats gained increasing influence over the political decision-making process following World War II, in part due to Japan’s technocratic, government-managed model of economic development. By 1975, the power of the civil servants had grown so much that one minister in Parliament griped that the legislative branch was “an extension of the bureaucracy.”

But in a country known for its conservative political culture, the LDP remained in power even as the bureaucracy mushroomed and the country slogged through the “lost decade” of economic stagnation in the 1990s. During his tenure in the early 2000s, Prime Minister Junichiro Koizumi battled many of his fellow Liberal Democrats to shrink and privatize the 400,000-member government-run postal, insurance, and financial conglomerate known as “Japan Post.” Although the initiative was ultimately successful, it took years of political maneuvering and intense infighting to pass the legislation.

After Koizumi’s departure in 2006, the LDP was unable to produce another popular candidate. The party replaced its prime minister three times in three years, foreshadowing its landslide defeat at the hands of the DPJ in this year’s elections. The new Prime Minister, Yukio Hatoyama, appears to have a mandate for change with an approval rating hovering around 70 percent.

The DPJ includes many former LDP members, but the parties diverge in their governing style and foreign policy orientation. Gerald Curtis, professor of political science at Columbia University, said in an interview with HPR, “the differences are very coherent and dramatic. It is the biggest change in more than half a century in Japan. The two parties have totally different views on how to govern.” Although the DPJ has center-left roots, it has taken a hard line on taming the bloated bureaucracy and crafting an Asia-centered foreign policy.

Taming the Bureaucratic Monster

In its first months in power, the DPJ has faced the challenge of reforming the Japanese civil service head on. The party leadership has focused on increasing accountability and transparency in the government by restoring power to appointed ministers. Michael Green, Japan Chair at the Center for Strategic and International Studies, told the HPR that the DPJ “has been trying to give politicians more control, and leave the bureaucrats in a more implementing role.” Whereas the LDP lacked the political will to confront its allies in the bureaucracy, the DPJ’s plan has achieved considerable success in a short period of time. “The DPJ has managed in only a month in office to fundamentally change this system … . In today’s climate, if bureaucrats actively oppose a policy, they will lose their jobs,” Curtis explained.

With the influence of the bureaucracy in check, policymaking has become less opaque. Prior to the recent elections, top civil servants in each ministry were allowed to hold weekly decision-making meetings without the participation of politicians. The DPJ quickly banned those meetings, to the acclaim of most of the Japanese public.

The Beginning of a “Different” Friendship

The DPJ has also gained popularity for its new approach to foreign policy, which many Japanese had perceived as too dependent on the United States. Hatoyama has repeatedly declared that he will pursue a “more equal relationship” with America. This attitude stems in part from a sense among left-leaning politicians in the DPJ that close ties with the U.S. have not sufficiently benefited Japan. In particular, they point to Japan’s extensive cooperation with the Pentagon and the establishment of dozens of American military bases on the Japanese islands. The largest set of bases, in Okinawa, occupies 18 percent of the island’s territory. Located close to residential areas, they are unpopular among the public. The DPJ’s vision of an “equal relationship” with the United States entails the removal of many of these bases. In another sign of the new order it wishes to establish, the DPJ has reduced Japan’s involvement in Afghanistan. The DPJ recently ended the controversial refueling of NATO ships in the Indian Ocean.

Japan’s consul general in New England, Masaru Tsuji, downplayed the changes in an interview with the HPR. “Although American relations remain a cornerstone for the country, the new regime wants to emphasize equal partnership. Both countries have a new administration and thus require a new type of cooperation,” Tsuji argued, noting that Japan remains the third largest contributor to economic reconstruction in Afghanistan.

Yet there is little doubt that there has been a shift in rhetoric and policy. Shoichi Itoh, an expert in U.S.-Japan relations at the Brookings Institution, told the HPR that the DPJ “desires a more independent foreign policy,” and would be less deferential to Washington than its predecessor. 

In a pre-election op-ed in the New York Times, Hatoyama called for a “new path for Japan” and the creation of an “East Asian community” for collective security. “We must not forget our identity as a nation located in Asia,” Hatoyama wrote. “I believe that the East Asian region, which is showing increasing vitality, must be recognized as Japan’s basic sphere of being. … The financial crisis has suggested to many that the era of U.S. unilateralism may come to an end.”

Hope and Change

The DPJ has thus begun to give seiken kotai concrete meaning at home and abroad. Its victory portends not only an era of increased competitiveness and accountability in Japanese politics, but also a significant departure from the LDP’s domestic and foreign policy. Prime Minister Hatoyama seems set to pursue many long-anticipated changes as a reformer. But the real test for his party may be whether reform produces renewed economic growth and a new model of capitalism for Japan. If he is successful, the Japanese may soon see the benefits of their more competitive democracy in a tangible way.

Image Credit: m-louis (Flickr)

Can Latin America’s largest country rise above the hurdles?

As cannons blasted confetti down upon a roaring crowd in Rio de Janeiro in October, Latin America’s largest nation celebrated its arrival on the world stage. Like China before the 2008 Olympic Games, Brazil greeted the announcement that it would host the Games in 2016 as a rite of passage into the developed world.

But just two weeks later, a gang of drug traffickers in one of Rio’s notorious slums shot down a police helicopter in a brazen attack that killed three officers. More than 100 policemen poured into the shantytown to regain control in the ensuing gun battle, which took place only a mile from the stadium in which the Games are scheduled to be held.

Even as Brazil assumes increasing international prominence, the country’s political, social, and economic development remains hampered by fundamental problems of rule of law and severe inequality. Brazil’s economic growth in the past decade has been impressive, but the country will have to to overcome hurdles of stark social inequality, violent crime, and rampant corruption to establish itself as a rising superpower and role model in Latin America.

The “B” in “BRIC”

Brazil appears to have left behind the high inflation of inconsistent growth of the 1980s and 1990s, bolstered by a new currency and an economic stabilization plan developed in the past two decades. Goldman Sachs famously classified Brazil along with Russia, India, and China as one of the “BRIC” countries in 2003, ranking it among the largest and fastest-emerging markets in the world.

Jim O’Neill, the head of global economic research at Goldman Sachs who coined the term, told the HPR that Brazil has shown new promise. “Its ability to bounce back post-crisis, the decline in real interest rates, low and stable inflation, the amount of [foreign direct investment] building up in the ‘new’ Brazil, and its commodity richness” set the stage for sustained long-term growth, O’Neill explained. Brazil has experienced an average annual growth rate of nearly 5 percent in the past three years, and according to O’ Neill, is expected to be “stronger in the next decade than the last.”

Other experts echoed O’Neill’s optimism, citing Brazil’s stable government as an indicator of continued economic success. In an interview with the HPR, Filipe Campante, professor of public policy at the Harvard Kennedy School, attributed Brazil’s economic expansion to “institutional maturity” and “a consolidated democracy that has created more political stability.” Kevin Casas-Zamora, a Latin America expert at the Brookings Institution told the HPR that over the past fifteen years, the government – led by two strong presidents in a row  – has instituted important reforms to ensure “well-functioning political parties and an effective Congress.” These institutions provide Brazil with a solid foundation to sustain future growth.

Crime, Slums and Corruption

Despite this foundation, while Brazil has developed a strong, commodity-driven economy, such improvements have not translated into a broad distribution of wealth. Those living in the northeast region, for instance, have a per capita income that amounts to less than half the national average. Casas-Zamora noted that “regional imbalances in Brazil are huge because while the northeast of the country is at the level of development of sub-Saharan Africa, the Southern part is comparable to Southern Europe.” Campante noted that many “have no access to basic goods, services, and education.”  These troubles are hardly the mark of a highly developed economic powerhouse.

The problems of crime, violence and corruption in the slums, or favellas, dominate headlines about the breakdown of social order within Brazil’s major cities. There is a total lack of state control in many of the favellas, and the poorest neighborhoods are easily overrun by drug lords and mafias. Corrupt local police often fight gangs for the right to exploit the slum dwellers. James Roberts, research fellow at the Heritage Foundation, told the HPR that Rio in particular “is a dangerous city that certainly needs improvement and investments” before the Olympics arrives. David Samuels, professor of comparative politics at the University of Minnesota, told the HPR that most Brazilians point to crime as the biggest problem, followed closely by corruption. With a “dysfunctional” judicial system in which criminals can “buy their way out of charges,” Samuels said, Brazil is a long way from untangling this web of crime and corruption and strengthening rule of law.

A Way Forward: Education, Reform, and Transparency

Brazil may, however, be able to find a way forward through greater investment in education and the creation of a social safety net. “The faster Brazil grows and the richer it becomes, the more glaring becomes the fact that there are people who are extremely poor,” Campante explained. Unlike Mexico, said Samuels, Brazil has “a first world tax system.” But like Mexico, it offers only “third world [social] services.”

Spending on education may be particularly crucial, both as an investment in the country’s economic future and a viable alternative for youth to the illicit drug economy. Barry Ames, professor of Latin American politics at the University of Pittsburgh, told the HPR that Brazil must strengthen its limited social safety net. The bolsa familia or “family stipend” programs, Ames said, have been successful in keeping kids in school and reducing the malnutrition problem. Roberts suggested that Brazil use the Olympics as “a rallying point for the country” and invest in social welfare to “reduce socioeconomic pressures and give people opportunities to be productively employed.”

In addition, the government will need to wrest power away from the drug lords and reform the police and security forces from the top down.  Experts generally agree that a multi-pronged approach must be used to address corruption and violence.  Roberts argued that “having clear systems and procedures, transparency, not too many laws and the right incentives” would be steps in the right direction.

The rise of the press in Brazil is a critical part of increasing this transparency.  “Brazilian tolerance of corruption has decreased because a lot of corruption scandals are being revealed by the press, which indicates people are not willing to overlook it,” Campante explained. Ames agreed, noting that “democratic competition has led to an improvement in bureaucratic competence” as people vote corrupt politicians out of office. Samuels suggested that change will be a long-term process and that “Brazil will live under global scrutiny for another five to 10 years,” which may solidify the trend toward greater freedom for the press and open democratic competition.

Ultimately, rather than marking Brazil’s ascent as a done deal, the Olympic Games may galvanize political will to reduce inequality and buttress the rule of law in the country’s poorest regions. Having addressed the problems of violent crime and corruption, Brazil may be able to resume its exuberant samba on the world stage with a more confident step in 2016.

Image Credit: Mike Vondran

When President Bush campaigned in 2000, faith-based initiatives were at the center of his “compassionate conservative” pitch, and candidate Obama promised to renew the effort to help faith-based charities secure enhanced access to government assistance and funding. But the success of faith-based initiatives has been limited both by conservatives, skeptical of government-facilitated charity efforts, and by liberals, skeptical of faith-based projects. They have further suffered from the suspicion that they might be used, by either Party, to garner political favor with influential religious groups. From these nine years of experience, it is evident that faith-based initiatives have not, and arguably cannot, grow into a nationally significant piece of the poverty-solving puzzle.

Stuck in the Middle

Following through on his campaign promises, Bush signed an executive order creating the White House Office of Faith-Based and Community Initiatives early in his administration. But political support for Bush’s pet project was difficult to establish. As Byron Johnson, director of the Institute for Studies of Religion at Baylor University, told the HPR, “A major part of it was a complete misunderstanding of the initiative. Many people on the right actually opposed the initiative … because it would make faith-based groups secular.” And liberals were no friendlier. Typical liberal support for programs to help the needy was overridden by the concern that faith-based charities would capitalize on the opportunity to proselytize to those they served.

Criticisms and Constraints

Another criticism levied against Bush’s faith-based office is that it was used to curry political favor among certain religious groups. Leah Daughtry, a fellow at Harvard University’s Institute of Politics, told the HPR that these concerns were legitimate “given the clear political overtones of the Bush White House.” In the eyes of Democrats, faith-based initiatives were intended to solidify Bush’s support base in Christian communities, extensions of the administration’s stance on stem-cell research, abortion rights, and the Terri Schiavo case of 2003 to 2005. Given unfavorable reactions from both sides of the political spectrum, it is likely that Bush was steered away from expending too much political and financial capital on his primary compassionate-conservative project.

Another knock against Bush’s faith-based initiatives is that they never delivered much in the way of actual aid, perhaps precisely because of political constraints. E.J. Dionne, a senior fellow at the Brookings Institution, told the HPR that “[Bush] talked a lot about helping the poor through faith-based groups, but in general … compassionate conservatism didn’t direct a lot of money to these groups.” Political pressures, then, led to policy failures.

Change or More of the Same?

Perhaps surprising many of his supporters, candidate Obama pledged to renew Bush’s efforts to help faith-based charities get assistance from the government. Obama’s party affiliation, as well as his campaign promise to bar employment discrimination by groups receiving government money, might be enough to purchase the Left’s goodwill on this issue (though it is notable that he has since declared he will consider employment discrimination on a case-by-case basis). But, as Dionne pointed out, Obama has clearly decided to put other social reform projects on the back burner “until health care passes, in the first year.” Despite the appearance of change, including the office’s name change (now the Office of Faith-Based and Neighborhood Partnerships), not much has actually been done to alter — or, as promised, expand — the involvement of the government in helping faith-based charities. Furthermore, Johnson believes that criticisms similar to those that plagued Bush may also apply to Obama. “There will be some who say that he will use [the faith-based office] to promote more social programs that are not faith-based,” he told the HPR.

The dream of a compassionate-conservative project capable of uniting Republican fondness for religious groups with Democratic enthusiasm for government aid has, so far, been a bust. Opposition from both sides of the aisle largely wiped out Bush’s initial enthusiasm for faith-based partnerships, and Obama has shown little inclination to upset the status quo. The goal of a successful intermediary between government and faith-based charity groups has yet to be realized, and we have reason to suspect it will not be any time soon.

Boring is Best in Financial Reform

The most famous story of Wall Street is of an out-of-town visitor brought to Lower Manhattan and shown the dazzling boats of the bankers and brokers. “But where are the customers’ yachts?” the visitor inquires. The perception of Wall Street as the embodiment of rapacious waste continues to haunt the American psyche. Amidst the deepest recession since World War II, politicians from Andrew Cuomo to Ron Paul have found finance an easy target; yet their sharp critiques have gone mostly unheeded. While President Obama speaks of the need to reform the financial sector, Democratic legislation does not suggest drastic changes. Nonetheless, many of the proposed reforms will still prove ineffective or implausible, meaning true financial reform will rely upon boring, yet effective, capital requirements.

A Revised History of the Crisis

Even before the United States emerged from the 2008 credit crunch, popular perception already attributed much of the blame to the unregulated financial sector. This narrative is simple, succinct, and misleading. As the Heritage Foundation’s David John told the HPR, “There is no simple answer that includes a significant portion of the 2008 crisis.” John described factors from massive foreign surpluses of investment capital, to homeowners expecting endless double-digit returns as far more integral to the credit crunch than any government policy.

Some experts nonetheless contend that regulatory failure exacerbated the downturn. Speaking to the HPR, Doug Elliott of the Brookings Institution claimed that, “The government did make some serious mistakes…and better regulation would have reduced the level of damage.” As Elliot explained, commercial banks had long been limited to borrowing up to 16 times their capital, and investment banks somewhat more. Yet in 2004, the Securities and Exchange Commission permitted investment banks to leverage up to 40 times their asset base. Meanwhile, commercial banks discovered new ways to leverage, notably with Structured Investment Vehicles. The effect was to make banks both more profitable and more exposed to a downturn; a three percent loss, for instance, bankrupts a 40 times leveraged position. Yet short of banning SIVs altogether, regulating them would have proven difficult because their existence relied on being outside the regulatory structure. Elliott thus sees leveraging and SIVs as symptoms of a fundamental problem, arguing, “We had twenty good years in the markets. Individuals and investors learned that risk wasn’t scary and that taking risks was a lucrative thing to do. … The problem was that people assumed that it would continue forever.”

Taming the Finance Beast

In hopes of dampening the next era of complacency, the White House has called for the creation of a Consumer Financial Protection Agency designed to prohibit certain financial products, such as subprime loan prepayments. Proponents like Harvard Law Professor Elizabeth Warren argue that the CFPA would benefit financial institutions and consumers by limiting the mortgages and material with which Wall Street self-destructed. Yet George Mason Law Professor Todd Ziwiki disagrees, telling the HPR that, “Consumer protection did not cause the [2008] crisis and it won’t stop the next crisis.” Even if consumer protection does not equate to financial protection, however, it has occupied a significant fraction of congressional action on the issue. David John attributed this incongruity to the fact that, “Congress as a mechanism reacts to pressure from constituents. Constituents don’t understand capital requirements, but focus on the fact that they signed something, and something unpleasant happened.” Thus, additional mortgage disclosure requirements substitute for substantive financial regulations.

Washington’s responses to the crisis beyond the CFPA are an equally mixed bag. Most prominently, Federal Reserve Chairman Ben Bernanke has argued for a “super-regulator” over the financial sector to end the practice of multiple agencies imposing differing regulations on the same jurisdiction. Bob Litan of the Kauffman Foundation, an organization promoting entrepreneurship, explained to the HPR that, “Before, financial institutions were able to play one agency off of each other. AIG, for example, went to the Office of Thrift Supervision, and was able to go berserk.” The super-regulator would end the practice of ‘regulatory shopping,’ searching for the most lax regulator. Bernanke’s proposal has nonetheless drawn opposition, not least from the heads of the current regulatory agencies, who fear a diminution of their power. As Litan put it, “The CFPA is a backlash against the Fed and a super-regulator.”

More acceptable to all stakeholders may be House Banking Committee Chairman Barney Frank’s proposal for a systematic risk regulator to monitor general levels of risk in the economy. Litan agrees that, “It can’t hurt to have a systemic risk monitor, someone to warn people that there are bubbles being formed. …I prefer adjustment in loan to value ratios when you see bubbles being formed, but I worry you could have a regulator criticized for taking away the punch bowl at the party.”

Party’s Over

Indeed, Litan’s worry that investors will scorn regulation that curtails markets reflects larger concerns about the political implications of reform. It would have been an unpopular bureaucrat who proposed to halt the rising tide of the housing market in 2005, and the calls would likely have gone unheeded. Moreover, even if regulators have the will to sanction, they might lack the ability to distinguish. As Ziwiki pointed out, Washington has a poor history of regulating financial firms; according to him, “The SEC doesn’t work is because its regulators get captured.” In other words, the competent regulators get hired to work for the industries they were regulating, while the second-tier people remain behind.

Thus the most effective reforms may paradoxically be the easiest to apply. Increasing capital requirements may seem far less innovative than overseeing all levels of risk in the economy, yet the simplicity of the measure is its greatest appeal. More capital might not have saved insolvent firms, but it would certainly have nudged them toward fewer risks. Indeed, as John pointed out, “It makes perfect sense to try to deal with too-big-to-fail [companies] through capital standards,” thereby sidestepping questions of regulating the complex securities that neither regulators nor bank CEOs truly grasp. In Litan’s words, “I feel that the market does a reasonable job when you give it the right incentive, and capital requirements are a good signal.”

Wall Street and Washington have long been intertwined, dating back to at least 1912. Again and again, financial crisis has prompted new and diverse approaches to regulation, yet America is no closer now to ending boom and bust than when the regulatory climate first shifted. Because many of the administration’s current regulation proposals will ultimately prove ineffective or politically infeasible, increasing capital requirements may be the best option of a bad lot. This simple regulation won’t guarantee the customers their own yachts, but perhaps capital requirements may still save their 401(k)’s.