Much has been written over the past 9 years – and a heck of a lot more has been spent! – about improving economic development in Afghanistan. However, sometimes what is required is to have someone to come in with a fresh perspective – and without an agenda or unyielding preconceptions – to survey the situation and to give you a straight read on what they see. That’s just what two former U.S. military officers did with a new paper on entrepreneurship and private sector development in Afghanistan. They are Jake Cusack and Erik Malmstrom, who are both currently enrolled in the joint masters’ program at Harvard’s Kennedy School and the Harvard Business School.
Over the recent Fourth of July weekend, U.S. Secretary of State Hilary Clinton gave a major speech on democracy at the High Level Meeting of the Community of Democracies in Krakow, Poland, which was held from July 2-4.
I was privileged to have attended the conference on behalf of CIPE — and to have seen Secretary Clinton’s speech in person. I could have written this blog about some of the thematic elements in her speech — like the importance of a vibrant civil society in a functioning democracy and the need for civil society to be defended from the increasing instances of repression that they are currently experiencing in dozens of countries. Or I could have expounded on her references to “democratic governance,” the importance of “well-functioning markets,” and growing the private sector to achieve “broad based prosperity.” In context, however, this speech is important for a number of other reasons.
In what can only be termed a stunning upset, the 2006 Nobel Peace Prize was awarded to Muhammad Yunus, the entrepreneur who invented “microcredit lending,” a system whereby small amounts of capital are made available to poor, often rural individuals who would otherwise not be able to obtain credit or loans through traditional lending institutions or mechanisms. In fact, in most instances the primary consumers of microcredit are women who would otherwise have no means for starting businesses or entering into the economy.
The microcedit system Dr. Yunus devised in his home country of Bangladesh was coined “Grameen” and it did not require collateral, references or any legal instruments from its customers. It simply relied on the notion and power of being shamed in front of family and neighbors if one failed to repay the loan.
The Grameen Bank of Bangladesh’s 6.6 million borrowers so far have paid back 98.5 percent of their loans — compared to the typical repayment rate among traditional banks in Bangladesh of 45 to 50 percent. And according to the NY Times, since its creation in 1983, “Grameen has made a total of $5.72 billion in such small loans, and has turned a profit in all but three years, including $15 million in 2005.”
I’m not sure what the oddsmakers had pegged Mr. Yunus’ chances at, but I suspect he was probably much closer to Oprah, Tony Blair and George Bush (all reportedly at odds of 1001-to-1) than to the favorites going in — various players in the peace negotiations in the Indonesian province of Aceh (one of whom, Indonesian President Susilo Bambang Yudhoyono, was listed at 4-to-1). Bono and Bob Geldof were also in the running (no odds available but reportedly they were each listed as joint tenth favorite to claim the prize.)
(For comparison purposes, consider universally “popular” personalities such as Venezuelan President Hugo Chavez, who was listed as having odds of 251-to-1. Perhaps Blair, Bush and Winfrey should consider changing publicists???).
Despite such stiff “competition,” the Norwegian Nobel Committee selected an entrepreneur whose innovation has been replicated by multilateral finance and development institutions, national development agencies, and independent development NGOs around the world.
Just today another deadly car bomb was set off at a marketplace in the suburbs of Baghdad, demonstrating the extremely difficult obstacles affecting the reconstruction of Iraq and its economy. Last week, the Brookings Institution’s Saban Center for Middle East Policy released its latest report on Iraq, A Switch in Time: A New Strategy for America in Iraq. The report, written by renowned Middle East analyst Kenneth Pollack, is billed as “a comprehensive, alternative approach to current U.S. military, political, and economic policies in Iraq.” Everyone should read this excellent report, and I would draw attention to a few of the observations and conclusions contained in the third chapter which deals with the economic aspects of reconstruction.
Pollack laments that, due to the ongoing security problems in Iraq, many NGOs “which have repeatedly proven themselves critical to the rebuilding of a nation’s economy” have been forced to cease operations in Iraq or to scale back dramatically their programs. CIPE continues to operate in Iraq; however, it can give testament to the difficulty and dangers inherent in working there.
“Iraq must have both immediate economic relief and long-term economic reform,” Pollack observes. “If it emphasizes the short-term over the long, at best it will require constant infusions of foreign assistance to sustain even its current level of economic growth…. However, if it emphasizes the long-term reforms without doing enough in the short term, either the economy or popular support for reconstruction might crash – which would preclude getting to the long-term.”
The report criticizes “Washington’s over reliance on massive American firms to handle much of the contracting in Iraq. This makes sense from a bureaucratic perspective, but has been bad for reconstruction.”
On Wednesday afternoon, February 15th, a bipartisan group of Members of the U.S. House of Representatives announced the formation of the Congressional Middle East Economic Partnership Caucus. In the House of Representatives, caucuses are important organizations that allow Members to work together on issues of importance to them and/or their constituents. Caucuses serve as fora where Members and their staff can work in concert to promote a legislative agenda that furthers the cause they have come together to advocate. Caucus members will often join together to introduce legislation, to write letters to their colleagues or other government officials, and to make floor speeches to promote issues related to the caucus’ mission.
There are over 150 caucuses and similar informal Congressional membership organizations; they cover nearly every subject or policy matter imaginable. While there are several dozen caucuses that focus on U.S. relations with other countries or regions of the world — from the U.S.-Afghan Caucus to the Congressional Vietnam Caucus — this caucus appears to be the first to place such an explicit emphasis on developing the economic relationship between the U.S. and other nations and utilizing it as a means to to promote democratic reform. As CIPE has advocated for 20 years, these Congressmen understand what an important role free enterprise, economic growth, and trade can play in fostering democratic values and reform in other countries as well as how such policies can improve and solidify our relations with nations in this critical region of the world.
There are currently six co-Chair’s for the caucus: Reps. Phil English (R-PA), Paul Ryan (R-WI), Darrell Issa (R-CA), William Jefferson (D-LA), Gregory Meeks (D-NY), and Ben Chandler (D-KY).
At the event, Congressman English, also a member of the House Ways and Means Subcommittee on Trade, outlined the overall objective of the caucus:
This is a real opportunity for our two regions to build on our historical relationship and work together to find a common ground to promote peace, prosperity and democratic reforms through strengthened trade relations.
Congressman Meeks, who serves on the Board of Directors of the National Endowment for Democracy, had this to say:
We have seen real change take place in the Middle East and Maghreb region because of the increased economic ties with the United States. I am pleased to be a part of this initiative to further the progress and transformative effect that comes when we strengthen our relationship with allies that are willing to take on high level reform commitments for the betterment of lives in their countries.
In addition to the Members of Congress who spoke, U.S. Trade Representative Rob Portman appeared at the announcement ceremony and spoke in strong support of the caucus and its goals. Several ambassadors and other officials from Middle East and Maghreb countries also attended the event.
Recently, National Public Radio conducted an interview with Robert Kagan of the Carnegie Endowment for International Peace. The interview was ostensibly about possible outcomes from the recent elections in the Palestinian territories, and thus it adds some additional perspectives to a previous thread on that issue. However, Kagan goes on to expound on what components are necessary for a functioning democracy as well as the order in which we find them occurring. Hence, it also offered some poignant remarks for a posting I made earlier this week on the challenges faced by countries transitioning to democracy and what truly defines a democracy.
On the Palestinian elections, Kagan suggests that what we witnessed last week was most likely a necessary and productive exercise – both for the Palestinian people and for the wider Muslim world. Kagan states:
…probably Islam needs to go through this process. They need to go through the process of winning fair elections and then having to take a part in governing. I think that it may be the answer, to some extent, of the radicalism of Islam if they see that there is a root to governance through the democratic process.
After comparing the experience of socialists and communists during the Cold War to the plight of radical Islam today, Kagan asserts that there comes a time when popular political movements must decide whether they want to participate in governance or not.
It’s not as if Hamas wasn’t an influential force in Palestine before this election. Now, they’re an influential force that has to govern. I’m not at all sure that that is a negative development. I’m inclined to see it as a positive development.
Kagan then proceeds to discuss more broadly the challenges confronted by countries transitioning to democracy and offers some thoughts (inadvertently) on the debate recently instigated by the publication of the study Electing to Fight. Kagan observes:
But I don’t think that because in one election here or somewhere else we’re not thrilled with the people who are elected, that that means that democracy promotion is a bad idea. I think that we should have some faith as democrats ourselves, that over the long run and maybe even over the medium run, democratic elections will ultimately produce better governance in the countries that hold these elections and better allies for the United States.
Kagan finally offers his thoughts on the “chicken vs. egg” conundrum of democracy — whether countries should have liberal institutions in place before elections commence or whether elections can be the catalyst for the development of effective democratic institutions within a society:
The definition of what constitutes a genuine democracy has been a lively subject of debate in the political science world. Obviously, you want to see just not one election but several elections. And of course, you want to see the development of what people refer to as liberal institutions, the rule of law, an open economy, a free press, etc., etc. There are many people who think that you have to have those things before you should worry about elections. And I must say, I disagree with that. I think elections are more likely to produce liberal government than the other way around.
Last Friday (January 27), NPR broadcast a piece about a new study, Electing to Fight: Why Emerging Democracies Go to War, which purports to show that emerging democracies are more likely than other countries to become involved in wars. The study, authored by Professors Edward Mansfield of the University of Pennsylvania and Jack Snyder of Columbia University, uses qualitative and quantitative analysis to ”show that emerging democracies with weak political institutions are especially likely to go to war.”
The crux of the matter is really contained in the key phrase — “emerging democracies with weak political institutions.” I have not read the full book although I have read the first chapter. However, I do not think it is breaking new ground to posit that nascent “democracies”, especially those with extremely weak political and civil society institutions and countries so defined merely because an election was held, are going to find their transitions replete with obstacles and periodic setbacks. It is similarly not ground breaking to suggest that in many instances leaders of nascent democracies may seek to consolidate their hold on power by marshalling nationalist zeal on behalf of a military conflict with another country and in the process truncate or co-opt democratic processes or institutions designed to support it.
Lest there be any doubt about the real positions of the authors, let me quote several sentences from Chapter One of “Electing to Fight”:
No mature democracies have ever fought a war against each other. Consequently, conventional wisdom holds that promoting the spread of democracy will promote world peace and security…. Indeed, over the long run, it is probably true that the further spread of democracy will promote global peace and stability. In the short run, however, the beginning stages of transitions to democracy often give rise to war rather than peace…. Not all democratic transitions are dangerous; as we explain in this book, the chance of war arises mainly in those transitional states that lack the strong political institutions needed to make democracy work (such as an effective state, the rule of law, organized political parties that compete in fair elections, and professional news media).
So, it appears, even the authors accept that the axiom is in fact true – promoting democracy will, in the long run, help to create peace and stability in the world. So, one might ask, what is at issue then? The real thrust of the book, it strikes me, is two-fold. First, it reinforces the accurate postulation that elections are a necessary condition for achieving democracy but not a sufficient condition. Since the communist countries during the Cold War all held “elections,” I would have thought this was not a dramatic discovery. However, from the standpoint of maintaining public support in the mature democracies for continued support of efforts to promote democratic institutions and processes in transitional countries (especially after the first elections are held), it is a useful exercise. Similarly, it is important to remind the leaders and the populace in such countries striving to achieve democracy that merely holding that first real election is not the end of the transition but rather the beginning.