The Battle of Baghdad

According to news reports here, here, here, and here, an uprising has begun (once again) in Iraq. If you are too lazy to read the articles, the short story is that Al-Maliki has ordered Al-Sadr's Mahdi Army to surrender all weapons. The militia refused and so fighting has broken out. The U.S. is supporting Iraqi security forces in Baghdad, while the British support them in Basra (where the conflict has spread to).

One thing that is interesting is that Al-Sadr's side claims that this is an attempt by Maliki to destroy his party before the elections. My view is (and tell me if you disagree because it is an American view) that Sadr is missing the point that his militia is essentially a private army in the heart of the capital. What would an American think if (insert any politician's name) had a private army outside of Washington D.C. to help support his/her power in the Government. Chances are it would make you a little uneasy. Besides the obvious conflicts of interest involved in having two armed groups in the country following rival political leaders, it is extremely counterproductive for both sides.

Sadr is destroying his own party before the elections. It is not unreasonable for a government to disarm gangs and militias while trying to take over security operations. By refusing to lay down arms and promote peace in the war-torn city his bloc is committing political suicide because they will likely be imprisoned, killed, or lose backing. Had they laid down their weapons and promoted peace, or at least pretending to, they could have much more clout to use at the elections.

What do you think about this?

A Rock and a Hard Place

The U.S. is in a tight spot these days when it comes to energy. Aside from the uncertainty over carbon limits, the economic outlook is weakening. The Federal Reserve is trying to stimulate growth but keep inflation down. Fuel price spikes are racking up costs along supply chains and biofuels intended to increase fuel supplies are raising food prices.

According to this biofuels have kept gasoline prices 15% lower than if there were no biofuels. If it is true, this proves that biofuels can make a noticeable dent in gas prices. The only problem is that food prices (particularly corn, soybeans, and wheat) are inflating from the limited amount of land for farming.

The obvious move the federal government should make is to eliminate the tariff on imported biofuels, especially ethanol from Brazil. This would alleviate prices of food and fuel for Americans in the short term while the federal mandate issued for cellulosic biofuels creates the new technology. The drawback is that importing more biofuels does nothing for energy security, but that is not entirely true. A larger fuel supply provides more buffer for rising prices. Brazil may be seen a more stable economy and a more attractive investment location compared to some middle eastern or African oil economies.

The odds are not good that Bush will approve eliminating the tariff, so it may be a long shot. What do you think?

The Natural Economy

Every economy on Earth is facing large problems. The slow down in the USA, tackling environmental policy in Europe, controlling the effects of growth in China, and providing basic services in Africa are all examples of the looming problems. The fact that policymakers are missing is that the economy is a system, and like any other system it's made of entities, subsystems, and processes. These Comparing it to another system such as the life system on Earth:

	Economy	Environment
Entity	Individuals, companies	Organisms
Subsystem	Geographic, Online	Ecosystems
Processes	Investment	Reproduction
Interactions	Trade, Employment	Predator/Prey
Governing Laws	Regulations, Policy	Laws of Physics

The similarities are intriguing. Every participant is acting in their own interest which causes new entities to fill niches (Such as lichens in nature. The long tail in ecnomics). These innovators help to expand the system (certain plants grow faster in recently burned forests. The tech industry provides jobs to many recently impoverished populations). Resources flow throughout the system (Energy and water in nature. Money moves through trade and investment in the economy). Some act as buffers (Trees to absorb CO2. Banks for lending.) while others inadvertently work together (The tiny fish that clean sharks' teeth. The joint ventures between multinational corporations).

This leaves questions unanswered though. Why hasn't the success of industrial nations spread to the destitute parts of Africa? Why can't even well developed economies be sustained without government management the way the earth sustains life without having to alter the natural laws? I believe the answers are in the laws: the laws crafted always have unintended consequences (sort of like how every drug has side effects). These mismanaged regulations act like an economic pollution, disrupting the entire system.

Milton Friedman proved to most of the world that the less regulation and government intervention in economic affairs is better for the economy. I think it caught on so well because laws intended to solve one problem usually creates other problems. The regulation we humans make are not 'natural' or universal like laws of nature. As an example, gravity has an effect in all situations, from the planets circling or limiting flight to certain creatures on earth. The difference is the effect of the law of gravity always serves the purpose of maintaining equilibrium. Tax laws provide loopholes, energy subsidies that keep rates low discourage more expensive renewable energy, i.e., the laws we create are imperfect. This is likely because most laws crafted are reactive instead of proactive. (This is inherent in democracy because it requires consensus.)

The idea is that as a society we should work towards making our economy more 'natural' in this sense. It will provide more stability and equality for all. The process will not be easy, like science it must constantly be reexamined with increasing understanding. This will be hard to reach consensus on as the system is so complex. I think the best idea would be to start with tenants we can agree on such as achieving energy security or easing the forces that keep more people from investing in retirement rather than relying solely on pensions. It will take time and there will be mistakes, the central bank had to learn how to work as well as they do now (it's been seventy something years since we've had a worldwide depression). It may be a pipe dream but you've gotta have some hope.

What are your thoughts o n the matter?

Question from U.S. to the Rest of the World

A friend of mine believes that many countries view the United States as being more tolerant to crime than other countries. It is true that we don't have necessarily strict punishments such as caning criminals. My question is: Do foreign nations view that United States as being more tolerant of crime/criminals?

A Change of Heart for George Bush?

Bush is one of the most stubborn Presidents in my memory. He doesn't back down ever, he even refuses to have political ties with nations he disagrees with. This is what America chose in 2004, a strong war-time President. What seems surprising is that he has recently been shifting his position on climate change. This is evident because he has now said he is willing to commit to global emission limits if 'major emitters' (India, China, and others) agree to binding limits as well. This is a logical solution because: If the countries termed 'developed' by the Kyoto Protocol (EU, U.S.A, and others) eliminated emissions and the rest of the world continued unlimited, the only effect would be transferring manufacturing and other intensive industries the developing world, so there would be no decrease in actual emissions, just a shift in where they come from. But that is a whole different discussion for a different post.

Many people are taking his change in position for more than it may be. The question is if he has actually changed his mind about the issue of climate change. It may be that he has now realized that all the 2008 presidential candidates are proposing a cap and trade system as part of their environmental policy. A cap and trade on CO2 is inevitable. Could it be that Bush may be planning on an attempt to push his own cap and trade system through Congress before a new president takes over in 2009? What do you think?

The EU Goes Mediterranean

According to this article from Reuters, there different members of the European Union are squabbling over a proposal to create a 'Mediterranean Union' to expand and augment the goals of the European Union. Sarkozy could not be more ahead of his time by proposing this. For those who don't know more about this issue, information can be found here and here. It appears the most common reason for criticism is that the current EU members and the EU Commission are afraid of funding and resources being diverted from EU goals, such as setting up a Mediterranean Investment Bank. This argument has some valid points, after all there is only so much time, money, and political will to go around. The argument for the Mediterranean Union has noble goals as well, such as spreading human rights, development aid, and democracy to Mediterranean Nations. Another problem with the proposal is that many of the prospective nations are ruled by authoritarian governments that the EU doesn't want to blindly give funds without any oversight. This is also a valid concern but it must be dealt with because the nations with these types of governments are the most in need of civil freedoms. Similar issues arose in the 1950's and 60's when the EU was beginning form and the solution was to keep the process slow and focus on areas of agreement and mutual benefit such as the European Coal and Steel Community. I think this lesson would be well applied in this situation. Encouraging a few coastal Muslim countries to embrace freer trade agreements could lead to them adopting more secular laws and human rights as well as helping Europe and Middle East/North Africa to diversify their economies and generate employment.
Do you think this plan could work? How would you approach the situation?

Another Desalination Plant

According to a recent article on reuters, Peru has begun using desalination to meet water needs. This method is becoming increasingly common, especially Cyprus and parts of Africa/Middle East. It is only a matter of years before severe water shortages hit the Southern U.S. from Georgia to the Southwest and the Coast of California. The U.S. should start investing in water infrastructure projects and increasing water efficiency, preferably before aquifers are depleted. The major challenge to overcome is developing a way to finance these initiatives that satisfies all parties. Ideally it would be made of mostly private sector financing to spur job creation. During the great recession many public works projects were initiated to improve the economy. The current economic outlook (many consider a recession as of 03/07) would warrant some sort of government investment, and this type of investment would improve the economy and the lives of citizens for years after the project is completed.

What are everyone else's thoughts on the issue?