October 04, 2008

INDIA : After MAD, terror outfits planned BAM

DNA Correspondent
Saturday, October 04, 2008 17:39 IST

MANGALORE: Some sketches and other incriminating documents seized from the four terror suspects arrested at Mangalore on Friday indicated they had been planning a BAM (Bangalore, Ahmedabad, Mangalore) blasts after the recent MAD (Mumbai,Ahmedabad, Delhi) blasts.

The joint-operation, the Mumbai police, Karnataka's police and anti-Naxal squad, succeeded nabbing four Indian Mujahidin activists with substantial cash, CD, explosives, Jihad material, credits cards and active mobile sets. In all, 11 people were picked up, of whom four have been placed under arrests, and the remainder let off after interrogation.

The arrested, Mohammed Ali (56), resident of Mukkachari, Jawed Ali (20), student of Quranic studies in Ullal, Naushad (25), a resident of Subhashnagar engaged in construction work, and Ahmed Bawa (33), a resident of Haleyangady, engaged in petty business have all been booked under Unorganised Activities (Prevention) Act and sections of IPC for anti-national activities and sedition. All of them are branded close allies of Roshan alias Riaz of Bhatkal. Bhatkal is a fast progressing port town in Uttar Kannada district on the coastal Karnataka. It has, however, been under the grip of communal clashes for the past several years.

Interrogation of the arrested has revealed that terror modules had planned more attacks on some religious places of Bangalore, Mangalore and Ahmedabad. This was to be followed up with a serial attack on some key security installations. However, no date or time has been marked. Riaz Bhatkal has emerged the most-wanted man for the anti-terror security forces after the Mumbai ATS earlier this month learnt from arrested IM activists that Riaz is the kingpin of the terror network. He emerged a terror figure after his suspected involvement in the killing of a BJP MLA and a medical practioner Dr.Chittaranjan at Bhatkal in 1996.

The Mumbai police had said that Bhatkal was a key person and had knowledge of all the blasts. Moreover, he was ranked very high in the IM hierarchy, the police had also said.

The Inspector General of Police (Southern Range) A M Prasad said the police were hopeful gathering crucial information after the examinations of the CDs, hard-discs and SIM cards seized from the suspects. The fact that over Rs.11 lakhs in cash were found on their possession indicated the deep pocket the terror network kingpins had developed, the police officer said.

Indian National Overseas Congress Withdraws $100 Million Libel Law Suit filed against Kataria et al

October 2, 2008


Indian National Overseas Congress Withdraws $100 Million Libel Law Suit filed against Kataria et al, aimed at exposing truth about Sonia Gandhi.

Finally the truth has prevailed.

In a bizarre turn of events, Karasik & Associates attorneys for Indian National Overseas Congress, a subsidiary of Indian National Congress, headed by Sonia Gandhi, in INOC v. Kataria, et al. served a Notice of Discontinuance in the above-named action to Justice Emly Jane Goodman of the Supreme Court of New York on September 29, 2008. The Notice of Discontinuane tantamounts to an unconditional surrender by the Congress Party and could be construed as a victory of Dharmic forces. In actuality, the hearing in this case, originally, was scheduled to be held October 2, 2008.

The prominent Law Firm of Kornstein, Veisz, Wexler & Pollard represented Narain Kataria, Arish Sahani and Indo Caribbean Council. The stipulation between the attorneys of the two parties was agreed to, signed and stamped in the Court on October 2, 2008. Prior to this last month a similar case filed by INOC in New Jersey Court against Sunanda Thali, Satyanarayana Dosapati, Naresh Sharma, and Mahatma Gandhi International Foundation, Inc., was summarily dismissed by the Judge who found that the Plaintiff had no locus standi in filing such a frivolous case.

It is a matter of great happiness for all NRIs, particularly Hindus, that the famous adage from Vedic literature Satya Mev Jayate (Truth shall always prevail, once again, prevailed in New York and New Jersey Courts, on the Birthday of Mahatma Gandhi!

In this connection, it should be noted that the INOC had filed these two lawsuits on the alleged grounds that Kataria, Sahani et al had defamed President of Indian National Congress, Sonia Gandhi, by bringing out a full page advertisements in The New York Times, dated October 6, 2007. Some extracts from that advertisement are as follows:

“UN’s declaration of Mahatma Gandhi’s birthday on October 2nd as the International Non-Violence Day is commendable. However, instead of a true Gandhian delivering his message of peace and non-violence, Sonia Gandhi who is not a representative of Gandhian values is chosen.

“Sonia Maino Gandhi is NOT related to Mahatma Gandhi. She is attempting to misappropriate his name for political mileage and international legitimacy.

“Sonia is known to be vindictive and undemocratic. Her party uses various mechanisms, such as tax raids, direct threats to subjugate opposition. (“Know your Sonia” by Dr. Subramanian Swamy, visiting Harvard Professor)

“Due to her party’s pro-terrorist policies, India has second highest number of terrorism victims after Iraq. Her Government is requesting clemency to Afzal Guru, the mastermind of attack on Indian Parliament. In pursuit of Muslim vote bank, she has created soft borders and turned a blind eye towards Islamic fundamentalism.

“Her husband Rajiv Gandhi is alleged to have received payments from KGB. According to Schweizer, Illustrierte, Rajiv has a secret Swiss Bank account of 2 billion dollars. Her son Rahul projected as next Prime Minister of India, was detained by FBI with large unaccounted cash at Boston Airport in 2001. (Swiss magazine Schweizer, Illustrierte 11/1991, Indo Asian News Service).

“Her party was involved in the UN Oil for Food Scam that helped Saddam Hussain. She was involved in numerous scams, scandals and controversies. Before entering India, she was an au-pair with modest means. Since then, she and her family members have amassed millions through questionable means. (Know Your Sonia by India First Foundation)

The purpose of these cases, it is believed, was to silence the voice of the critics of Sonia Gandhi through her surrogates, stifle the voice of freedom, make defendants financially bankrupt, frighten them into submission, and suppress the truth.

It is also worthwhile to mention here that these two cases had generated an inquisitive interest in media, a sense of unity and brotherhood among Indian Diaspora, particularly Hindus and Sikhs, who had organized fund raisers and established Hindu Support Fund to defray attorneys’ fees and other related expenses to be incurred in these cases.

It is a matter of great satisfaction and joy that the Right of Free Speech guaranteed under the First Amendment of American Constitution has been upheld by the judges and the sinister designs of enemies of freedom of speech, actuated by the malicious desire to muzzle the voice of free speech, truth, and vilify the defendants, have been nipped in the bud.

For further information, please visit: www.HinduSupportFund.com.

Narain Kataria
Indian American Intellectuals Forum
41-67 Judge Street (5P)
New York, NY 11373
(718) 478-5735

Extraordinary Popular Delusions and the Madness of Crowds

Extraordinary Popular Delusions and the Madness of Crowds, originally published in 1841, is a landmark study of crowd psychology and mass mania, and a singular casebook of human folly throughout the ages. Chronicled here are accounts of swindles, schemes, and scams on a grand scale.

Charles Mackay's account of the three infamous financial manias - John Law's Mississipi Scheme, the South Sea Bubble, and Tulipomania.Between the three of them, these historic episodes confirm that greed and fear have always been the driving forces of financial markets, and, furthermore, that being sensible and clever is no defence against the mesmeric allure of a popular craze with the wind behind it.In writing the history of the great financial manias, Charles Mackay proved himself a master chronicler of social as well as financial history. Blessed with a cast of characters that covered all the vices, gifted a passage of events which was inevitably heading for disaster, and with the benefit of hindsight, he produced a record that is at once a riveting thriller and absorbing historical document. A century and a half later, it is as vibrant and lurid as the day it was written.For modern-day investors, still reeling from the dotcom crash, the moral of the popular manias scarcely needs spelling out. When the next stock market bubble comes along, as it surely will, you are advised to recall the plight of some of the unfortunates on these pages, and avoid getting dragged under the wheels of the careering bandwagon yourself.

After browsing through Extraordinary Popular Delusions and the Madness of Crowds, the reader may become convinced that human greed, folly, and madness-if not the essence of human history-are at least destined to repeat themselves. The book remains as fascinating and compelling today as was when it was written in the nineteenth century

October 03, 2008

Strategic dilemmas amidst the bloodshed of Pakistan’s Marriott attack

Occurring at the same time as a precipitous decline in Pakistan-US security co-operation, the bombing of the Marriott hotel in Islamabad heightens the need for Pakistan’s political and security institutions to harmonise their own efforts against jihadi insurgents, but illustrates the magnitude of this undertaking.

By Samir Puri for RUSI.org

The suicide truck bomb that devastated Islamabad’s Marriott hotel on 21 September 2008 killed fifty-three and injured a further 266. In addition to the human toll, the attack was awash with both symbolic and strategic significance. In matters of terrorism the line between symbolism and strategy is a blurred one indeed – in this case the audacity of the targeting, the scale of destruction, and the timing of the attack has combined to heighten Pakistan’s strategic conundrum in graphic fashion.

Symbolically, the Islamabad Marriott represented a key hub in Pakistan’s foreign interactions. Deemed both prestigious and secure, the US-owned hotel chain could list amongst its clientele foreign diplomats, businessman and journalists, as well as the Pakistani elite they interacted with. Although the brunt of the toll was borne by Pakistanis, including numerous hotel employees, the dead included the Czech ambassador, a pair of US defence department employees and a Danish intelligence officer. Similar to the assault on Kabul’s Serena hotel earlier in the year – that capital’s comparable bastion of international activity - the Marriott attack leaves little in doubt that the attack was a blood-drenched condemnation of foreign influence in Pakistani affairs.

Strategically, the attack was the latest in what is a sustained suicide bombing campaign waged against the Pakistani state’s physical apparatus, leadership, domestic popularity and ultimately its decision-making process. The relentlessness of the campaign is astonishing. Pakistan suffered some fifty-six suicide attacks in 2007 (including the attack that assassinated Benazir Bhutto that December), and the Marriott attack is the thirty-first of 2008. A little-known group, Fidayeen-e-Islam, has claimed responsibility for the Marriott blast, which is said to bear all the hallmarks of the Tehrik-i-Taliban Pakistan (TTP), an Al-Qa’ida affiliate operating from Pakistan’s autonomous tribal regions. Their suicide bombing campaign has been mounted specifically to coerce the Pakistani state to cease military operations directed against them along the border regions with Afghanistan, which are seen as being undertaken at US behest by a mercurial Pakistani state that has received in excess of $11 billion from Washington since 2001.

The suicide bombing campaign aims to raise to unacceptable levels the negative costs of Pakistan’s participation in Washington’s security agenda, and as such, the shakiness of Islamabad’s civilian government cannot have escaped the jihadists attention. The Marriott attack occurred mere hours after President Asif Ali Zardari – the widower of Benazir Bhutto – delivered his inaugural address to parliament. Subsequent to the attack, confused details emerged from the Interior Ministry suggesting the Marriott had been mooted as a venue for hosting Zadari, Prime Minister Yusuf Gillani and other key ministers for dinner that very night, meaning the attack may have been envisaged as a decapitation strike against the Pakistani leadership. Regardless of whether or not assassination defined the intent of the attack, Pakistan’s stuttering political rehabilitation after the Musharraf era could well do without such assault. In August the PPP/PML-N parliamentary coalition that had swept to power amidst much popular optimism in February’s nationwide elections was fractured through its own contradictions. Parallel though this trend may be to the bombings, if Zardari can be cast to the Pakistani populace as a politically isolated American stooge – in the same way Musharraf came to be viewed – this would clearly suit the militants’ purposes.

The Marriott attack brings into sharp focus important elements of the strategic nature of the jihadi-Islamist assault against the Pakistani state.

• Geographic distribution of attacks: the suicide bombing campaign is the forward-most projection of power the insurgents operating along the Pakistan-Afghan border can manage. Had the violence of the insurgency been limited to the ‘wild west’ of Pakistan’s North West Frontier Province (NWFP) and Baluchistan regions, it would have far less coercive value than attacks occurring in the Punjab heartland. The Marriott attack, just like the suicide attack on the Pakistan Ordnance Factories in the Punjabi town of Wah the month before, are indicative of a threat that cannot be contained and a situation that is slipping from Islamabad’s grasp.

• Target selection: the targeting in this coercive campaign is indicative of its nature, having overwhelmingly attacked the physical apparatus and the symbols of the Pakistani state (albeit with a huge toll in blood of ordinary Pakistanis killed and maimed). Security check posts and military bases, armaments factories, political figures and symbols of foreign influence have dominated targeting selections, indicating a focussed intent on behalf of the attackers.

• The attributes of the weapon itself: the Pakistani state is under sustained assault by a weapon that Islamist circles credit for past coercive successes ranging from the expulsion of US and foreign forces from Lebanon after the 1983 bombings of US and French barracks in Beirut, to the Spanish withdrawal from Iraq after the Madrid train bombings in 2004. Suicide bombing – an act that typifies the abhorrence of Jihadism to others – is a tactic that carries great potential strategic utility to the Pakistani state’s tormentors.

However, the bilateral contours of Pakistan’s internal security affairs belie the instrumentality of the US-Pakistan partnership in guiding events. The Pakistani state is under quite immense pressure from dual sources: from a US ally that is forcing Pakistan’s hand by staging humiliating unilateral operations of its own using drones and latterly US special forces to strike within Pakistani territory; and from a jihadi-islamist foe that has delivered on its threat to drench Pakistan in bloodshed as punishment for the state’s unholy alliance with the US. Caught between these seemingly unassailable dual trends, Pakistan’s range of workable options is starkly limited.

Western critics have long-since argued that Pakistan does have one option, and that is to more comprehensively embrace the war against Islamist militancy as its own struggle. In order to effectively confront terrorism and the growing and writ of ‘Talibanisation’, they argue, Pakistan’s trinity of its political leadership, security institutions and populace must harmonise and intensify their fight. If there is any optimism lying amidst the fire-gutted ruins of Islamabad’s Marriott, then it is that Pakistan’s collective senses may be further heightened towards this end. In this context, continued US unilateralism may well score tactical successes by killing individual militants, but will prove strategically ruinous by confirming in Pakistani eyes that an ungrateful US benefactor is in fact the principal source of its woes.

Samir Puri is an Analyst with RAND Europe.

The views expressed above are the author's own, and do not necessarily reflect those of RUSI.




By allowing capital to flow unchecked from one end of the world to the other, globalisation and abandon of sovereignty have together fostered the explosive growth of an outlaw financial market. Indeed the engine of capitalist expansion is now oiled by the profits of serious crime. From time to time something is done to give the impression of waging war on the rapidly expanding banking and tax havens. If governments really wanted to, they could right this overnight. But though there are calls for zero tolerance of petty crime and unemployment, nothing is being done about the big money crimes.
By Christian de Brie

Financial crime is becoming less visible, periodically coming to light in one country or another in the guise of scandals involving companies, banks, political parties, leaders, cartels, mafias. This flood of illicit transactions - offences under national law or international agreements - has come to be portrayed just as accidental malfunctions of free market economics and democracy that can be put right by something called "good governance". But the reality is quite different. It is a coherent system closely linked to the expansion of modern capitalism and based on an association of three partners: governments, transnational corporations and mafias. Business is business: financial crime is first and foremost a market, thriving and structured, ruled by supply and demand.

Big business complicity and political laisser faire is the only way that large-scale organised crime can launder and recycle the fabulous proceeds of its activities. And the transnationals need the support of governments and the neutrality of the regulatory authorities in order to consolidate their positions, increase their profits, withstand or crush the competition, pull off the "deal of the century" and finance their illicit operations. Politicians are directly involved and their ability to intervene depends on the backing and the funding that keep them in power. This collusion of interests is an essential part of the world economy, the oil that keeps the wheels of capitalism turning.

Three factors have combined to improve the workings of capitalism. The end of the 1980s saw the complete liberalisation of capital movements, taking them beyond national or international control. Then the revolution in communications technology accelerated the expansion of financial transactions. Finally, tax havens, that planetary archipelago of centres specialising in the tolerance of financial crime, became more "reliable".

Revolution, said Mao Zedong, is not a dinner party. Neither is competition. It has little to do with the tournaments of gallant knights celebrated by the troubadours of the free market, where by the grace of God the best always wins - the best product or the best service at the best price. As in feudal combat, if you want to win the economic war, anything goes - and the dirtier the better. The arsenal is well supplied with weapons: restrictive practices, cartels, abuse of dominant position, dumping, forced sales, insider dealing and speculation, takeovers and dismembering of competitors, fraudulent balance sheets, rigging of accounts and transfer prices, the use of offshore subsidiaries and shell companies to avoid and evade tax, embezzlement of public funds, bogus contracts, corruption and backhanders, unjust enrichment and abuse of corporate assets, surveillance and spying, blackmail and betrayal, disregard for regulations on employment rights and trade union freedoms, health and safety, social security, pollution and the environment (1). Not to mention what goes on in the world’s growing number of free zones, including those in Europe and in France, where the ordinary rule of law does not apply, especially in social, tax and financial matters (2).

Such goings on can be found in all major sectors and on all markets: arms, oil, public works, civil aviation, air, rail and sea transport, telecommunications, banking and insurance, chemicals and food, to name but a few. They result in massive misappropriations of funds which disappear from the transnationals’ bona fide accounts only to resurface in some tax haven. An incredible plunder, the full extent of which will never be known.

All this would be impossible without the power of the state and international and regional organisations, especially their ability to keep restrictive regulations to a minimum, to abolish or override such rules as do exist, to paralyse inquiries and investigations or put them off indefinitely, and to reduce or grant amnesty from any penalties. In exchange, they offer to "fund democracy" by financing parties’ election campaigns, promoting the most promising political personalities and senior officials; they have them followed and closely watched by armies of lobbyists who can be found close to every decision-making authority and whose brief is to help them "make the right choices", to corrupt them (3).

On occasion they have no compunction about using the services of professional organised crime. In most of their subsidiaries and offshore suppliers in the southern hemisphere, workers have to contend with thugs hired by the bosses, blackleg trade unions, strike-breakers, private police and death squads. In Japan, recalcitrant shareholders are watched by yakusas at general meetings. Or they take out "contracts" on intermediaries that have become too much of a nuisance or on over-inquisitive investigators: numerous businessmen, bankers, politicians, judges, lawyers and journalists have "committed suicide" drinking a cyanide-laced cappuccino, hanged themselves or fallen from a tenth floor window with their hands tied behind their backs, shot themselves twice in the head, drowned fully clothed in a puddle or in the bath, slipped under a bus or into a vat of concrete or acid, fallen naked from their yachts into the sea under their bodyguard’s very eyes, disappeared on a flight or car journey.

More than anything else, banks and big business are keen to get their hands on the proceeds - laundered - of organised crime. Apart from the traditional activities of drugs, racketeering, kidnappings, gambling, procuring (women and children), smuggling (alcohol, tobacco, medicines), armed robbery, counterfeiting and bogus invoicing, tax evasion and misappropriation of public funds, new markets are also flourishing. These include smuggling illegal labour and refugees, computer piracy, trafficking in works of art and antiquities, in stolen cars and parts, in protected species and human organs, forgery, trafficking in arms, toxic waste and nuclear products, etc.

Every country has its criminal underworld. The biggest organisations and the ones that have been active the longest can be found in the hubs of capitalism: the United States (Cosa Nostra), Europe (the Sicilian mafia) and Asia (the Chinese triads and Japanese yakusas). Others have also emerged over the last few decades, such as the Colombian cartels in Latin America and the Russian mafias. Hundreds of rival groups share the national and international crime markets. They enter into alliances and subcontracting agreements, tending to break up into small, flexible, mobile units specialising in a market sector or a profitable niche.

The annual profits from drug trafficking (cannabis, cocaine, heroin) are estimated at $300-500bn (not to mention the rapidly mushrooming synthetic drugs), that is 8% to 10% of world trade (4). Computer piracy has a turnover in excess of $200bn, counterfeit goods $100bn, European Community budget fraud $10-15bn, animal smuggling $20bn, etc. In all, and counting only activities with a transnational dimension, including the white slave trade, the world’s gross criminal product totals far above $1,000bn a year, nearly 20% of world trade.

Even allowing for overheads (production and suppliers, intermediaries and corruption, investment expenditure, management costs, losses from seizures and crackdowns) amounting to roughly 50% of turnover, that still leaves annual profits of $500bn. Over ten years that makes $5,000bn, more than three times the foreign currency reserves of all the central banks (5), one quarter of the capitalisation of the world’s top five stock markets and ten times that of Paris (6).

All that remains is for this fantastic wealth to be managed, impossible as it is to dispose of in small denomination notes (7). It is enough to set the world’s financial brains spinning. But these are the people whose help the criminal organisations need if they are to launder all this money and recycle it through legal channels. They are willing to pay the price, and they do. The cost is about one third, $150bn shared between banking networks and intermediaries: lawyers, brokers and trust managers. The upshot is that over $350bn are laundered and reinvested annually, that is $1bn a day.

No sector of activity comes anywhere near these figures and none can match that capacity, representing as it does between one half and two thirds of direct foreign investment (DFI) (8). Close watchers of the markets and of globalisation which they understand perfectly, the multinational criminal organisations have no time for savings banks. They go for the highest gains: hedge funds, inflating the bubble of financial speculation, emerging markets, property, new technologies. At the same time, they secure for themselves a solid return from the finest of industry and commerce. In permanent partnership with the transnationals in which they invest and the banks that manage their investments, they are the oil in the wheels of the extraordinary expansion of modern capitalism. And they still have enough money left over to maintain their lifestyle and help to fund and corrupt the political parties and leaders that are best placed to preserve the system that serves them so well.

That is precisely the service that the third partner, political power and bureaucracy, renders in exchange for the financial assistance that allows it to stay in place, to recover from every setback and to get richer in the process. It gives the illusion of a permanent struggle, constantly stepped up and internationally coordinated, by governments, police and judiciary against financial crime (bribery, trafficking, laundering) while not affecting the system’s operation. Changing everything so that everything stays the same. The failure of over 30 years of international war against drug trafficking is testimony to the formula’s "success". The same fate awaits the fight against money laundering and corruption, ostentatiously relaunched by the G7 at the Arch Summit, Paris, in 1989 and, in addition to the member countries, involving the United Nations, the Organisation for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), the Bank for International Settlements (BIS) and the European Union.

Specialist organisations have been set up (9) and international conventions signed and ratified for the prevention of corruption on international markets (10) and for police cooperation and mutual judicial assistance (11), while conferences and studies, commissions of inquiry and reports have multiplied. All this has been accompanied by the most strongly worded declarations and promises from those in authority, but the system of financial crime has not been the least bit shaken. It is poised to win by attrition the battle that the best are bent on waging against it; the weariness overtaking police and judges engaged on the exemplary Operation Clean Hands in Italy is evidence of this. So is the lack of response to the alarm (the "Geneva Appeal") sounded by seven specialist European judges at the end of 1996 (12).

There is no question of doing away with tax havens, those places of refuge for financial crime, only of encouraging them to adopt codes of good conduct. This would be as effective as asking the mafia to provide security vans, with a moral obligation to submit its vehicles to a MOT. Nor is there any question of setting up any form of permanent international cooperation, or even a European judicial area, only of considering discussing it. Yet it takes 18 months for a request for judicial assistance to make the round trip between Paris and Geneva.

Better still, under the aegis of international financial crime’s number one partner, the US, we are seeing a rationalisation, or rather, Americanisation, of corruption techniques, seeking to replace the somewhat archaic practices of palm-greasing and secret (or open) "commission" payments by lobbying, which is more effective and presentable. It is a service industry in which the Americans have a considerable lead over their competitors, not only in know-how, but also in the vast financial and logistical resources they are able to make available to their multinationals; these include the secret services of the world’s most powerful state apparatus, which, with the cold war over, have moved into economic warfare.

This is evidenced by the media success of the publication of an annual league table of bribe paying and taking countries drawn up by Transparency International, a lobbying association and CIA correspondent funded by governments and corporations, especially American ones, that are experts in the matter. These include Lockheed, Boeing, IBM, General Motors, Exxon, General Electric and Texaco (13). The only objective of the anti-corruption campaigns taken up by international organisations (World Bank, IMF, OECD) is the "good governance" of a financial crime that is now an integral part of market globalisation under the leadership of the American democracy, the most corrupt on the planet.

The headlong rush for profits and capital accumulation by any means is reflected in the widespread robbery of the fruits of men’s labour and of common wealth and the moral corruption of the ruling classes. The robber barons are giving way to the pillaging princes.

More about Christian de Brie.
Translated by Malcolm Greenwood

* Globalisation Observatory

(1) Znet Commentary, a Canadian site, offers a ranking of the top 100 criminal firms. - http://www.corporatepredators.org/t op100.html

(2) On free zones, see Le Monde diplomatique, English edition, March 1998.

(3) Over 40,000 lobbyists in Washington, thousands in Brussels, hundreds at the WTO.

(4) $5,250bn in 1998.

(5) The central banks’ official reserves totalled $1,636bn at the end of 1998 (source: 1999 Report of the Bank for International Settlements).

(6) New York (New York Stock Exchange and Nasdaq), Tokyo, Chicago and London total $20,000bn (source: International Federation of Stock Exchanges).

(7) $1bn in $100 bills stacked up would be 1,000m high.

(8) $650bn in 1998, $450bn in 1997 (source: 1998 Report of the United Nations Conference on Trade and Development - Unctad).

(9) In particular the Financial Action Task Force (FATF), which works with banks to prevent financial crime and has been churning out recommendations for ten years.

(10) The most recent concerns the OECD convention on combating bribery of foreign public officials.

(11) The European Council meeting in Tempere, Finland, in October 1999 decided to strengthen Europol’s powers and to create Eurojust as a test bed for a future European public prosecutor’s office.

(12) See Denis Robert, La Justice ou le Chaos, Stock, Paris, 1996.

(13) Le Canard enchaîné, 3 November 1999

Sarkozy Suggests New Bretton Woods Summit Should Take Place in the U.S

Increase DecreaseOctober 1, 2008 (LPAC)-- The French, Oct. 4 "preparatory meeting" in Paris for a New Bretton Woods summit aims to bring together the heads of state and government of those EU members that belong to the G8. Besides French President Nicolas Sarkozy, German Chancellor Angela Merkel, British Prime Minister Gordon Brown, and Italian Prime Minister Silvio Berlusconi, the talks will also include financial decision-makers of the Eurozone: EU Commission President Jose Manuel Barroso, European Central Bank President Jean-Claude Trichet, and Jean-Claude Juncker, head of the eurogroup.

This "G4" is scheduled to meet on Saturday afternoon, for three reasons: 1) The U.S. House of Representatives is expected to have voted on the revamped version of the Paulson swindle; 2) The ECB will have decided on its interest rates on Oct. 2; and 3) Markets are closed.

The final meeting date can still change, and reports from Le Monde indicate how shaky this scramble looks. Barroso and his Brussels gang already moved in with a whole pile of impotent "measures," aimed at increasing bank surveillance, early warning systems, better risk analysis, etc. Other proposals being floated are hedge fund regulation, rating agencies control, offshore banking regulation, and so on.

President Sarkozy hopes that a full G8 summit among heads of state and government could take place between mid-November and mid-December, after the U.S., Japanese and Canadian elections. The location for that meeting can be fixed as desired, but according to Sarkozy, the ideal place to have it would be in the U.S., so that both the outgoing U.S. President and President-elect would be available.

Questioned on French radio Europe 1, Jean-Claude Juncker said that he "applauded President's Sarkozy's initiative" to "take the leadership" of a world response to the financial crisis. But he estimates that the G8 alone "does not have the ability to solve the problems by themselves" of world finance. "One has to add India and China" to achieve a global and long-term response

Keynote Address -Robert B Zoellick ,Sixth IISS Global Strategic Review

The Sixth IISS Global Strategic Review

IISS 50th Anniversary Conference
12-14 September 2008
Geneva, Switzerland

All events will take place at
The InterContinental Hotel
7-9 Chemin Du Petit-Saconnex, Geneva 1211


As Prepared for Delivery


You might be asking, “Now why did John Chipman invite the President of the World Bank Group to speak to the International Institute for Strategic Studies?

In addition to the pleasure of seeing many friends, there is a particular reason why I wanted to speak to this audience. So let me explain.

In 1944, delegates from forty five countries gathered at Bretton Woods, New Hampshire, to consider the economic causes that had led to the World War that was then raging. Their vision was not only to achieve military victory, but also to secure the peace, unlike their predecessors in Paris in 1919.

That generation – like any other – had its parochial attitudes, differences in perspectives, and inability to foresee what was to come. But it perceived one big idea: the nexus among economics, governance, and security.

Those who gathered at Bretton Woods agreed to create the International Bank for Reconstruction and Development, the original institution of what has become the World Bank Group. As the delegates noted, “Programs of reconstruction and development will speed economic progress everywhere, will aid political stability and foster peace.” The IBRD approved its first loan to France in 1947. That $250 million investment remains, in real terms, the Bank’s largest loan to date.

Over sixty years later, the “R” in IBRD has a new meaning: reconstructing Afghanistan, Cambodia, Côte d’Ivoire, Haiti, Iraq, Kosovo, Liberia, the Palestinian territories, the Solomon Islands, Southern Sudan, Timor-Leste, and other lands of conflict or broken states. In Fiscal Year 2008, the World Bank Group committed over $3 billion in development assistance to countries affected by fragility and conflict.

When states are breaking down or overcome by conflict, they pose waves of danger. The first surge threatens the people living there: with death and disease, economic stagnation, and environmental degradation. One billion people, including about 340 million of the world’s extreme poor, are estimated to live in fragile states. These countries lag behind in meeting all the Millennium Development Goals. They account for about a third of the deaths in poor countries from HIV/AIDS, a third of those who lack access to clean water, and a third of children who do not complete primary school. Half of all the children who do not live to the age of five are born in fragile states. And fragile states have poverty rates averaging 54 percent, compared to 22 percent in other low income countries.

The next perilous wave undermines their neighbors with refugees; warring groups; contagious diseases; and transnational criminal networks that traffic in drugs, arms, and people. As we have seen most recently in South Asia and Africa, fragile states can create fragile regions. It is much harder for economies to prosper if they cannot sell to, buy from, invest with, and even transit their neighbors. Landlocked countries with failed or failing neighbors can lose access to the world economy.

And as the world witnessed seven years ago yesterday, broken states can be the weak link in the global security chain if they are infiltrated by terrorists who recruit, train, and prosper amidst devastation.

The trauma of fragile states and the interconnections of globalization require our generation to recognize anew the nexus among economics, governance, and security. Most wars are now conflicts within states, and fragile states account for most of them. But our knowledge about how best to respond remains thin.

We maintain this ignorance at our peril. The diseases, outflows of desperate people, criminality, and terrorism that can spawn in the vacuum of fragile states can quickly become global threats. Moreover, just reflect for a moment about the loss to the world – the waste of human energy, creativity, invention, and possibility – of leaving one billion people in destitute circumstances.

Fragile states are the toughest development challenge of our era.

Those who have struggled with this problem on the ground are no doubt correct when they caution that “no one size fits all.” As one expert told me, the worst thing the development community could do is develop a step-by-step handbook for dealing with fragile states.

Yet that warning is true for any security, diplomatic, political, or economic problem. Without being formulaic, we can and need to do better, learning from experience. As Mark Twain prudently cautioned, “History may not repeat itself, but sometimes it rhymes.”

Too often, the development community has treated states affected by fragility and conflict simply as harder cases of development. No doubt new aspects of globalization, such as climate change, rapid urbanization, and greater levels of inequality within countries can become entwined with fragility and violence.

Yet these situations require looking beyond the analytics of development – to a different framework of building security, legitimacy, governance, and economy. This is not security as usual, or development as usual. Nor is it about what we have come to think of as peacebuilding or peacekeeping. This is about Securing Development – bringing security and development together first to smooth the transition from conflict to peace and then to embed stability so that development can take hold over a decade and beyond. Only by securing development can we put down roots deep enough to break the cycle of fragility and violence.

The stakes are very high. That’s why I identified states coming out of conflict or seeking to avoid breakdown as one of the World Bank Group’s six strategic challenges shortly after becoming President last year.

This evening, I will discuss what we have observed about fragile states, and then suggest ideas about how to assist these countries.

Understanding Fragile States

Let me start with some background. Academic analysis of how to measure, categorize, or rank fragility vary, but three main characteristics stand out: a witches’ brew of ineffective government, poverty, and conflict.

The United Kingdom’s Department For International Development defines fragile states as “those where the government cannot or will not deliver core functions to the majority of its people, including the poor,” and then suggests the most important services.[1]

Ashraf Ghani and his colleague Clare Lockhart refer to a “sovereignty gap” – a disjunction between the state’s capacity to govern by law and its capacity to provide for the needs of the people in practice. What is missing in fragile states, they argue, is “a process for connecting citizens’ voices to government and making government

accountable to citizens for its decisions.”[2]

Fragility does not just mean low growth, but a failure in the normal growth process, such that poverty becomes a persistent condition. Weak governance, corruption, and insecurity combine in a downward spiral.

Fragile states also run a higher risk of conflict than other developing countries. Fragility and poverty alone do not necessarily lead to conflict, but low and stagnant incomes, unemployment, and ineffective government can create an environment that sparks violence. They may increase the opportunity for predators to offer young, disconnected men the allure of achieving power and criminal gains through brutality.

Fragile states with natural resource wealth are especially vulnerable, because these riches can give dangerous people something valuable to fight over.

Paul Collier has put particular emphasis on the cycle of failed government, persistent poverty, and civil war. He argues that fragile states are caught in a “conflict trap,” whereby violence in turn weakens security and institutional capacities, reduces growth by about 2.3 percent per year, lowers incomes, destroys infrastructure, and redirects resources from development. This unwinding reverses development gains. It makes the post-conflict environment even more vulnerable to collapse than the pre-conflict. “Civil war,” Collier asserts, “is development in reverse.”[3]

Collier estimates that post-conflict countries are twice as likely as other developing countries to fall into conflict, and that about half of countries recovering from conflict relapse within the first decade.

A recent study by RAND examines the problems of fragile states in terms of the overlaps among government, economy, and security. Breakdowns in any of these areas, the analysis argues, reinforces breakdown in the others. The result is not just a conflict trap, but a web of unfit government, economic collapse, and insecurity that breeds violence.[4]

Looking across the analytical frameworks for understanding fragile states, we can see a number of common threads – and some gaps.

First, we need to look beyond the state to the state of society.

The development community is used to dealing with sovereign countries: We talk about state-building and building the capacity of accountable and legitimate governments. But when state functions collapse, citizens are often compelled to look elsewhere to fill the sovereignty gap—not only to the international humanitarian community, but to religious authorities, clans, ethnic or tribal groups, warlords, criminal or terrorist organizations, and others. Political, social, military, or economic networks may operate at local, regional, or sometimes global levels, challenging the capacity of the fragile state apparatus to be effective, and hence its legitimacy.

When the state loses the ability to deliver the most basic functions, such as security and legal order, or sustains itself through illicit sources of revenue, fragile “state” may be a misnomer – the state as an entity does not really exist. Witness Somalia.

It may therefore be more appropriate to think about fragile states as countries enmeshed in fragile situations. Not only can external actors contribute to fragility, but so can social, economic, and environmental factors such as demographic pressures, mass movements of refugees, severe economic decline, and desertification, as well as a lack of a sense of nationhood. To help countries caught in fragile situations, we need to understand the state of their societies and the external forces bearing upon them. In some parts of the world, notably in Africa, the challenge is nation-building as well as state-building.

Second, the linkages and overlaps among weak governance, poverty, and conflict help to explain how states can remain fragile over decades. They also suggest that if we want to help these countries – first and foremost by preventing a resumption of conflict – we need to have a much better understanding of the interconnections among these conditions.

An initial step should be to look more closely at possible predictors or indicators of civil violence, such as historical divisions, ethnic and tribal grievances, environmental factors such as drought, or economic conflicts. If conflict is often the reoccurrence of past violence, then we need to give greater attention to stopping the cycle of conflict.

Today, post-conflict peace building and reconstruction efforts have received the bulk of development assistance. This is understandable: It is hard to get donors to pay attention to something that has not yet happened. But conflict prevention must be a better way to ensure stability and peace than picking up the pieces after conflict has destroyed societies, institutions, and lives. Prevention should not just be about last-ditch efforts to avert violence, but about making peace settlements stick through sustained security and support. When risks of conflict increase, those that may be able to avert it need to act quickly. If mediation is possible, we may need more flexibility to offer prompt economic support.

Third, the most critical challenges are concentrated where governance, economy, and security intersect. We need to integrate a variety of tools—military, political, legal, developmental, financial, and technical—and a variety of actors, including states, international organizations, civil society, and the private sector. This will not be easy.

I was struck how an observation of former U.S. National Security Advisor Anthony Lake parallels my experience:

Mention the deleterious political effects of a sound economic policy at a meeting of economic planners and watch their fingers drum impatiently on a table. Talk about the economic details at a conference of diplomats working on a political settlement and watch their eyes glaze. Tell a politician about the importance of painful economic sacrifice now for the sake of economic health later and watch his or her eyes widen in alarm.[5]

To assist in drawing the disciplines together, let me suggest ten considerations to help figure out what to do – or at least what questions to ask – in fragile situations.

Ten Priorities

1) First, Focus on Building Legitimacy of the State

In all things, one should keep in mind the need to build the legitimacy of the fragile state. In the terms of Clausewitz, building legitimacy is the Schwerpunkt, the center of gravity, of the strategy.

Of course, security is fundamental, but even that activity must be connected to achieving the strategic purpose. The counterinsurgency model of clear, hold, and build can only succeed if security is combined with effective governance and development.

Legitimacy in fragile situations is not just achieved through elections or agreements that share power among factions. In some cases, premature elections may actually trigger a new cycle of violence. Legitimacy must be achieved through performance. It needs to be earned by delivering basic services, especially visible ones. Clean up the garbage.

Build institutional capacity by doing things: supplying clean water; sanitation; simple roads to connect territories that may have been cut off from one another; electricity for some part of the day; basic preventative health care such as immunization. Get boys and girls into schools quickly, as in Afghanistan.

New governments, especially ones elected amidst continuing political division and fragility, need to deliver tangible benefits -- not grandiose plans – and fast. As President Johnson-Sirleaf of Liberia reminded at a recent meeting, “A dollar today is worth more to us than $50 in three years time.”

In some cases, the state may have actually had a malignant role, so a new government must demonstrate a benign face. Practical improvements can offer people hope, create a sense of progress, build governmental accountability, and demonstrate how to manage even limited resources – all building confidence and trust.

Project sustainability is important, but in some cases – such as delivering seeds, fertilizers, and tools to farmers for the first planting – sustainability concerns may need to take second place. This is difficult for some development donors to accept.

To achieve legitimacy, it is not only the services that matter, but who performs them: They should be undertaken by the government and local people as soon as feasible. This strategic consideration should guide both the handoff from humanitarian aid to development and the design of transition services. Outsiders can share international experience of what has worked, while the new government and community groups can decide what to do and how to customize to local conditions while implementing. Even as donors pursue short-term objectives, they need to begin to strengthen and transfer responsibilities to ministries and local authorities.

Transparent management of resources is vital. Fragile situations are rife with rumors and spoilers. The best antidote is clearly and repeatedly communicating what the government is doing and why. In Liberia, I traveled with President Johnson-Sirleaf to one of the “town halls” she holds throughout the country to explain the government’s goals, introduce Ministers, take questions, and build a sense of patriotic enthusiasm for rebuilding. President Preval of Haiti led by example and passed a law requiring his Ministers to disclose their financial assets, as a public check on corruption and conflict.

2) Provide Security

The first among equally important services for a fragile situation is the establishment of a relatively safe and secure environment. The debates I have listened to between equally well-meaning security and development specialists have reflected different training, expectations, and attitudes about systems built on command versus those reliant on incentives and markets. Given the linkages between breakdowns in the economy and stability, security and development need to go hand in hand, mutually reinforcing each other. It may make more sense to think of “securing development” in terms of simultaneity rather than sequencing.

In practice, this means more interaction on the ground between security and development staff so they can communicate their respective interests, capabilities, and limitations. As one Canadian development official in Afghanistan pointed out to me, even the term “security” may have different meaning to a soldier in body armor and a female NGO worker living in a village. Too often, the leaders of the professional cultures have kept their distance from one another, but I have found a great deal of mutual respect among the people in the field. The provincial reconstruction teams (PRTs) in Iraq and Afghanistan offer a good example.

Soldiers may not wish to – or think they cannot – defend fixed points or lines, such as villages or power lines, pipelines, and roads. But without some strategy to minimize danger and disruptions, development may be impossible, and a fragile state’s legitimacy undermined.

Clearly, one lesson is that the numbers matter: As many as 15,000 military personnel are authorized to keep the peace in Liberia for a population of 3.6 million, while the Democratic Republic of the Congo has roughly the same number of peacekeepers but a population of more than fifty million in a country the size of Western Europe. The United States learned it needed more forces to succeed in Iraq, and NATO needs more troops in Afghanistan today.

If we are serious about breaking the downward spiral of violence and state breakdown, larger forces need to be kept in place longer. To build confidence, UN peacekeeping mandates and renewals should be authorized for much longer than 6 to 12 months. In some cases, we may need mandates that are less restrictive, so UN operations can prevent the outbreak of violence.

Development experts, in turn, need to recognize the priority of using economic progress to boost security. When soldiers discuss the economics of security, their first priority is jobs – no matter how created. When a security gain can be leveraged, development projects may need to be suboptimal economically – “good enough” rather than first-best. When areas of a country are still insecure, development may need to be pursued piecemeal through pilot projects.

To build legitimacy and effectiveness, international partners also need to assist the fragile state to build – and pay for – its own reliable police and armed forces. Properly organized and trained, local police and military are key to securing public support, gaining intelligence, and sustaining security. A good police force and army are worth the investment, because ill-trained forces or an officer corps that does not respect the government’s legitimacy will perpetuate or even worsen a destructive situation. Job training and placement for ex-combatants, to help transform fighters into participants in recovery, is also a critical need – and a consistent deficiency.

3) Building Rule of Law and Legal Order

The most fundamental prerequisite for sustainable development is an effective rule of law, including respect for property rights. Yet the international security and development communities have let the task of building of justice and law enforcement systems fall between the cracks. It is not clear to me where the international capacity exists to help establish basic courts and tribunals to resolve disputes, train judges and advocates, and build prisons and police forces, all of which need to recognize local cultural and legal traditions. The effort of UNDPKO to launch an office of Rule of Law and Security Institutions is at least a start.

Poorly trained and paid police usually add to fragility by arming and empowering predators. In much of Afghanistan, the greatest security fear for businesspeople is kidnapping, often by the police. The positive results with building a police force in Bosnia seem to be the exception that proves the rule.

A legal order is not only vital to public safety – it is also a safeguard against the serious risk of criminalization of the state. Corruption adds to fragility and lack of legitimacy. Abuse of state power destroys confidence, and ultimately the state’s legitimate and core purpose.

4) Bolster Local and National Ownership

Local and national ownership in state building is fundamental to achieving legitimacy, trust, and effectiveness.

Community driven development programs, which give control over decisions on investing modest resources to community groups and local governments, have proven to be successful. Afghanistan’s National Solidarity Program is a good example. This program, launched five years ago by the Afghan government with the World Bank’s help, today empowers more than 20,000 elected Community Development Councils to allocate modest grants to local priorities—whether micro-hydroelectric generators, schools, roads, irrigation, erosion, or water supply projects. The program reaches more than 17 million Afghans in all 34 provinces, and has an economic rate of return of close to 20 percent.

The community structures established with the help of the World Bank’s Community Reintegration and Development Project in Rwanda now form the backbone of the government’s decentralization policy and have become the platform for implementing projects in multiple sectors. These types of local programs link self-help with self-determination.

At the national level, donors need to help governments develop the capacity to employ the national budget as a transparent tool for coherent planning and accountability. This means strengthening both the Ministry of Finance and the cabinet process. The starting point is to assist with the development of simple systems for financial management, payrolls, and procurement. Otherwise, channeling resources through a national budget will be like pouring water on sand. Even worse, the aid could create an asset for people to fight over.

Unfortunately, many donors seeking “results” – often with their flag, not the government’s – circumvent the national budget altogether. In Afghanistan, two-thirds of donor funds are outside the budget.

If donors cannot work with a government to build national accountability systems that donors can trust, how can one expect the public to trust its own government? Recall the strategic center of gravity is to build legitimacy through good and effective governance.

5) Ensure Economic Stability – as a Foundation for Growth and Opportunity

Macroeconomic stability is a prerequisite for effective recovery. Countries need to get the fundamentals right –fiscal, monetary, and exchange rate policies – so that there can be stable economic conditions that permit markets to expand; trade can resume; people can rely on a currency as a store of value; and investors can feel more secure about saving and building.

But we also have to recognize that fragile states are just that – fragile, especially in the face of sudden shocks. They need specialized, real-time monitoring that can assess and respond to changing external conditions – such as fast-rising food and energy prices – with speed and flexible support. Reforms for economic stability need to be sequenced with political cycles to avoid triggering governance crises that will make economic reform impossible.

The international financial institutions – including the IMF and the World Bank Group – need tools to help quickly, such as by clearing arrears, and then to fill gaps promptly, whether for governmental capacity, food, or balance of payments support.

6) Pay Attention to the Political Economy

Effective efforts to address fragility and conflict must be grounded in a political economy that is capable of sustaining peace. This means taking into account the relationships between power and wealth in society. Conflict and instability can, after all, be a lucrative business for those in power who may exploit state resources or profit from violence. If links develop between political power and illegal economic activity, they can deprive the legal economy of an opportunity to grow, the state of revenue, and both of legitimacy. This may be especially dangerous in countries where there is natural resource wealth.

Putting in place the economics incentives for stability and peace may not be enough if donors do not have a good understanding of who wins and loses from peace settlements. Donors need to understand the history of a country and its people, who holds power and how power is brokered and used, and the relationship between these relationships and formal institutions. This kind of expertise does not always come easily to those schooled in more traditional development disciplines. Yet too many perfect economic plans have floundered upon the rocks of political impossibility.

The challenge for donors increases when the technocrats who may be in charge at the start of reconstruction give way to political leaders. Unfortunately, development technocrats are too often dismissive of the arts and compromises of politics. At the same time, a new political leadership that has come to age through fighting or in exile will need support, and some patience, in learning their new roles and responsibilities.

7) Crowd in the Private Sector

It is important that a focus on building state legitimacy, capacity, and performance not lead us to overlook the sustainable engine of recovery and growth: a healthy private sector.

Private sector development and the creation of small businesses spur investment, jobs, opportunity, and hope. It empowers the market to meet local needs, whether for food, basic goods, or services. A healthy private sector will eventually provide the source of sustainable revenues for a legitimate government.

To some extent, private sector development can happen even in the absence of formal legal frameworks and financial sectors, drawing on private remittances and transfers from abroad. Protection of property rights through traditional institutions and networks can help, as we are seeing in Northern Somalia. But early efforts to signal the value the government places on investing in the future – whether through work or capital – are important. Enforceable property, contract rights, and basic security that prevents predation on business offer the foundation. Transparent and simple rules lower the costs of doing business and enable people to get started without fearing confiscations by the state.

Given the risks and uncertainties of investing in a post-conflict environment, fragile states will need a combination of public and private support. Institutions such as the World Bank Group, through its private sector arm, the International Financial Corporation, can provide investment and advisory services, help assess the investment climate, develop basic financial services and microcredit, encourage better governance and rule of law, and enable an environment for private sector activity.

We need to develop more innovative models for leveraging public and private capital to build basic infrastructure – such as power plants, ports, and communications, transport, and energy systems. Post-conflict environments are also an opportunity for small and medium enterprises to develop.

In addition, we need to acknowledge that risk is simply a factor in dealing with fragile states. We need to be prepared for some projects to fail in these countries if the larger effort is to have a chance.

8) Coordinate Across Institutions and Actors.

States, international institutions, foundations, NGOs, and the private sector all have a role to play in helping these countries. But without greater coordination – and even integration of activities – we will overwhelm the very governments we seek to help.

The average developing country hosts 260 visits from donors a year. Cambodia has 22 different donors in the health sector, with 109 separate projects. In 2006, across all developing countries, donors directed 70,000 aid transactions, and the average project size was only $1.7 million. This overload is a huge burden for any developing country’s reform team; in a fragile state it can overwhelm a small team that needs time to work with colleagues and countrymen as well. We can also weaken our own hand, by making it easy for our national partners to play one actor against the other.

We need joint assessments that reflect an inevitably dynamic process of rebalancing security, governance, and development – always with an eye on building legitimacy. We need joint benchmarks to encourage convergence of strategies. And the countries need donors to create greater interoperability – for example, the UN and the World Bank, and the World Bank and the EU. Donors also need to create sensible divisions of labor, leverage synergies, and share best practices.

Greater use of Trust Funds – where donors pool resources – could reduce the administrative burden on weak governments of having to deal with so many different donor procedures. This is the source of sharp debate between the European Commission, which has supported trust funds, and some Member States and European Parliamentarians. The United States and Japan have also been reluctant to contribute to trust funds.

Furthermore, a more diverse group of partners may be able to broaden the support for these countries. Brazil is leading the UN Peacekeeping operation in Haiti. China’s investors are a growing source of finance in developing countries, including many fragile ones, just as its peacekeepers are serving in larger numbers in UN operations. The major countries of South Asia have long contributed to Blue Helmet missions. And the development of more effective and larger African Union peacekeeping forces would be of great benefit, especially if they could be interoperable with developed country forces and logistical networks.

9) Consider the Regional Context

States in fragile situations can be both the cause of regional unrest and the object of manipulation by neighbors.

Successfully resolving conflict inside national borders may not be enough to build a lasting peace. We need to recognize the consequences of cross-border ties, whether tribal and ethnic, religious, or other transnational identity groups; population movements; trade and smuggling routes; narcotics and criminal rings; or political links. These connections may underpin hostility, or be the key to easing it.

Resolving conflict requires a regional approach that provides positive incentives to neighbors and seeks to dissuade spoiling neighbors. We have some successful examples, such as the EU’s support for reconstruction in the Balkans through the incentive of EU membership, and the role of the Economic Community Of West African States (ECOWAS) in Sierra Leone and Liberia, including through the provision of regional peacekeeping forces. In early days, the Bonn process for Afghanistan appeared to encourage the recognition of common interests in lowering trade barriers, investing in energy and transit, controlling illegal narcotics, and pledging political non-interference, but that accomplishment has frayed seriously. As the new Iraqi government strengthened its legitimacy, it has made efforts to reach accommodations with its neighbors.

10) Recognize the Long-term Commitment

These are not quick-fix countries: Support needs to be for the long-haul. Money and humanitarian aid flood into the more fortunate countries at the beginning of a post-conflict settlement, often beyond the state’s capacity to absorb it. But, as in Timor-Leste in 2006, when the “CNN moment” had passed, aid tapers off and attention shifts to another crisis. In Haiti, this pattern of attention and inattention created a perception that outsiders were not really committed to long-term recovery – emboldening spoilers.

If we are serious about the problems of countries in fragile situations or coming out of conflict, we need to move beyond ad hoc and post hoc remedies. We need to reconsider the handling of donor conferences in the immediate aftermath of conflicts, so that we do not announce high figures that exceed absorption capacities and raise expectations that can later lead to a backlash of disappointment. Funding mechanisms need to ensure continuity and stability of resources over a decade or more. This means managing the expectations of donors and, for some organizations, changing financing parameters for fragile and post-conflict states. The World Bank, for example, is constrained by the allocation formula our donors establish for the International Development Association, or IDA, our largest source of highly concessionary financing. (These are grants or long-term loans with a 10-year grace period and no interest charge).

But this work is not just a matter of money. Commitment to helping fragile states also means sustained attention to signs of fragility and conflict, and countering the myriad risks that threaten security, governance, development – and legitimacy.


There are many pressing matters worthy of IISS’s attention as part of its Global Strategic Review. The rise of new powers. Nuclear proliferation. Climate Change. Competition over Natural Resources. Cutting-edge technologies and military transformations.

Yet consider where many militaries are engaged today. Whether motivated by calculations of national interests, humanitarian causes, regional instabilities, filling unstable vacuums, or preventing terrorists from basing and building, fragile states are a principal area of operation.

Militaries have made advances in counterinsurgency strategies, operations, and training. Yet the military arm is but one tool, which must be integrated with political and economic capabilities to be successful. Ultimately, the most important element in fragile or post-conflict states is the people of those countries. And those who made war need to make peace.

Soldiers and aid workers need to cooperate to help the people in these countries shift from being victims to becoming the principal agents of recovery. Without this cooperation, efforts to save fragile states are likely to fail, and we will all pay the consequences.

Our appreciation of how best to secure development – to synthesize security, governance, and economics to be most effective – is still modest.

I have been encouraging development and finance ministers, experts, and practicing professionals to think about fragile states with new perspectives and to reach out to other disciplines to better understand their experience and insights.

To expand our understanding and work on fragile states, the World Bank Group is organizing “headline seminars,” convening people from different disciplines, publishing research and best practice notes, assembling an Advisory Group, and reconsidering our operational procedures, training, resources, and support. I hope that IISS can help us strengthen the exchange among security specialists, students of governance, development practitioners, and political leaders.

One of the strategic challenges for the World Bank Group is modernizing multilateralism: We need to help overhaul the institutions and regimes of multilateralism, some established over 60 years ago, to meet the necessities of a very different era. Both U.S. Presidential candidates have spoken about strengthening America’s multilateral approach to foreign policy. The time is ripe, and the dangers – and opportunities – of fragile states will be on the agenda for all of us.


[1]“Why we need to work more effectively in fragile states,” DFID (2005).

[2]Ashraf Ghani and Clare Lockhart, Fixing Failed States, (2008), 21.

[3]Paul Collier, The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, (2007), 27.

[4]Marla C. Haims, David C. Gompert, Gregory F. Treverton, Brooke K. Stearns, “Breaking the Failed-State Cycle,” RAND, (2008).

[5]Anthony Lake, as cited in Geoff Harris, ed. Recovery from Armed Conflict in Developing Countries: An Economic and Political Analysis, (1999), 63.

INDIA: Reform Local Law Enforcement


This one is for not just those Catholic Bishops and U.R. Ananthamurthy but also Mr. Jaswant Singh and Ms Vasundhara Raje and every other Indian who loses sleep over every local incident of violence or mishap, jumps to the most attractive conspiracy theory if there was one, demands CBI probes and Judicial enquiries at the drop of a hat, express moral indignation when a Arushi murder case is reduced to a media circus but then conveniently forget that at the root of all this is the rot that afflicts Local Law Enforcement across the nation.

This is also to remind them that those who abett and participate in Mob Violence are no outlaws operating outside the bounds of society. These are almost always individuals with a stake in the system who are otherwise law abiding but feel encouraged to break the rule of law by seeking refuge in the anonymity of the Mob.

Offstumped had on multiple occassions called for Local Law Enforcement to be freed of the current system of bureaucratic hierarchies controlled by centralized Ministries. On every such occasion Offstumped had demanded that Local Law Enforcement be made directly accountable to the people through direct democracy with Officers who have a direct stake in the Community. Offstumped had also demanded on every such occasion that current system of Political Control of Law Enforcement be brought to an end so the first responders have a direct obligation to the community they serve and not to a bureaucrat or Minister sitting in the State Capital.

Below is a compilation of past posts on this subject.

Offstumped on the Burra Bazar Blaze in Kolkota back in January 2008 on how the alarm bells are ringing on Local Governance.

Offstumped on the Noida Nithari Killings on how Social Justice had subverted Criminal Justice back in January of 2007.

Offstumped asking Mumbaikars to make Local Law Enforcement an issue in the BMC Polls, also in January of 2007.

Also demanding autonomy for Bangalore with a specific demand to make local law enforcement directly accountable to the residents of Bangalore.

Then this comprehensive piece in May of 2008 on the rot in local law enforcement.

The history of India in the last century and this decade is littered with a million mutinies where local law enforcement just failed the citizens in its failure to be uncompromising and unrelenting in upholding the rule of law. Offstumped had highlighted this in its analysis of the Srikrishna Report on Mumbai 1993 riots.

In the face of this fundamental flaw with the way we run local law enforcement it is galling that Catholic Bishops to Communal Socialists like U.R. Ananathamurthy should hijack the public debate on the recent violence in Karnataka to a discussion on fascism and root causes.

Offstumped would like to ask these Communal Socialists where they were on every previous occasion when Karnataka or any other state witnessed mob violence on issues as benign as a wedding procession to issues as asinine as a Movie Actor’s Death.

Offstumped Bottomline: From communal riots to the attacks on Taslima Nasreen, from the Cauvery riots to Raj Kumar’s Death, India is no stranger to Mob Violence. To selectively view the fundamental problem with Mob Violence through a Communal Prism does the victims of Mob Violence little justice. Drawing dubious parallels with Terrorism and obfuscating the issue with talk of Fascism only hijacks the debate away from the rot in Local Law Enforcement. It may help armchair analysts assuage their guilt. But it provides little or no insurance to the common man from the next mob

Surge in Anti-Jewish Messages on Online Finance Sites

ADL Reports Surge in Anti-Semitic Messages on Online Finance Sites in Response To Money Crisis

New York, NY, October 2, 2008 … In the wake of the collapse of major investment banks and the government's proposed bailout of financial institutions, the Anti-Defamation League (ADL) is reporting a dramatic upsurge in the number of anti-Semitic statements being posted to Internet discussion boards devoted to finance and the economy.

Hundreds of anti-Semitic posts regarding Lehman Brothers and other institutions affected by the subprime mortgage crisis have been submitted to discussion boards dealing with finance, with many more arriving by the minute. The messages rail against Jews in general, with some charging that Jews control the government and finance as part of a "Jew world order" and therefore are to blame for the economic turmoil.

Anti-Jewish invective also has surfaced on a wide variety of blogs and conspiracy Web sites, according to ADL, which monitors anti-Semitism on the Internet through its Center on Extremism. And similar messages have also appeared on neo-Nazi and white supremacist Web sites and Internet forums, which frequently seek to exploit current issues in an effort to spread anti-Semitism to potential recruits.

"We know from modern history that whenever there is a downturn in the global economy, there will be an upturn in the level of anti-Semitism and bigotry, and that is what we are seeing now," said Abraham H. Foxman, ADL National Director. "The age-old canards about Jews and money are always just beneath the surface. As we witnessed after 9/11, whenever there is trouble or uncertainty in the economy or world events, Jews become the scapegoats, and ugly anti-Semitic canards are given new life."

Examples of some of the more virulent anti-Semitic posts to mainstream Finance message boards include:

"(Jews have) infiltrated Wall Street and Government and have ruined our country."
"What is a GS Jew? Goldman Sachs? Jews are greedy, rotten slime balls."
They (Jews) love money nothing else, no faith or religion can be so heartless to their victims."

That's how they work they short the stock all the way making billions and then cover right it up sell and then taxpayers to the rescue and it is true all those institutions are ran by Jews …."

While operators of the most popular finance message boards, including those hosted by Yahoo! Finance, have been quick to remove offensive comments, the rate at which new posts are arriving prevents them from removing all of the objectionable material before it is widely read. In many cases, other individual members of the groups have immediately responded against the anti-Semitic comments, decrying the messages as bigoted, inappropriate and categorically false. In recent weeks since the crisis started to unfolded, many Internet users have reported their concerns directly to ADL.

"The good news is that providers of Internet services and moderators of message boards and even individual users are quick to react whenever anti-Semitism enters the discussion," said Mr. Foxman. "The service providers are responsive, and in most cases the offensive messages are quickly removed. But in many cases -- especially with online discussions that occur in real time and are closely followed by large groups of users -- the damage is already done."

Similar anti-Semitic sentiments about the economy are appearing with great frequency on white supremacist Web sites such as Stormfront, the largest Internet forum for white supremacists and neo-Nazis. Posts and discussions on Stormfront have included references to Jewish control of the banking industry and suggestions that Jews hold complete power over government and the financial services sector.

Wrote one poster on Stormfront of the collapse of Lehman Brothers: "No doubt many of the board of directors, which is usually composed of the major shareholders that wield power, are still largely Jewish … I would imagine the likelihood of the Fed etc. bailing the company out depends largely to what degree it is Jewish owned."

The Anti-Defamation League, founded in 1913, is the world's leading organization fighting anti-Semitism through programs and services that counteract hatred, prejudice and bigotry

Chinese monitors track Internet messages

International herald Tribune

By John Markoff Published: October 2, 2008

SAN FRANCISCO: A group of Canadian human-rights advocates and computer security researchers has discovered a huge surveillance system in China that monitors and archives certain Internet text conversations that include politically charged words.

The system tracks text messages sent by customers of Tom-Skype, a joint venture between a Chinese wireless operator and eBay, the Web auctioneer that owns Skype, an online phone and text messaging service.
The discovery draws more attention to the Chinese government's Internet monitoring and filtering efforts, which created controversy this summer during the Olympic Games in Beijing.

Researchers in China have estimated that 30,000 or more "Internet police" monitor online traffic, Web sites and blogs for offensive content in what is called the Golden Shield Project or the Great Firewall of China.

The advocates, who are based at Citizen Lab, a research group that focuses on politics and the Internet at the University of Toronto, discovered the surveillance operation in September. They said a cluster of eight message-logging computers in China contained more than a million censored messages. They examined the text messages and reconstructed a list of restricted words.

Chinese monitors track Internet messagesMicrosoft to open research centers in EuropeIn Silicon Valley, storm clouds from a troubled economy
The list includes words related to the religious group Falun Gong, Taiwan independence and the Chinese Communist Party, according to the researchers. It includes not only words like democracy, but also earthquake and milk powder. Chinese officials are facing criticism over the handling of earthquake relief and chemicals tainting milk powder.

The list also serves as a filter to restrict text conversations.

The encrypted list of words inside the Tom-Skype software blocks the transmission of those words and a copy of the message is sent to a server. The Chinese servers retained personal information about the customers who sent the messages. They also recorded chat conversations between Tom-Skype users and Skype users outside China. The system recorded text messages and Skype caller identification, but did not record the content of Skype voice calls.

In just two months, the servers archived more than 166,000 censored messages from 44,000 users, according to a report published on the Information Warfare Monitor Web site at the university.

The researchers were able to download and analyze copies of the surveillance data because the Chinese computers were improperly configured, leaving them accessible. The researchers said they did not know who was operating the surveillance system, but they said they suspected that it was the Chinese wireless firm, possibly with cooperation from the Chinese police.

Independent executives from the instant message industry say the discovery is an indication of a spiraling computer war that is tracking new communications technologies.

"I can see an arms race going on," said Pat Peterson, vice president for technology at Cisco's Ironport group, which provides messaging security systems. "China is one of the more wired places of the world and they are fighting a war with their populace."

The Chinese government is not alone in its Web surveillance efforts. In 2005, The New York Times reported that the National Security Agency was monitoring large volumes of telephone and Internet communications flowing into and out of the United States as part of the eavesdropping program, intended to hunt for evidence of terrorist activity, that President George W. Bush approved after the terrorist attacks on Sept. 11, 2001.

And earlier this year the issue of Skype monitoring was raised in both Germany and Austria. Classified documents that appeared in the press indicated Germany was considering the deployment of a system that could be secretly installed on a personal computer to undermine Skype security. In June, remarks by an Austrian government official led to speculation that there was a secret "back door" in the software for monitoring purposes. At the time Skype declined to comment on the reports. However, previous technical audits of the software by independent cryptographers suggested that such a loophole did not exist.

The researchers said their discovery contradicted a public statement made by Skype executives in 2006, after the content filtering of the Skype conversations was reported. At the time, the company said that the conversations were protected and private.

"We were able to download millions of messages that identify users," said Ronald Deibert, an associate professor of political science at the University of Toronto, who along with Nart Villeneuve, a senior research fellow at Citizen Lab, found the surveillance system. "This is the worst nightmare of the conspiracy theorists around surveillance coming true. It's 'X-Files' without the aliens."

Jennifer Caukin, an eBay spokeswoman, said, "The security and privacy of our users is very important to Skype." But the company spoke to the accessibility of the messages, not to the monitoring activities in China. "The security breach does not affect Skype's core technology or functionality," she said. "It exists within an administrative layer on Tom Online servers. We have expressed our concern to Tom Online about the security issue, and they have informed us that a fix to the problem will be completed within 24 hours."

Not a Cent for the Bankrupt Banks --Italian Senate

This article appears in the October 3, 2008 issue of Executive Intelligence Review.

by Helga Zepp-LaRouche

This article was translated from German.

Although Germany will probably be the last nation where the media will report on it, in reality, there is only one realistic proposal, as to how the greatest breakdown crisis of the finanical markets since money came into existence, can be overcome. This revolutionary proposal was just submitted as a resolution in the Italian Senate by Sen. Oskar Peterlini and, so far, by an additional 19 Senators. It calls upon the Italian government to immediately put on the international agenda the entire program proposed by Lyndon LaRouche for a New Bretton Woods. Italian Economics Minister Giulio Tremonti had previously repeatedly demanded the immediate formation of a new financial architecture.

The second—unrealistic—proposal of U.S. Secretary of the Treasury Henry Paulson, to ram through a fund of $700 billion as the beginning of an unlimited rescue action for the involvent banking system, could rapidly fall through, in the face of the resistance of conservative Republicans and furious American taxpayers, who see themselves faced with having to pay for the rich speculators, and in the process, losing their savings and their standard of living through inflation.

The question of which of these two conceptions will prevail, will decide whether the world recovers relatively soon from the escalating financial crisis and depression, and can begin a reconstruction of the world economy, or whether a hyperinflationary worldwide collapse will occur as happened in Germany in 1923, and a crash into a New Dark Age.

The chance absolutely exists, that the solution proposed by LaRouche will prevail. Even if it remains to be seen, whether the right actions follow the words quickly enough, French President Nicolas Sarkozy used his speech, as the current president of the European Union, before the UN General Assembly on Sept. 23, to say that he will organize a New Bretton Woods conference in November. In his keynote address on the financial crisis given two days later at an event in Toulon, France, Sarkozy said: "The entire global financial and monetary system must be rebuilt from scratch, as was done after World War II in Bretton Woods," and added: "With the end of finance capitalism[!], an epoch draws to a close." There has been no regulation and no political interference in the market. "The idea that the market is always right is insane."

Much as Sarkozy's thinking seems to go in the right direction, we don't have two months in which to convene such a New Bretton Woods conference; the tempo of the meltdown is much too rapid. Not only is the former Presidential candidate of the Solidarity and Progress party, Jacques Cheminade, who for many years has advocated the ideas of LaRouche in France, pushing for immediate action, but so are representatives of other parties, such as François Hollande, general secretary of the Socialist Party, and former prime minister Michel Rocard. A debate on the New Bretton Woods has broken out in full in the French media, in glaring contrast to the complete Gleichschaltung [marching in step] of the German media, which reports neither on the discussion of a New Bretton Woods in Italy, nor on that in France. Also in Russia, which has been gripped by the repercussions of the financial crisis, a full debate on a New Bretton Woods has broken out. The increased interest in the programmatic ideas of LaRouche is reflected in hundreds of Russian websites, as well as in the interview with LaRouche that the state TV station Russia Today broadcast on Sept. 22, in which LaRouche pointed out the parallels of the current financial crash to the 14th Century, and the danger that now, as then, the crash threatens to result in a Dark Age.

Moreover, right now there almost no nation in the world, in which many leading individuals are not confronting themselves with the question of how right LaRouche has proven to be, in his webcast on July 25, 2007, in which he emphasized that the world financial system had already collapsed, and that now we would just observe how the effects of this collapse would wash up on the shore. Three days later, the U.S. subprime mortgage crisis broke out. Many are now trying to figure out how LaRouche could have known that, whereas so many "experts" had not only regarded a systemic collapse as impossible, but even in May of this year, were proclaiming that the worst was over.

Change of Mood in the U.S.A.
The situation in the U.S.A. has meanwhile intensified dramatically. On top of the substantial list of banks that had already gone bankrupt, now, with the bankruptcy of Washington Mutual—the largest U.S. savings and loan bank, with deposits of $188 billion and a mortgage portfolio of $176 billion, much of which is in distress—the biggest banking collapse in U.S. history has occurred.

In the face of this dramatic development, the mood in the population is more inclined to lynch the unscrupulous speculators, than to accept Paulson's proposal to create a bailout fund of $700 billion, the Mortgage and Financial Institution Trust (MFI), whose funds are to be increased without limit, as required.

Now the Senators and Congressmen who will be up for reelection on Nov. 4, are getting an earful of this change in the mood of the population, when they return to their home districts. And conservative Republican Senators have said that they perceive it as deeply "un-American" to socialize financial losses.

When it became apparent, at the crisis summit in the White House on Sept. 25 (in which, besides President Bush, John McCain and Barack Obama also participated), that not everybody agreed with the Paulson plan, Paulson knelt down in front of Speaker of the House Nancy Pelosi, seeking support for his hyperinflationary swindle—a gesture which was as laughable as it was senseless.

Paulson's attempt to have the MFI take over 100% of the toxic waste—that is, the worthless, unsellable "commercial paper" of the banks and hedge funds, as well as domestic and foreign investors—would prove to be the poison that finally kills the patient: the world economy. Due to the lack of transparency in over-the-counter derivatives transactions, no one knows with certainty the precise extent of this problem; however, the figure of $600 trillion has been mentioned as comprising the outstanding derivative transactions. but it could very easily be even higher.

If all of these outstanding debts were honored, it would result in hyperinflation, which would endanger the livelihoods of literally billions of human beings. At the same time, the MFI's hundred percent guarantee would be an incentive for all mortgage holders and creditors of all types to apply for help in meeting delinquent payments, in the certainty that they would be compensated. The "moral hazard" would explode.

German Government Indignant, But at a Loss
When Paulson demanded that other nations create similar funds to save their banks, a storm of indignation broke out. Chancellor Angela Merkel and Finance Minister Peer Steinbrück adamantly refused German participation, saying that this was an American problem. That this is not the case, could surely be understood by anyone in Berlin, after the losses of IKB, Saxon LB, Baden-Württemberg LB, Bavarian LB, and the Kreditanstalt für Wiederaufbau (KfW), and the difficulties of the German subsidiaries of Lehman Brothers. And, as the London Times points out, Great Britain's five top bankers alone have $175 billion in "endangered deposits," and could claim a quarter of Paulson's mega-rescue package, if it comes to fruition.

French Finance Minister Christine Lagarde is among those who was pleading with Paulson to save the insurance giant AIG, which had insured over $300 billion in credit derivatives of European firms. And Daniel Gross, director of the Centre for European Policy Studies in Brussels, in an interview with the Daily Telegraph went so far as to say that the Paulson plan was, in reality, a rescue plan for the European banking system. Gross explained that Deutsche Bank deploys foreign capital that amounts to 50 times its own capital, and has obligations of $2 trillion, which amounts to 80% of the German gross national product. Fortis Bank has obligations which add up to 300% of Belgium's gross national product. Europeans, moreover, do not have the means to save these banks; only the European Central Bank can do that, and precisely such action has been ruled out by the Maastricht Treaty.

This could be the reason for Steinbrück's refusal to participate in the Paulson plan. Because, since Germany handed sovereignty over its currency over to the European Central Bank, the Bundesbank has lost its role as the "lender of last resort," nor does the ECB see this as its responsibility. There is therefore no basis in law for the creation of a German rescue plan along the Paulson model. The only thing Steinbrück could do under current circumstances, would be to burden the budget with a new issuance of credits to the money markets, in order to rescue the banks, and that, in ludicrous dimensions. It will very quickly become obvious, if it has not already, that herein lies one of the errors in construction of the European Monetary Union.

If what the Süddeutsche Zeitung pointed out is true—that even Left Party chairman Oskar Lafontaine not only approved the Paulson plan (and thus the hyperinflationary rescue of the speculators at the taxpayers' expense!), but also demanded that the German government participate in it, then Lafontaine has "outed" himself as more economically incompetent than Steinbrück himself—and that's saying something.

The fact is, that in a systemic crisis such as we are experiencing today, only national governments are capable of handling the situation. Sarkozy has clearly recognized this, and announced that the state will play a very much greater role in French policy, from now on. In Germany, the government would be well advised to recognize that all its members have sworn an oath of office to protect the German people from harm. Concepts of how to do that, in the face of the international conflagration of the financial system, have not been put forward in any way.

Liko-Bank, equipped for insuring deposits in an emergency, was already nearly depleted by the losses of the German subsidiary of Lehman Brothers, shedding further light on how inadequate the allegedly so secure protection of savings deposits is in Germany. When the Paulson plan hit the skids politically, the European central banks, the ECB, the Swiss National Bank, and the Bank of England reacted by making available to the investment banks, as they had before, seven-day loans of about Eu74 billion, thereby demonstrating that they are apparently still determined to keep refinancing the interbank borrowing and swaps with credit derivatives.

In the face of the fact that the world finds itself in an advanced state of meltdown, the flap over the transfer by KfW of over Eu500 billion to Lehman Brothers, after the news of its insolvency was out, was, if anything, a diversion from the real problem. And surely, there was a certain degree of negligence, as well as a certain automatism in play, in which the seven-hour time differential between Europe and the United States played a role.

But such ill-advised money transfers are happening more often. Chase Manhattan transferred money to Herstatt Bank, which had gone bankrupt back in the 1970s. After a protracted legal battle, the Bundesbank stepped in and refunded the sum, for reasons of goodwill. It would thus be only fair, if today the Fed would likewise refund the money to KfW, for reasons of goodwill.

On a more fundamental level, one thing must be clear: Only if the decision is made in time, to put the hopelessly bankrupt financial system into an orderly bankruptcy proceeding, and to establish a Bretton Woods system such as that which Franklin Roosevelt conceived in 1944, and Lyndon LaRouche represents today, will we emerge from this crisis.