This is the
right time for
the United
States to
seriously
consider
embarking on a
bold investment
of creating
technology in
energy that
would reduce the
cost of energy,
create energy
independence via
renewable
sources and
attendant
benefits of
favorable trade
balance,
employment,
higher GDP
growth, deficit
reduction and
national debt
reduction. The
energy
independence
platform of the
U.S.
administrations,
from President
Carter to
President Obama,
has not met
goals for energy
independence.
This void can be
filled by a
determined
decision to make
the U.S. the
world's largest
producer of
renewable
energy.
With the
advent of the
Organization of
the Petroleum
Exporting
Countries (OPEC)
in the early
70s, the energy
crises ensued in
the high
energy-consuming
countries in
Europe along
with the United
States in which
the price of oil
was set and by
OPEC -- an
organized and
collusive
oligopoly -- a
cartel. OPEC was
able to shift
approximately
$2.1 trillion of
additional
wealth transfer
-- above a free
market price --
from the
American
consumers to oil
producing
countries during
1973-2011.
In response,
the West has
opted for energy
independence
attempting to
develop
renewable
energy. But the
effort has been
meager. For
instance
17% of
Germany's
electricity
supply is in
renewable energy
and only 8% of
energy supply
draws upon
renewable energy
in the U.S.
Other policy
measures such as
price control,
raising oil
taxes, monetary
and fiscal
incentives have
not been
effective. The
United States'
petroleum
imports from
OPEC were
leveled at
41 percent
in 2009, a much
lower percentage
from 70 percent
in 1977. U.S.
petroleum
imports shifted
from OPEC to
non-OPEC after
1992; although
petroleum prices
are set by OPEC
globally. The
United States
has had a
negative energy
trade balance
since the
mid-50s.
After nearly
half a century
of struggling
with the energy
issue in the
U.S. the
following are
obvious:
All of
the
development
of renewable
energy
(solar, wind
and others)
thus far has
contributed
only 8
percent of
the total
energy
supply in
the U.S. It
follows that
a large
supply gap
for
renewable
energy
remains to
be filled in
the U.S.
market. To
put this
figure into
perspective,
coal and
petroleum
comprise 58
percent of
total supply
for energy
consumption.
Energy
consuming
countries
remain
heavily
dependent
upon oil
imports,
most notably
in 2010; the
United
States'
import bill
of oil had
reached
$337 billion.
Per
person
energy
consumption
has steadily
increased
over time
with the
rise of
living
standard
outstripping
per capita
production
of all
sources of
energy. This
has
contributed
to higher
prices of
energy.
Energy
expenditures
per person
have
increased
from
$404/year in
1970 to
$4,089/year
in 2009. The
rise in
energy
prices has
had negative
impact upon
distributional
objectives
of the U.S.
imposing
pressure on
middle and
low income
groups.
China
and India --
the two
emerging
countries
with high
growth rates
have entered
the buyers'
market in
energy,
contributing
further
pressure
upon oil
prices. Both
China and
India
account for
36 percent
of
incremental
increase in
the world
primary
energy
market.
Oil
companies in
the private
sector while
amassing
billions of
dollars in
profits have
not solved
the energy
supply
constraint.
The private
sector which
is the
logical
agent of
invention,
innovation,
and
technological
breakthroughs
in energy
technology
has not
measured up
to the
requirements
of the
supply
challenge
for energy.
In the first
three months
of the 2011,
Exxon Mobil
Corp.
actually
increased
its
performance
by 69
percent over
last year's
and in the
process
earned
nearly
$11 billion
of profits.
The first
quarter
closed off
at $6.3
billion
profits for
Royal Dutch
and $7.1
billion
profit for
British
Petroleum.
These
companies
were
collectors
of revenues
for OPEC not
inventors of
energy
independence
from OPEC.
Higher
taxes on
energy have
been
regressive
and have not
reduced
quantity
demanded for
oil due to
inelastic
demand for
oil.
WHAT
NEEDS TO BE
DONE?
Since energy
independence is
a public issue,
the government
must invest in
basic and
applied research
perhaps in the
order of $2
trillion despite
the current
status of high
unemployment,
high deficit,
high national
debt and high
unfavorable
balance of trade
but because of
it. A joint
government --
university --
industry
consortium is
required to
tackle the
energy issue in
a similar way
that the
government
invented the
computer, the
internet and
many other high
tech societal
innovations.
With its
track record,
the United
States has
proven to
overcome
challenges time
and again. The
energy challenge
is no exception.
Nake M.
Kamrany is
Professor of
Economics and
Director of
Program in Law
and Economics at
the University
of Southern
California.
Vincent Viruni
is a research
associate of the
Income
Convergence
Research Group
in Los Angeles.
By
Nake
M.
Kamrany
Posted: 7/20/11
The Current Budget
Gridlock
It is axiomatic that the congressional
debate over the current budget gridlock was
disingenuous and a partisan game on the
American people. Because the politicians
know, or should have known, the following
facts about the annual budget and the
national debt and not cause consternation of
an impending decline in U.S credit rating
that would be very injurious to the economy.
First, all nations in the world sustain
annual budget deficits and have accumulated
national debt. At the end of the fiscal
year, the budget books are cleared and the
deficit is moved up to national debt where
it accumulates. The U.S. national debt
relative to its gross domestic product (GDP)
is about in the middle among the rich
industrialized nations. U.S. national debt
now stands at about 93% of the GDP. By
comparison, advanced rich countries'
debt to GDP ratios is: Japan 226%, Italy
118%, and France 84%.
Second, the major causes of annual budget
deficit and national debt are wars and
recessions. Currently the U.S .is engaged in
three wars (Iraq, Afghanistan and Libya) and
it sustained a great recession during
2007-2008 that is still lingering. War has
to finance wars for national security
reasons, although the current three wars
that we are in did not pose much of a
national security threat upon us. There were
no weapons of mass destruction in Iraq, no
Osama bin Laden in Afghanistan, and no clear
objectives in Libya. Nevertheless, wars
would have to be financed with borrowing,
which adds up to national debt. These wars
cost us plenty. Recession has to be fought
also with counter-cyclical measures, i.e.,
deficit financing to promote our economic
interests. Recessions inflict economic
damages such as high unemployment. The cost
of recessions is the loss of GDP largely due
to high unemployment. Currently the U.S.
unemployment rate is at 9.2%, as compared to
Italy 8%, United Kingdom 7.6% and China 4%.
Third, whether we get into wars is a
decision that is ultimately made by the
President. Economic management of the
country is in the hands of the Federal
Reserve Board (the FED) who manipulates the
supply of money by mini-managing the
movement of the economy. Unfortunately
several recessions over the last couple
decades were brought upon us by the FED when
it set the interest rate very high and
squeezed the supply of money in the economy.
Also, the Fed's lifting of many controls
contributed to the great recession. The
private sector also contributed to recession
due to undue speculation, greed, and high
risk-taking, as was exemplified in the 2007
-2008 great recession as well as in the
major crash of 1929 and the ensuing
depression.
Fourth, the major burden of national debt
is the annual interest on the debt that has
to come out of the annual budget plus the
fact that the burden of debt is passed on to
the future generations. The benefit of the
debt is that it creates assets and values
when it gets rid of recessions and gets the
economy (GDP) to grow and reduce
unemployment.
Fifth, economic policy prescription
during any recession, as we are in now, is
to increase government expenditures and
reduce taxes. The politicians are intent to
do the reverse, i.e., reducing government
expenditures and raising taxes on some
people. The result of such a policy would
lock the economy into a high unemployment
rate in the range of 9%-11% instead of a
range of 3%-6%; as was the case prior to
2007. And it will add more people into
poverty and permanent unemployment.
Sixth, if the U.S. credit rating is
downgraded as a result of the budget
gridlock, it will cause the interest rate to
rise on government borrowing. The additional
interest cost would put more pressure on the
budget which means more deficit and higher
national debt.
In conclusion, the current political
jockeying on the budget and national debt
may prove counterproductive. It may further
reduce the growth rate of the GDP, depress
stock prices, increase unemployment, prolong
the recession and add more people to the
rank of poverty.
This is an illustration and a typical
case of "the tragedy of the commons" wherein
each politician is trying to promote his/her
personal /individual agenda at the cost of
public good, i.e., when measured
collectively it would cause a breakdown of
the system.
Nake
M. Kamrany and Danielle Nicole
Ramirez
Posted: 06/24/11 11:19 AM ET
Colombia's Economic
Problems and
Prospects
Recently, a
global
transition to a
more diffuse
distribution of
economic power
is broadly
recognized,
pointing to a
shift in the
balance of
global growth
from rich to
low- and middle-
income
economies.
Colombia may be
a prime example
as its recent
rapid per capita
income growth of
8.8% per year
points to the
potential for
Colombia's
convergence to
the ranks of
rich countries.
However,
Colombia's
economic growth
has been
constrained by
40 years of a
costly and
ineffective drug
war policy that
has failed. The
illicit activity
of the drug
cartel grosses
approximately
$10-$20 billion
a year; it does
not enter into
the GDP
accounting. In
addition, the
FARC
(Revolutionary
Armed Forces of
Colombia) has
stifled
Colombia's drive
towards economic
prosperity.
Baring the
impasse which is
largely social
and political
the economy
would flourish.
Colombia's drug
production
conforms to the
theory of a
French classical
economist --
Jean Baptiste
Say (1803), who
coined Say's law
-- that supply
creates its own
demand. It
follows that
production of
illicit drugs
creates demand
which is
injurious for
the user. And
the drug users'
(consumers)
demand along
with supply has
created a black
market
internationally.
Drug war has not
suppressed
production on
the supply side.
And on the
demand side
policies such as
criminalization,
incarceration
and
stigmatization
has not
suppressed the
use of illicit
drugs. It is
time to modify
both supply and
demand policies
and shift to
providing
farmers' subsidy
on the supply
side for not
producing
illicit drugs
and employing
medical
treatment of
drug users
instead of
criminal
sanctions. Such
shift in
policies would
disarm drug
cartel as a way
to deny profit
of drug dealers.
Colombia is
nestled in the
northern part of
South America,
with 46 million
people and a GDP
of $235 billion,
is the fourth
largest economy
in the
continent.
Although
Colombia's per
capita GDP is
well below the
United States',
a rapid increase
can be seen
starting around
the year 1999,
which was the
same year Plan
Colombia was
formulated, an
agreement that
provides
Colombia with
military and
monetary aid by
the United
States to combat
drug
trafficking.
Considering
recent increases
in Colombia's
GDP per capita
at 8.8% per
annum there is
great potential
for economic
convergence, and
in fact, the
estimates of the
convergence
theory point to
a possible
Colombia's per
capita income
convergence in
roughly 42
years, i.e., by
the year 2051.
However, this
forecast is
highly
optimistic at
this time
considering
Colombia's
political
impasse. Drug
trafficking
undoubtedly
plays a large
role in the
Colombian black
market economy;
cocaine is
produced at
$1,500/kilo and
is sold in the
U.S. for as much
as $50,000/kilo.
There is so much
profit to be
made with the
trafficking of
drugs that even
many Colombian
government
officials fall
victim to
temptation.
Moreover, the
aid funds from
Plan Colombia
are being used
to fight the
FARC
(Revolutionary
Armed Forces of
Colombia) (CRS).
This
Marxist-Leninist
guerrilla
organization has
been playing
Robin Hood
(taking from the
rich and giving
it to the poor)
and has been at
war with the
Colombian
government since
1966. This time
period has been
known as La
Violence. The
FARC raises its
funds through
ransom,
kidnappings and
taxing drug
trade out of its
South Colombian
region. Plenty
of Colombia's
resources have
been used to
fight this
brutal civil war
that has lasted
about half a
century, with no
end in sight. In
fact, as
mentioned
earlier, Plan
Colombia has
further
instigated the
FARC because of
the pesticides
being spread all
over the
countryside to
kill the coca
plants that
cocaine comes
from. However,
the pesticides
are also killing
the legal crops
of the small
Colombian
farmers.
Moreover, the
pesticides are
also damaging
the farmers'
health making it
even harder for
them to provide
for their
families.
The key to
forging ahead is
for the
Colombian
government, with
the help of
international
assistance,
makes it
economically
unappealing for
the FARC's
guerrilla
fighters to
continue
fighting in
support of the
FARC's leaders
and their
ideology.
Economic
incentives must
be offered to
these fighters
exceeding the
benefits that
they receive for
fighting. With a
lack of support
and a strong
central
government the
14 leaders of
the FARC will
have no way of
continuing their
fight.
No doubt
FARC's mission
will become
superfluous when
Colombia's per
capita income
rise to a high
level. Indeed,
the end of the
FARC conflict
would also free
many of
Colombia's
resources that
would be put to
better uses
instead of being
wasted on the
exhausting civil
war. Also,
currently FARC
provides great
armed protection
to the Colombian
drug cartels
that operate out
of the land that
the FARC
controls.
Without this
strong source of
protection, the
drug cartel
would be
automatically
weakened. Once
the area is rid
of the coca
plants, the land
can be used for
the production
of legal crops.
In fact,
Colombia is rich
in natural
resources such
as minerals and
fuel oils, so
there is no
reason why
Colombia cannot
prosper once
these issues are
resolved.
Nake M.
Kamrany is
professor of
economics and
director of
program in law
and economics at
the University
of Southern
California.
Danielle Nicole
Ramirez is an
Associate at the
Research Group
for Global
Conversion of
Per Capita
Income in Los
Angeles.
Nake
M. Kamrany and Martin Park
Ghana's Recent Economic
Surge
Posted: 05/26/11 09:24 AM
ET
Just at about the time of industrial
revolution and the advent of renaissance,
the United Kingdom led a pack of European
countries, the United States and Japan
towards higher stages of economic growth,
creating a dichotomy of rich countries and
poor countries. For a long time, development
economists held the view that the cleavage
of rich countries and poor countries was a
permanent state of global affairs. Then came
the newly industrialized countries of the
far east (Taiwan, Hong Kong, Korea,
Singapore) demonstrating rapid economic
growth with significant convergence of their
per capita income with rich countries. This
trend picked up more credence when China,
the most populous country in the world,
adopted significant elements of market
economy causing a long surge of per capita
income. The per-capita income convergence
theory describes the progression of low and
middle-income countries converging with high
income countries. According to Professor
Nake M. Kamrany's theory, countries have
been rapidly converging due to three
underlying phenomena: declining fertility
rates, rapid transfers of technology and the
demise of the Soviet Union that opened up
the world's economy. Furthermore, in order
for countries to converge three criteria
must be met: the difference in the level of
productivity, difference in the annual
growth rate and a long time horizon.
There
have been variations in the economic
convergence rate among countries and
regions. Europe and central Asian regions
seem to be converging the fastest based on
their growth rate while sub-Saharan Africa's
performance has been disappointing as these
countries' growth rates have been less than
2.5%. The combination of corruption,
violence and debt along with AIDS endemic
have suppressed the growth of African
regions. However, not all African nations'
convergence prospect is gloomy.
As its namesake suggests, Ghana has been
the "warrior king" in Africa for the last
decade in terms of economic and political
stability. Ghana's economic turnaround from
1965 to 2009 has allowed greater political
accountability and improved fiscal
responsibility. Between 2000 and 2009,
Ghana's average annual growth rate in terms
of GDP per-capita stands at 17.6% as
compared to the rich countries' 3.05%. Ghana
still faces some economic hurdles that may
impede future growth -- ranging from low tax
collection rates to staggering inflation and
heavy reliance on commodity trade -- but the
country's overall prospects seems promising.
Therefore, the question arises: how has
Ghana eluded the very economic and social
turmoil and corruption that has plagued its
neighbors with endless wars and extreme
poverty? For instance, both Ghana and Ivory
Coast economies are driven by their rich
sources of natural resources, especially oil
and gold, and both uphold democratic
practices. Yet, Ivory Coast has witnessed
two civil wars in the last decade and has
experienced economic decline, stemming from
internal corruption and the falling prices
of coffee.
Ghana's political stability and economic
prosperity can be partly credited to the
support and financial sponsorship by China.
With an influx of capital, China's six-day
tour last September ended with a $10.4
billion concessionary-loan program for
Ghana's infrastructure projects with a
majority of this funding going towards the
oil and gas sector. In addition to this
agreement, China's Development Bank helped
broker the acquisition of Ghana Bauxite
Company for the Chinese firm, Bosai Minerals
Group -- leading the way for a greater
Chinese presence in the African nation.
China's recent investment in Ghana did
not come from thin air but was a long-term
strategic move to further their presence in
Africa and its natural resources. In 2007,
China Development Bank set up a $1 billion
fund to encourage investment and finance
trade to the impoverished continent. This
fund was designed as a passageway for
Chinese multinationals to explore Africa's
abundant natural resources. It has
established strong relations with promising
countries in hopes to secure new trading
partners and necessary access to oil and
industrial metals.
Ghana's shift in foreign relations has
caught Western nations by surprise. Both the
U.S. and the UK have housed Ghanaian
refugees for decades and established credit
facilities in exchange for a hefty stake in
the region's abundant and unexplored oil
fields. Yet their influence has slowly
diminished, leaving China and their
commodity conglomerates to revel in the
country's success.
Investments from China will ostensibly
assist Ghana's economic growth. Based on
empirical data taken between 2000 and 2009,
Ghana's per capita income could converge
with rich countries by 2037 assuming a
continuation of recent trends. The United
States should follow Chinese footsteps and
respond to Ghana's eagerness as an
opportunity to invest in the burgeoning
economy. Furthermore, if Ghana is able to
reel in foreign investments from superpowers
like the U.S., it will help ensure Ghana's
rapid economic growth and a bright spot in
the African continent.
It is important to note Ghana's economy
has seen dramatic growth over the past
decade due to sound structural reforms and
economic policies with the help of World
Bank and IMF. During 2005 - 2008 Ghana
enjoyed real GDP growth of 6% - 7.3%. The
rapid growth was due to strong credit growth
that increased private sector activity
stemming expansionary fiscal policies as
well as strong agriculture growth. Ghana has
also improved social factors such as
development of the educational system,
decrease in corruption and political
stability, and improving freedom of speech,
press and information.
Nake M. Kamrany is Professor of
Economics and Director of Program in Law and
Economics at the University of Southern
California. Martin Park is an Associate at
the Research Group for Global Convergence of
Per Capita Income in Los Angeles.
Jobs and Wars: DNC's Prodigious Resolution for Expanding U.S.
Jobs and Winding Down War Is Admirable
Nake M. Kamrany
Professor of
Economics, University of Southern California
Posted: March 2, 2011 08:56
AM
The Obama administration must heed to
Democratic National Committee's (DNC') resolution of last
Saturday in favor of domestic job creation and speeding up
substantial troop withdrawal from the Afghanistan war by or
before July of 2011. This is a remarkable prescription at this
time of high unemployment and Afghanistan's quagmire.
Ostensibly the great recession of 2007-2009
is continuing with an unemployment rate of 9% which must be
brought down to below 6%. This can be done without additional
borrowing that would run up the budget deficit of $1.1 trillion
or without raising taxes. Raising taxes during recession is not
a good idea in spite of current anti-debt mania raging. Instead
taxes should be lowered in recessions. More importantly, to
create employment, resources can be reallocated from the
military to the civilian sector.
Such an approach is politically feasible as
secretary of defense Robert M. Gates has hinted towards cuts in
some military budget and avoidance of future U.S. military
involvement in wars such as Iraq and Afghanistan. Moreover, the
U.S.' current military budget, at approximately 4% of the GDP,
is larger than the combined sum of all other nations' military
budgets.
Parenthetically, DOD's budget should be
reoriented and reexamined to determine its optimal, and
affordable level in consonance with the national security
interest, create a flexible defense capacity that can readily
respond to national security demand. For every percentage point
reduction of the DOD budget relative to GDP, more than half a
trillion dollars could be transferred into the civilian sector
with a higher multiplier and job creation than military
expenditures. For instance in the Persian Gulf War the economic
stimulus from defense spending was -- 1.3% in terms of real GDP
growth and it was 0.5% in the first quarter of the Iraq war.
Creating employment through wars is old economics and no longer
can be legitimized. Prosperous methods of job creation that are
politically attractive include building new sources of energy,
taking care of deferred public infrastructure, creating
purchasing power through productive employment and responding to
compelling economic issues such as high unemployment (currently
13.7 million) and national debt (currently at $14+ trillion). It
follows that creating more jobs per the DNC resolution requires
a creative, technocratic and non-ideological approach.
The DNC's resolution to speed up military
withdrawal from Afghanistan rests with President Obama's
decision as his vice president and 72% of the American public
agree with DNC's resolution. Currently, the United States is
engaged in three wars, the Iraq war that is winding down, the
Afghanistan war that is expanding and the war against Bin
Laden/al Qaeda in Pakistan which is not a conventional war and
the U.S. is being constrained by Pakistan's claim of protecting
sovereignty and its inability to close down insurgent hideouts.
President Obama identified the Iraq war as the wrong war and the
Afghanistan war as the right war, but in reality, both wars were
the wrong wars. The United States should not have gotten into
either of these wars. It should have pursued bin Laden/al Qaeda
directly in Pakistan. Our military operations in Afghanistan
have turned into a war against the Pashtun tribes (the largest
tribe in Afghanistan) instead of al Qaeda, since there are no
longer al Qaeda in Afghanistan since 2001.
The recent rise in U.S. casualties in
Afghanistan appears to be consistent with the experience of the
last ten years of U.S. occupation of Afghanistan, i.e., there
appears to be a direct correlation between the number of U.S.
soldiers and U.S. casualties and worsened security. Why has the
security situation not improved with additional NATO forces? It
can be explained by looking at the genesis of the conflict that
has evolved over time. In 2001, U.S. bombing in Afghanistan
started in the northern regions of the country, it moved to the
central regions and western regions. But bin Laden and Al Qaeda
were residing in the eastern region (Jilalabad) of the country
giving him time to slip out through Tora Bora into the
Northwestern region of Pakistan. Bin Laden and his top deputy
have not been captured ever since. However, the conflict in
Afghanistan continued as U.S. forces routed the Taliban and
dismantled their government.
To counter the danger of Al Qaeda returning
to Afghanistan and using it as a base of terrorist operations
and to prevent the return of the draconian Taliban regime onto
the helm of power again, the U.S. assisted Afghanistan in
establishing a democratic government in line with its
traditional democracy promulgating a constitution and an elected
government in 2004 and 2009. However, President Hamid Karzai
lost legitimacy when he stole the second election, corruption
reigned and the Kabul government failed to extend its reach to
the countryside. The Taliban regrouped and over time they have
been able to create shadow governments in many provinces and
launched attacks against NATO forces, including roadside bombing
and suicide explosions. Now the conflict is characterized by
stalemate with no victory or defeat in sight. And as DNC has
pointed out, the conflict in Afghanistan does not lend itself to
a military solution. Moreover, the Taliban characterized NATO
forces as occupiers and infidels triggering jihad or holy war
against them.
President Hamid Karzai has not been an
effective strategic partner over the last ten years in spite of
$100 billion dollars/yr. of U.S. expenditures. Corruption,
nepotism, warlord and drug dealings are pandemic which has
demoralized the general populace. The U.S. should shift its
support to educated, sophisticated, secular and nationalistic
Afghans who have been kept on the sideline thus far. Moreover,
there is a great uncertainty about the effectiveness of U.S.
counterinsurgency strategy largely because of Karzai's failure
to reach to the villagers. The Pashtun tribes share the same
religious sect and share cultural and traditional affinities and
loyalties. The former Soviet Union's counterinsurgency during
1979-89 failed.
A negotiated settlement is possible as the
Pashtuns traditionally settle wars through negotiations. It
follows that President Obama should seriously consider shifting
the current military strategy fighting the Pashtun tribes. There
are 30 million Pashtuns on both sides of the Afghan-Pakistan
border pointing to a protracted war including unlimited supply
of insurgents which will make a victory cost-prohibitive as the
British realized through three Anglo-Afghan wars and the Russian
ended in Soviet retreat after 10 years of occupation.
Prof. Nake N, Kamrany is on the faculty
of economics, director of program in law and economics at the
University of Southern California and a member of California
Bar.
The Essence of Our Current Economic Problems, and the Solution
It is axiomatic that an employed person in
the labor force receives compensation and dispenses his earnings
for his family's consumption, housing, transportation, medical,
education, entertainment, savings and other necessities and
luxuries of life. The sum of these expenditures and savings
create the cash flow for banks, corporations, markets,
investment companies and all of the economic structure of
society, however, the building block is employment. If
employment falters, the rest will crumble down rapidly. That is
where we are at since the current recession that started in
2007.
During the Great Depression of the 1930s,
President Roosevelt (FDR) created employment to counter the
depression. Eventually it worked and we got out of it.
To address the issue at its core, the
Congress of the United States passed the Employment Act of 1946,
providing responsibility for the government to maximize
employment. However, the Employment Act got stuck with
semantics. Maximizing employment was viewed as maximization at
given conditions of the economy. Therefore, at bad times
maximizing employment could be high unemployment (6% or higher).
To rectify this semantic bottleneck, the Humphrey-Hawkins Bill
of 1978 was passed.
Given the current economic bottleneck, the
main job we have at this point is to add to employment, creating
jobs not only for the unemployed but also the underemployed and
discouraged workers. That, in fact, is the law in both The
Employment Act of 1946 and The Humphrey-Hawkins Full Employment
Act was passed, the latter having been signed into law by
President Jimmy Carter on October 27, 1978 and codified as 15
USC § 3101.
The current Great Recession which started in
2007 is continuing. It did not end in July of 2009, as claimed
by the National Bureau of Economic Research's (NBER) dating
committee. The Obama approach thus far is an indirect,
roundabout method of coping with high unemployment. It provided
assistance to banks and corporations who were expected in turn
to stimulate the economy and employment. Obviously the approach
is either not working or is too slow for comfort. There is a
need o revise the approach and create jobs directly for the
unemployed without the middle man. And maintaining full
employment of the labor force (94+%) must be the core target of
our macroeconomic fiscal and monetary policy, in other words,
employment must be considered the basic and most
significant unit of economic policy for the short and the long
term.
To reiterate, if the private sector is not
providing needed jobs then the federal government should be
doing so, as the employer of last resort, much as it did in the
Great Depression under FDR. President Obama's stimulus program
and bailouts have not worked to reduce unemployment
substantially, nor has the Fed's stimulative monetary policy
including QE2. Many of our other problems of income and wealth
inequality, home foreclosures, personal bankruptcies, etc. could
be substantially alleviated by significant reductions in
unemployment.
Nake M. Kamrany is a faculty member in
economics and USC and Michael Intriligator is a faculty member
at UCLA.
Nake M. Kamrany
Professor of Economics, University of Southern California
Posted: February 18, 2011 01:05 PM
China's Rapid Recovery in the Great Recession of 2007 - 2009
During the recession of 2007-2009 China's exports dropped
15-18 percent causing 23 million workers to be laid off, but 98%
readily found jobs as the economy bounced back and the
unemployment rate dropped to 4% with a $586 billion stimulus
package. The strategy was to create employment directly through
fiscal means as President Roosevelt did during the Great
Depression of the 1930s. In the great recession of 2007-2009,
President Bush and Obama's monetary stimulus have not reduced
U.S. unemployment rate below 9% as of this date..
China is indeed back on track having 11.9 percent growth of GDP
for the first quarter of 2010.
It is now U.S.'s second largest trading partner, largest
holder of U.S. public debt, is the number one producer of solar
energy, second to the U.S. in energy consumption, is the biggest
producer of greenhouse gasses, and the number one market for
U.S. autos. China has a trade surplus with the U.S. in the
amount of $238 billion. It intentionally keeps the value of its
currency renminbi (yuan) low against the dollar to promote its
favorable trade surplus. China has a de-facto G-2 partnership
with the U.S. power sharing deal,
The U.S. and China have common and divergent interests as
China is becoming a global power house. China is holding $1.295
trillion of U.S. securities, an increase of 6.4 fold since 2002.
China's per capita income is $6,546 as compared to $40,208 for
the U.S. The GDP is $9 trillion as compared to $14 trillion for
the U.S.. If China's economic performance continues at the same
rate as in the last 30 years, its per capita income will
converge with that of the U.S. by the year 2040 assuming it
remains politically stable.
China's reform started in the 1980s just about in the same
time as President Richard Nixon's visit to China which opened
the way for China's incursion into international trade and
economic growth. Since then, more than 250 million Chinese have
been lifted out of poverty -- a remarkable achievement.
China's system cannot be emulated by other nations because of
its unique institutional framework, nor is it intending to
export its system. Some of its leaders fear that adopting
Western democracy may cause turbulence in society. Its main
objective in dealing with foreign countries is economic
opportunity, trade and development in a pragmatic way. Political
leadership of a one-party system is elected every five years.
China has a market authoritarian form of a system in which a
free market is allowed to operate with the government holding a
very firm hand on political activity in the country. Last year
10,000 small protests were tolerated. Currently over half of
China's GDP is produced by privately controlled enterprises.
Currently China's unemployment is at 4% by adopting a policy of
employing labor into the factories in contrast to engaging
private loans through micro-financing schemes as is prevalent in
India and Latin America or through short term manipulation of
the supply of money as being practiced in the U.S. Further, it
is most notable that China escaped three global financial
meltdowns since 1990 including the Japanese severe credit
implosion, the developing Asian economies who suffered foreign
reserve meltdown caused by money flight due to fixed exchange
rate regimes and the 2007-2011 great recession that engulfed
most of the world's economy except China. The 2007-2011 great
recessions were contagious and China's strong globalization
orientation was expected to push the Chinese economy into the
transmittable and turbulent global meltdown, but ironically
China escaped.
Thus the Chinese rapid economic performance draws attention
to the Western neoclassical synthesis concerning management of
macroeconomic stability, macro/monetary policy and efficacy of
countercyclical measures in the short run and in the long run.
What is it that distinguishes China's approach in contrast to
the rest of the world? Essentially the Chinese performance
suggests a reexamination of the received doctrine of mainstream
macroeconomic paradigms in the West as the costs of the economic
meltdown of 2007-2009 and on previous occasions point to the
limitations of the existing remedies of macroeconomic and
financial framework.
Nake M. Kamrany is professor of economics and director of
program in law and economics at the University of Southern
California. This article is a synopsis of a chapter in the
forthcoming book, "China After the Global Financial Crisis," to
be published by International Research Institute in November,
2011.
Nake M. Kamrany and Megan Sieffert
Posted: January 3, 2011 09:50 AM
Estimating War Damages Sustained by Iraq (2003 - 2010)
In several studies, estimates of Iraq war
damages sustained by the United States have ranged around $1-$3
trillion. In this current study, measure of war damages
sustained by the people and country of Iraq is estimated at
$394.4 billion. This figure consists of 66,081 individuals who
lost their lives. The present value of their work life earnings
and pain and suffering of their heirs amounted to $14.2 billion.
Moreover 176,382 individuals sustained injuries ranging from
100% disability to 25% disability incurring monetary damages for
medical care and loss of earnings in the amount of $6.0 billion.
The war caused 1.9 million individual Iraqi's to emigrate
outside of Iraq leaving the war behind including their jobs and
property sustaining $30.8 billion of damages. Another 2.65
million Iraqis migrated internally from violent regions to less
violent regions in Iraq who sustained damages of $33.9 billion.
The economy of Iraq lost 27 years of economic progress. The
decline in lost Iraqi GDP caused by the war is estimated at
$309.5 billion. Societal loss creating social discords including
sectarian strife is not quantified.
Sources of data include Iraq Body Count, the
Brookings Institute, NGOs, and U.S. government. The best
casualties estimate is made by an organization called the Iraq
Body Count. This organization surveys the news for each incident
and reports the body count. According to Body Count the deaths
in the database are derived from a comprehensive survey of
commercial media and NGO-based reports, along with official
records that have been released into the public sphere. The
Brookings Institute in a regularly updated paper called the Iraq
Index provides an estimate of the Iraqi Coalition Fighters who
lost their lives. Since the Iraq Body Count only includes
civilian casualties, the Coalition Fighter deaths must be added
to the body count from the Brookings Institute estimates.
Relegating the blame game to historians to
assess the real motivation for the Iraq war and to determine the
degree of fault whether it was negligence, intentional or
malicious culpability on the part of the aggressor. Proceedings
such as the British Chilquot Inquiry and others in the future
are expected to shed light on the issue although ostensibly the
absence of credible evidence of the presence of weapons of mass
destruction (WMDs) in Iraq establishes prima facea case of gross
negligence. It follows that as a starting point; estimates of
the damages of the U.S. war in Iraq are predicated upon legal
theory of tort. Economic damages were estimated via opportunity
cost and calculated on the basis of the present value and future
value of the stream of damages that the war inflicted and will
continue to inflict for generations of Iraqi people and society.
The psychological and medical scars of this war are pervasive.
The devastating effects of the Iraq war where culpability is
still undetermined and the cause of action is still unclear to
many and is being debated.
It is time to shed light on the measure of
damages sustained by Iraq and inflicted by armed combat, but it
stands as a harsh reminder to members of governments to fully
analyze the full economic, medical, and psychological
consequences of all decisions they make concerning wars. Iraq
sustained damages to its social structure including ethnic,
tribal, and clan, sectarian and socio-political discord as a
result of the war which is not quantified.
This post is an abstract of a larger study at the Department
of Economics, University of Southern California and is being
presented (1/7/11) to the annual meeting of the Economic
Association of the Middle East in conjunction with the American
Economic Association in Denver, Colorado. Nake M. Kamrany is
Professor of Economics and Director of Law and Economics at USC.
Megan Siefert is Research Associate at USC and Pepperdine Law
School.
The demise
of Osama Bin
Laden, the
longest
American war
in history
(10 years
and
continuing)
and
President
Barack
Obama's
military
draw-down
schedule --
it seems
that this is
an
appropriate
time for the
U.S., the
Afghan
leaders and
international
community to
launch a
program in
Afghanistan
that would
leave a
legacy of
the highest
order in
terms of a
common goal
and
assisting
the people
in the
post-war era
of
Afghanistan.
At this
time, an
economic
approach may
substitute
war for
peace and it
is in
accordance
with the
wishes of an
overwhelming
majority of
the Afghan
people.
Re-building
Afghanistan
calls for a
realistic
approach
that one
would have
to be
cognizant of
several
factors.
One,
EMPLOYMENT
AND ECONOMIC
GROWTH. The
strategy of
creating
EMPLOYMENT
AND ECONOMIC
GROWTH will
most likely
rapidly end
the war.
Second,
SHARED
RESPONSIBILITY.
The task
would have
to be
apportioned
among
concerned
parties.
Shared
responsibility
falls on the
shoulders of
the central
and
provisional
governments
of
Afghanistan,
the private
sector of
Afghanistan,
the
contending
groups and
parties, the
international
donors, and
the new
enterprises
of
Afghanistan.
Third,
LIMITED
RESOURCES.
Resources
are limited
in view of
the dire
economic
conditions
of
Afghanistan
and the
limited
wherewithal
of donors in
light of
many
obligations
and the
current
economic
conditions
in the
United
States and
in Europe.
The
essence of
this
approach is
to make
EMPLOYMENT
(the current
unemployment
is over 50%)
as a means
to get rid
of political
discord and
to create
jobs and
earnings for
Afghans,
including
the Taliban
who would
put down
their arms.
In the
process of
re-building,
the young
labor force
in
Afghanistan
will have an
opportunity
to launch a
development
process and
lift up the
country
through
Afghanistan's
internal
resources,
including
its vast and
valuable
minerals
resources,
agricultural
production,
and
development
of tourism,
building
infrastructure,
training and
education.
The theme
will be
self-reliance,
dedication,
discipline,
hard work
and candor
re-capturing
the
traditional
values of
mutual
respect,
dignity and
service to
people and
country.
DONORS'
participation
and shared
responsibility
is expected
to assist
with
provision of
capital
equipment,
financing,
technology,
training and
management
on a
mutually
beneficial
basis. The
interaction
of donors
with Afghans
in
Afghanistan
will be
based upon
mutual
respect,
dignity,
candor,
accountability
and
transparency.
The donors
will
understand
that the
Afghans will
take charge
and be in
the
"drivers'
seat" in all
matter of
affairs.
This means
that all
projects
will be
designed to
become
Afghanized,
i.e., the
Afghans will
take over
from foreign
companies
the
implementation
of projects
as quickly
as feasible.
It is the
broad
expectation
that
post-war
Afghanistan
will be a
peaceful
environment
and it will
attract many
ex-patriot
Afghans from
all over the
world to
return and
visit
Afghanistan
for the
purpose of
investment,
employment,
starting a
business,
raising a
family,
transferring
music,
plays, the
arts and
sciences and
contributing
to the
quality of
life. This
will be the
transformation
of
Afghanistan
through
economic
means.
WHAT NEEDS
TO BE DONE
Rebuilding
Afghanistan
through
economic/employment
transformation:
a shared
responsibility.
1.
Transition
from war to
peace via
employment
and earnings
2.
Creation of
economic
transformation
-- massive
public and
private
employment
opportunity
3. Shared
responsibility
of
investment,
cost and
effort
a. The
government
of
Afghanistan
(central and
provisional
governments)
b.
Afghanistan's
private
sector
participation
c.
Donors'
assistance,
provision of
subsidy for
new
employment
and
participation
d. New
entrepreneurial
activities
4.
Inclusive
participation
by all
groups
regardless
of party and
group
affiliations
-- the
Taliban will
be invited
to
participate.
5.
Employment
Enhancement
-- Focused
Training and
Vocational
Education --
A
combination
of training
on the job
(learning by
doing),
short term
vocational
education,
and
concurrently
holding jobs
and
acquiring
training and
education
6. Job
creation
through
Afghanistan
resources --
re-building
the country
through
Afghanistan's
internal
resources
including
mineral
exploitation,
agricultural
production,
tourism,
infrastructure
and others
plus DONORS'
participation
7.
Donors'
Shared
Responsibility
-- Subsidy
for New
Employment
-- Donors
provision of
subsidy for
the cost of
new labor
employment
is estimated
at one
billion
dollars, a
fraction of
what is
being spent
there now.
($2,666
direct cost
including
overhead/worker/yr.
or Donor's
subsidy of
75% --
$2,000/worker/yr.
for 500,000
worker/yr.
=$1
billion/yr.
or $6.1
billion
during first
five years
assuming
annual cost
increase of
10%.
Estimates of
total
project
costs are
not
included).
Total
employment
creation
will be more
than 500,000
due to
multiplier
effect. This
is a
fraction of
what the
donors are
spending in
Afghanistan
now.
8.
Building up
institutional
foundations
of
employment
and jobs at
the
university
level,
vocational
training and
on the job
participation.
9.
INDICATORS
for
re-building
Afghanistan
--
Socio-Economic
and
political
gamut --
intermittent
progress
report --
re-evaluation
and
modification.
10.
CONCLUSION
-- A ROAD
MAP WHERE TO
GO FROM HERE
By
Nake
M.
Kamrany
Professor
of
Economics,
University
of
Southern
California
Posted: 05/17/11 10:22 AM ET
Pakistan's
Duplicity is the Cause of
American Casualties in
Afghanistan
The United States Navy SEALs' triumph with two significant feats for
the world
community
may cause an
end to
international
terrorism.
First,
Osama bin
Laden was
killed in
his compound
at
Abbottabad,
Pakistan, on
May 2.
Second and
equally
significant
was the Navy
Seals'
exposure of
Pakistan's
duplicity in
harboring
bin Laden
for nearly
ten years
inside
Pakistan. In
doing so,
Pakistan was
in breach of
the trust
and a mutual
bargain
which was
struck
between the
United Sates
and
Pakistan's
President
Pervez
Musharraf in
2001. Under
the bargain,
Pakistan has
received
$20 billion
thus far.
In
compliance
with this
bargain, had
Pakistan
turned bin
Laden over
to the U.S.
when he
crossed from
Afghanistan
to Pakistan
through Tora
Bora, or at
any time
thereafter,
the United
States would
not have
sustained
the enormous
damages in
blood and
wealth
during the
ten-year war
in
Afghanistan,
including
1,414
American
soldiers
dead and
9,971
wounded,
plus
multi-billion
dollars for
waging the
war fighting
insurgents
supported by
Pakistan.
During
this interim
period
(2001-2011),
ostensibly
Pakistan's
spy agency
--
Inter-Services
Intelligence
Directorate
(ISI) --
conspired
with bin
Laden and
his Al Qaeda
group and
other groups
such as
Mullah
Mohammad
Omar of
the Afghan
Taliban, the
Jalaluddin
Haqqani
network, the
Gulbuddin
Hekmatyar
group and
the
Pakistani
Taliban to
kill and
injure
American
soldiers
inside
Afghanistan.
The ISI
played a
duality in
bad faith
pretending
to fight
terrorism
and
concurrently
being
engaged as
an accessory
to the
killing and
injuring of
American
soldiers.
ISI was
serving as
the conduit
by sending
fighters,
roadside
bombs and
suicide
youth to
attack
American
soldiers in
Afghanistan.
Some
elements of
ISI
knew
where bin
Laden was in
Pakistan
since 2001.
Otherwise,
he could not
have
remained in
Pakistan for
as long as
he did. In
his last
residence in
Abbottabad,
bin Laden
felt so
secure and
comfortable
with his
wives and
children
that he did
not bother
surrounding
himself with
security
guards; he
was just
another
member of
the
neighborhood
community --
safe and
secure in
that town of
Pakistani
military
elites. He
was sending
directives
through his
messengers/couriers
directing
his
world-wide
terrorist
network for
destruction
and murder,
including
American
people and
property.
And the
Pakistani
government
let him do
it and
assisted the
process.
As a
matter of
retribution,
the United
Sates has
several
options when
duplicity is
firmly
ascertained
via bin
Laden tapes
and computer
files.
1. Take
out
Pakistan's
atomic
facilities,
thereby
neutralizing
its ability
to detonate
atomic
weapons in
any future
conflicts.
2. Dismantle
the ISI
apparatus
and arrest
its
leadership
for crimes
against
humanity,
including
judicial
criminal
prosecutions
that have
caused the
death and
dismemberment
of thousands
of American
soldiers and
Afghan
soldiers and
civilians in
Afghanistan.
But for
Pakistan's
duplicity,
the United
States and
Afghanistan
would not
have
suffered
sustained
casualties
inside
Afghanistan.
ISI of
Pakistan was
the ring
leader of a
criminal
conspiracy
whose
members
included bin
Laden and Al
Qaeda, the
Pakistani
Taliban, the
Jalaluddin
Huqqani
group, the
Mullah
Mohammad
Omar and the
Afghani
Taliban, and
the
Gulbuddin
Hekmatyar
group.
3. Impose
war
reparation
upon
Pakistan
equal to the
present and
future value
of the
following:
Work-life
earnings
loss and the
value of
life of
every
American and
Afghan
soldier and
civilian
killed since
2001, and
the present
value and
future value
of every
American and
Afghan
soldier and
civilian who
sustained
partial or
total
disabilities
for the
remainder of
their life,
plus the
military and
civilian
expenditures
of the U.S.
war in
Afghanistan
since 2001
(had
Pakistan
turned over
bin Laden to
the U.S. in
2001, there
would have
been no U.S.
war
involvement
in
Afghanistan.
Plus $20
billion --
the amount
of
assistance
that
Pakistan has
received
from the
United Sates
since 2001,
plus
punitive
damages for
bad faith.
4. Dissect
Pakistan
into three
smaller
states --
Baluchistan
for the
Baluchi
separatists
including
the city of
Quetta,
Pashtunistan
for the
Pashtun
separatists
covering the
Pashtun
tribal areas
including
Peshawar and
the border
areas, and
Pakistan
proper
including
Lahore and
the Karachi
areas. The
ongoing
domestic
dissent in
the Pashtun
and Baluchi
areas are
rooted in
the
exploitative
and
discriminatory
practices of
the ruling
class of
Pakistan --
the Lahore
elite -- who
have
alienated
those
groups.
5. Create a
strong
civilian
government
in Pakistan
by
dismantling
the ISI,
reducing
Pakistan's
military
prowess and
supporting
the educated
and secular
population.
Pakistan has
a strong
judiciary
and press at
this time. A
strong
civilian
government
is needed to
implement
democratic
institutions
and
processes.
6. At a
minimum,
Pakistan
must turn
over to the
United
States
Gulbuddin
Hekmatyar
from the
Peshawar
area,
Jalaluddin
Haqqani from
the northern
Waziristan
area and
Mullah
Mohammad
Omar from
Quetta,
Baluchistan
area. These
insurgents
are shooting
at American
and Afghan
soldiers
inside
Afghanistan
and enjoy
safe havens
that are
provided by
ISI and are
being
sheltered in
Pakistan.
It is
extraordinary
that
Pakistan's
former
president,
Mr.
Musharraf,
still denies
that he knew
where bin
Laden was
residing in
Pakistan
while the
current
prime
minister,
Mr. Yousuf
Raza Gilani,
and the
Pakistani
parliament
are trying
to shift the
debate from
Pakistan's
duplicity to
the American
violation of
Pakistan's
sovereignty.
They believe
that the
rubric of
sovereignty
will save
the day for
them. Not
so. The Navy
SEALs'
possession
and custody
of bin
Laden's
computer
files and
tapes will
end that
debate,
which may
identify
Pakistan as
the most
dangerous
nation on
earth.
Nake
M. Kamrany
is professor
of economics
and director
of program
in law and
economics at
the
University
of Southern
California
and a member
of
California
Bar.
A Road Map to Peace in Afghanistan
Posted: January 24, 2011 09:18 AM
Co-authored with Ved Pratap
Vaidik and Abdul Ghaffar Mogul
The late ambassador Richard Holbrooke,
President Obama's envoy to Afghanistan and
Pakistan, had identified the connection of
the Afghanistan's war with Pakistan and
referred to the issue Afghan-Pak issue.
However, he realized that the connection is
rooted in India and wanted to extend his
authority and responsibility to weave
diplomacy to Afghan-Pak-India. Indeed, that
is the key to ending the war in Afghanistan
and withdrawing 100,000 U.S. troops that are
stationed there. Vice President Biden's
recent disconcerting comment in Kabul that
U.S. forces will stay in Afghanistan as long
as they are wanted demonstrated the
confusion of the American diplomacy and
caused chagrin to thousands of American
families.
Pakistan is apprehensive about India's
hegemonic behavior in Afghanistan and unless
it is corrected it will continue to provide
safe haven in its territory to Al Qaeda, and
insurgent groups such as Haqqani, Hekmatyar,
and Mullah Omar who have inflicted major
damages to U.S. forces in Afghanistan and
whose presence in Pakistan is viewed as
strategic asset by Pakistan.
Pakistan's concerns emanate from India's
political advances as evidenced by the fact
that India has spent about $1.3 billion
during the last nine years in Afghanistan,
mostly on long-term projects, such as roads
and dams. There are about 4,000 Indian
citizens working in Afghanistan. In addition
to an embassy in Kabul, India has four
consulates in major cities of Afghanistan --
Kandahar, Mazar, Herat, and Jelalabad. In
retaliation Pakistani-controlled insurgents
have blown up the Indian embassy in Kabul,
have caused death to several Indian project
staff in Kabul and continues to send suicide
bombers and roadside bombs inside
Afghanistan.
The key to end the war in Afghanistan is to
strike rapprochement between the three
countries (Afghan-Paki-India) without
intruding on their sovereignty.
Realistically, Afghanistan has to be
cognizant of Pakistan's sensitivity in this
regard and do whatever to alley Pakistanis
apprehension about India. The two countries
have gone to war three times and their feud
over Kashmir is continuing. Afghanistan
would have to weigh the benefit of stopping
suicide bombers and roadside bombing
emanating from Pakistan in exchange for
maintaining a balanced policy towards India
and Pakistan. After all more than 50% of the
population of Afghanistan resided in
Pakistan for nearly a decade (1979-89)
during the Soviet occupation of Afghanistan.
The U.S. could play a constructive
diplomatic role to mend relations of the
tiresome.
Moreover, Afghanistan is caught in a vicious
circle: Pakistan sends suicide bombers and
roadside bombs against U.S. forces, and has
been intransigent. The U.S. retaliates by
bombing Pashtun villages causing human and
property losses while the vicious circle
continues. A way must be found to break this
vicious circle and respond to the higher
interest of peace in the region and ending
this senseless war. Rapprochement of the
three countries under U.S. guidance may
produce peace and may serve to make military
aid to Pakistan superfluous.
Nake M. Kamrany, an
Afghan-American economist, is professor of
economics at USC, Abdul Ghaffar Mughal, a
Pakistani-American economist, is serving in
Iraq under a USAID project. Ved Pratap
Vaidik is an Indian political columnist
residing in New Delhi.
The U.S. occupation of Afghanistan has
entered its 10th year, the longest U.S. war
in history, with no victory or defeat in
sight. The initial objective of capturing
Osama bin Laden in Afghanistan is no longer
valid as he and his al Qaeda followers fled
to Pakistan nearly a decade ago. In the
meantime we do not have clear objectives in
Afghanistan. Our attempts at creating
security, eliminating poppy production,
establishing civil governance, and promoting
economic development and democratization
have largely failed. The cost of this war,
estimated at more than $52 billion, given
our own recession, is becoming prohibitive
and exceeds the GDP of the country.
Currently, we have deployed over 100, 000
soldiers there at a cost of one million
dollars per soldier per year. Our casualties
are mounting by the day while our real
enemies, al Qaeda, are in Pakistan. One must
ask why are we there?
We are caught in a vicious circle in this
war as the perpetrators of this war --
Mullah Omar, Hekmatyar, Haqqni, and former
ISI operators -- are in Pakistan sending
roadside bombs and suicide youth from
Pakistan to inflict damage on U.S. troops in
Afghanistan. We in turn retaliate and punish
the Pashtun tribes in the south, east, and
southwest by bombing their villages, burning
their crops and killing their animals and
population. This feeds right into the hands
of al Qaeda who inflame hatred against the
U.S. in Pakistan and the Middle East at
large. If this vicious cycle is not broken,
we could be caught in this quagmire for a
long time and President Obama's announced
troop withdrawal date of July, 2011 has
already been moved to 2014.
Our casualties and loss of troops and
expenditures of wealth in Afghanistan do not
contribute whatsoever to our national
security as the Afghans hold no ill will
towards the United States and there is no
possibility that they will ever allow al
Qaeda to return to Afghanistan after what
the Afghans experienced in the last ten
years. Besides, Afghans are traditional
Muslims and do not subscribe to fanaticism
or international intrigue. The Afghans are
grateful and still consider the Americans
friends who helped their resistance against
the Soviet Union occupation during
1979-1989.
What should we do? We believe that the
best alternative is to declare victory and
pull our troops out of Afghanistan now --
not next year or thereafter. We may keep a
military presence and divert some of the
resources to help economic development. This
will end the war and the Afghans will be
able to sort out and define their own system
as other countries have done when our troops
departed. There may be a short civil war but
it will dissipate quickly as weary Afghans
are exhausted of the more than 30 years of
war that they have suffered.
Nake M. Kamrany is Professor of
Economics and Director of the Program in Law
and Economics, Department of Economics at
USC. Michael D. Intriligator is Professor of
Economics, Political Science and Public
Policy at UCLA. This piece is a synopsis of
the authors' presentation to the Global
Security Seminar at UCLA.
Co-authored with Ved Pratap Vaidik
and Abdul Ghaffar Mogul
The late
ambassador Richard Holbrooke, President
Obama's envoy to Afghanistan and Pakistan,
had identified the connection of the
Afghanistan's war with Pakistan and referred
to the issue Afghan-Pak issue. However, he
realized that the connection is rooted in
India and wanted to extend his authority and
responsibility to weave diplomacy to
Afghan-Pak-India. Indeed, that is the key to
ending the war in Afghanistan and
withdrawing 100,000 U.S. troops that are
stationed there. Vice President Biden's
recent disconcerting comment in Kabul that
U.S. forces will stay in Afghanistan as long
as they are wanted demonstrated the
confusion of the American diplomacy and
caused chagrin to thousands of American
families.
Pakistan is apprehensive about India's
hegemonic behavior in Afghanistan and unless
it is corrected it will continue to provide
safe haven in its territory to Al Qaeda, and
insurgent groups such as Haqqani, Hekmatyar,
and Mullah Omar who have inflicted major
damages to U.S. forces in Afghanistan and
whose presence in Pakistan is viewed as
strategic asset by Pakistan.
Pakistan's concerns emanate from India's
political advances as evidenced by the fact
that India has spent about $1.3 billion
during the last nine years in Afghanistan,
mostly on long-term projects, such as roads
and dams. There are about 4,000 Indian
citizens working in Afghanistan. In addition
to an embassy in Kabul, India has four
consulates in major cities of Afghanistan --
Kandahar, Mazar, Herat, and Jelalabad. In
retaliation Pakistani-controlled insurgents
have blown up the Indian embassy in Kabul,
have caused death to several Indian project
staff in Kabul and continues to send suicide
bombers and roadside bombs inside
Afghanistan.
The key to end the war in Afghanistan is to
strike rapprochement between the three
countries (Afghan-Paki-India) without
intruding on their sovereignty.
Realistically, Afghanistan has to be
cognizant of Pakistan's sensitivity in this
regard and do whatever to alley Pakistanis
apprehension about India. The two countries
have gone to war three times and their feud
over Kashmir is continuing. Afghanistan
would have to weigh the benefit of stopping
suicide bombers and roadside bombing
emanating from Pakistan in exchange for
maintaining a balanced policy towards India
and Pakistan. After all more than 50% of the
population of Afghanistan resided in
Pakistan for nearly a decade (1979-89)
during the Soviet occupation of Afghanistan.
The U.S. could play a constructive
diplomatic role to mend relations of the
tiresome.
Moreover, Afghanistan is caught in a vicious
circle: Pakistan sends suicide bombers and
roadside bombs against U.S. forces, and has
been intransigent. The U.S. retaliates by
bombing Pashtun villages causing human and
property losses while the vicious circle
continues. A way must be found to break this
vicious circle and respond to the higher
interest of peace in the region and ending
this senseless war. Rapprochement of the
three countries under U.S. guidance may
produce peace and may serve to make military
aid to Pakistan superfluous.
Nake M. Kamrany, an
Afghan-American economist, is professor of
economics at USC, Abdul Ghaffar Mughal, a
Pakistani-American economist, is serving in
Iraq under a USAID project. Ved Pratap
Vaidik is an Indian political columnist
residing in New Delhi.
Time to Get Out of Afghanistan
By Michael D. Intriligator and Nake M. Kamrany
Date Posted:
11/24/2010
The U.S. occupation of Afghanistan has
entered its 10th year, the longest U.S. war in
history, with no victory or defeat in sight. The
initial objective of capturing Osama bin Laden
in Afghanistan is no longer valid as he and his
al Qaeda followers fled to Pakistan nearly a
decade ago. In the meantime we do not have clear
objectives in Afghanistan. Our attempts at
creating security, eliminating poppy production,
establishing civil governance, and promoting
economic development and democratization have
largely failed. The cost of this war, estimated
at more than $52 billion, given our own
recession, is becoming prohibitive and exceeds
the GDP of the country. Currently, we have
deployed over 100, 000 soldiers there at a cost
of $1 million per soldier per year. Our
casualties are mounting by the day while our
real enemies, al Qaeda, are in Pakistan. One
must ask why are we there?
We are caught in a vicious circle in this war as
the perpetrators of this war — Mullah Omar,
Hekmatyar, Haqqni, and former ISI operators —
are in Pakistan sending roadside bombs and
suicide youth from Pakistan to inflict damage on
U.S. troops in Afghanistan. We, in turn,
retaliate and punish the Pashtun tribes in the
south, east, and southwest by bombing their
villages, burning their crops and killing their
animals and population. This feeds right into
the hands of al Qaeda who inflame hatred against
the U.S. in Pakistan and the Middle East at
large. If this vicious cycle is not broken, we
could be caught in this quagmire for a long time
and President Obama's announced troop withdrawal
date of July, 2011, has already been moved to
2014.
Our casualties and loss of troops and
expenditures of wealth in Afghanistan do not
contribute whatsoever to our national security
as the Afghans hold no ill will towards the
United States and there is no possibility that
they will ever allow al Qaeda to return to
Afghanistan after what the Afghans experienced
in the last ten years. Besides, Afghans are
traditional Muslims and do not subscribe to
fanaticism or international intrigue. The
Afghans are grateful and still consider the
Americans friends who helped their resistance
against the Soviet Union occupation during
1979-1989.
What should we do? We believe that the best
alternative is to declare victory and pull our
troops out of Afghanistan now — not next year or
thereafter. We may keep a military presence and
divert some of the resources to help economic
development. This will end the war and the
Afghans will be able to sort out and define
their own system as other countries have done
when our troops departed. There may be a short
civil war but it will dissipate quickly as weary
Afghans are exhausted of the more than 30 years
of war that they have suffered.
Michael D. Intriligator is a professor of
economics, political science and public policy
at UCLA. Nake M. Kamrany is a senior lecturer of
economics and director of the Program in Law and
Economics, Department of Economics, at the
University of Southern California. This piece,
which originally ran in the Huffington Post on
Nov. 23, is a synopsis of the authors'
presentation to the Global Security Seminar at
UCLA.
The 53 essays contained in this edition revisit the
tortured path that Afghanistan has followed over the
past three decades. The essays, which are grouped under
five subject headings, paint a revealing picture of
Afghanistan’s complex social, political, and economic
landscape and of the interplay between domestic and
external forces. They also catalogue the missed
opportunities and callous opportunism that have been
partly responsible for Afghanistan’s misfortunes during
the past 30 years.
I'm very honored to say that I've had the privilege to be
able to contribute to the above publication. This is a free web
publication offered by Middle East Institute.
Please read this book! And give this excellent article your
careful consideration. (Allow several minutes for
download)
Download a copy or click on the link above.
Nake
M. Kamrany and Martin Park
