By Ryan Walsh
In 2008, Iraq was only the 13th largest oil producer even though it holds the third largest proven petroleum reserves. Iraq’s energy sector faces a period of development ahead and the industry has not yet reached its pinnacle. This from a country where oil export revenues account for more than 75% of GDP, proving that energy infrastructure will be critical to Iraq’s future economic success.
Nonetheless, challenges abound concerning oil development. Though Iraq is rich in resources, its oil is concentrated in the Shiite-dominated and Kurdish-controlled areas. For instance, Southeastern Iraq, which holds 70 to 80 % of Iraq’s proven oil resources, is controlled mostly by Kurds. The near-constant risk of sectarian conflict is a difficulty that the government will need to overcome. This is particularly noteworthy because the government is has considerable clout over the industry; the Ministry of Oil maintains control over nearly all the oil and gas production infrastructure through three entities: the North Oil Company, the South Oil Company, and the Missan Oil Company.
Although the Ministry of Oil maintains control over oil fields, it has moved towards a system of awarding contracts, as an answer to international pressures. It has also formed bonds with its neighbors, with sharing agreements on oil fields with Kuwait and Iran. Iraq has also signed agreements with Russian, South Korean, and Malaysian companies to develop oil fields in the Bedra region, where production is expected to be 170,000 barrels per day for the next 20 years.
Iraq’s tumultuous past has certainly complicated its path going forward. For instance, contracts signed during Saddam Hussein’s government have to be reviewed or renewed, while a new legal framework for oil development is being established. Moreover, the Kurdistan Regional Government has created its own hydrocarbon laws for the oil fields in Northern Iraq. It is unclear how these laws will be resolved with national Iraqi laws once they are in place. Additionally, Iraq has land and maritime disputes with both Kuwait and Iran, which could hinder future cooperation on oil field development. There are also disputes over the rights to develop oil fields between these nations, which could escalate as new pipelines are discussed.
Looking forward, Iraq is looking to invest in its refineries, with a goal of increasing its refining capacity up to 1.5 million barrels per day from 600,000 barrels in 2017 compared to 2008. This ten-year strategic plan includes five new refineries as well as investment into its existing refineries, and $5 billion for investment in natural gas fields. Hence, from the economic and business side, Iraq’s oil industry has been well planned and organized. This will form the foundation of long-term growth in the energy sector and establish market stability through investment power.
In terms of the general Iraqi economy, improvement is expected in the future as key infrastructure continues to be built after the war. Though unemployment remains a serious problem – it was 17.6% at the end of 2007 – inflation has dropped and oil exports have risen. Rising oil prices have similarly buttressed this growth. This has been fueled by the rise in world oil demand, especially in developing countries. Continued support of high oil prices by OPEC will ensure a healthy economic future for Iraq. With more stability there, private sector investment has also increased. Nevertheless, violence still affects the oil and agriculture industries, and the ever-present threat of sectarian violence weighs down on the economic future. In a future of political and societal stability, though, economic growth is expected to be robust.
Indeed, the oil industry is becoming the foundation, powering economic growth. Oil-field contracts have been awarded to BP, ExxonMobil, China National Petroleum, and other foreign investors, bringing in billions of dollars of foreign cash. This brings along other foreign suppliers who vie for contracts to build infrastructure. The International Monetary Fund estimated 2010 economic growth at 7.3%. Foreign direct investment is expected to grow as the need for infrastructure increases. The central bank has been helpful, relying on the IMF to help stabilize the dinar, reducing inflation from 80% in 2006 to single digits. This has provided a predictable, stable environment for investment.
Cooperation with the United States government will provide a safety mechanism for Iraqi markets as well. Not counting limited security arrangements, the Strategic Framework Agreement provides economic engagement in various sectors, including health, education, science, and technology. American mediation has also helped repair business and political relations with Egypt and Saudi Arabia, paving the way for greater economic investment. The U.S. State Department has also hosted business forums in Iraq to provide opportunities for American corporations in Iraq. Thus, American involvement can provide a baseline level of stability while additionally offering higher levels of economic engagement.
Unfortunately, the Gulf Cooperation Council has offered little substantive engagement with Iraq. Qatar and Kuwait both have bilateral disputes while Oman possesses little capital to invest. Saudi Arabia, on the other hand, views Iraq only in terms of balancing against Iran, and as such rarely pushes for more direct economic relationships. Through this all, Iraq still needs foreign investment. Luckily, Iran and Iraq still have a strong trade relation – they have signed several Memoranda of Understanding to build their economic ties, which have resulted in nearly $10 billion in bilateral trade in 2010. Nevertheless, black market oil and agriculture have stifled greater growth and could pose bigger problems in the future. Similarly, Turkey, as Iraq’s largest trading partner, and the United Arab Emirates have helped drive reconstruction and investment initiatives.
The global recession and credit crisis has undoubtedly weakened Iraq’s economic positioning for the future. Over-reliance on oil exports means that as soon as oil prices tank, the national budget will collapse and the private sector will lose out on the investment that oil production brings. Moreover, the perception is that the Iraqi government has little vision and economic planning to overcome such an obstacle. The government is much larger than it was during Saddam, meaning it would be less flexible to change during a chaotic investment environment. This is especially true for the investment occurring in Iraq, which is also concentrated in housing and real estate. Investors worried by the global credit crunch will have little reason to continue investing in infrastructure projects if the global recession becomes direr.
However, a business-friendly regulatory framework and lessening concerns about political stability and security have combined to help Iraq draw in foreign capital. Its oil development plans going forward have provided a measure of stability, as it has averaged about 4.5% real growth over the past four years. The relatively well-educated population has also helped firms transitioning to Iraq. And though mistrust may exist towards the government, its National Development Plan includes more than $100 billion in infrastructure projects over the next four years. Assuming oil prices remain relatively constant, Iraq’s economic and energy future is expected to see stable growth and expansion.
1 Volkan Guner, “Source of Conflict and Life: Energy Future of Iraq,” Eurasia Critic (Eurasian Intelligence & Strategies), April 2010, http://www.eurasiacritic.com/articles/source-conflict-and-life-energy-future-iraq.
2 Elena McGovern, “Iraq’s New Reality: Finding its Role in the Middle East,” The Stimson Center and The Centre for International Governance Innovation, March 01, 2009, http://www.stimson.org/books-reports/iraqs-new-reality-finding-its-role-in-the-middle-east/
3 Ephraim Kam, “Iraq in Turmoil,” The Middle East Strategic Balance 2007-2008, The Institute for National Security Studies, 2008.
4 Stanley Reed and Nayla Razzouk, “Iraq’s Economy Wakes Up,” Bloomberg Businessweek, April 22, 2010, http://www.businessweek.com/magazine/content/10_18/b4176017884558.htm.
5 Elena McGovern, “Iraq’s New Reality: Finding its Role in the Middle East,” The Stimson Center and The Centre for International Governance Innovation, March 01, 2009, http://www.stimson.org/books-reports/iraqs-new-reality-finding-its-role-in-the-middle-east/
6 Matt Kennard, “American companies look to Iraq as US economy stalls,” The Comment Factory, August 10, 2011, http://www.thecommentfactory.com/american-companies-look-to-iraq-as-us-economy-stalls-5577/.
7 Aiyob Mawloodi, “The global credit crisis and the potential impact on Kurdistan’s economy,” The Kurdish Globe, August 20, 2011, http://www.kurdishglobe.net/display-article.html?id=6AD2FBC7F12F286CA27E112B4EECCD3F.
By Ryan Walsh
As any student of economics knows, a nation’s Gross Domestic Product is directly affected by the consumption and investment expenditures of its citizens. Given our present GDP of $14.6T, our national debt of $14.9T, and our federal budget deficit of $1.3T, the prospect of decreasing the US national debt is indeed daunting .
There are two means by which our government can accrue enough money to pay off our national debt: (i) it can cut its discretionary spending and use the money it saves as payment; or (ii) it can increase taxes and use the revenues towards payment. When the national debt exceeds the GDP by $0.3T as it does now, if the government absolutely must intervene in the economy, it must tread lightly to avoid causing a recession.
Because consumption and investment are directly affected not only by the amount of disposable income a business or citizen has, but also by consumer expectations of the economy, the future of the United States economy is, indeed, in trouble. The American people know that the debt must be paid off in some way or another, and unfortunately, many expect that the government will choose to increase future tax rates rather than cutting its own discretionary spending.
Given that prices of consumer goods have increased by nearly 68 percent since 1967, consumers already find it difficult to purchase food and other goods due to this drop in disposable income. Moreover, resource costs for businesses are very high due to the falling value of the dollar in currency markets, and because of union power and wage floors, the costs of employment are also very high. Because of our high inflation rate, consumers have been less inclined and less able to purchase large quantities of goods and services, and because of high production costs, producers have had to either supply less at higher prices or lay off workers in order to maintain price and supply levels.
And there’s the rub—— when our national debt exceeds our GDP and our government wishes to– or rather feels that it must— intervene, corporate and personal income tax rates will inevitably increase, consumer and investor confidence and propensities to spend will decrease, and the GDP will decrease, giving us little hope of closing the gap between the amount of money we owe and the amount of money we earn each year.
The best course of action would undoubtedly be to increase aggregate demand and aggregate supply by increasing households’ disposable income and lowering businesses’ costs of production. However, little can be done unless the federal government actually decides to slash its spending on superfluous special-interest programs. If the government were to decrease its spending, it would have a budget surplus which it could employ towards the reduction of our debt. Further, consumers and businesses would be more willing and able to spend more on goods and resources given a reduced anticipation of an increase in their taxes. If the GDP were to increase and the unemployment rate were to decrease as a result of such policies, the United States might find itself better able to pay off its debt.
By Alex Liao
Ever since the Monroe Doctrine, the United States has had to carefully watch its relationship with Latin America – and for good reason. The latest issues – drug trafficking, right-wing anti-American leaders, and border violence have drawn attention towards American policy with its Southern neighbors. Yet, one aspect that is frequently overlooked, not least by the media and certainly by ordinary Americans, is the existence of the School of the Americas (SOA).
First, some background: Located in Fort Benning, Georgia, the School of the Americas was established following the Cuban revolution by the U.S. Southern Command. The intent, at the time, was to strengthen counterinsurgency training and to extend those intellectual resources to the continent. Notwithstanding, this “counterinsurgency” curriculum has been bastardized into an amalgam of lessons on how to commit human rights violations. As the Department of Defense and the Pentagon have admitted, the SOA curriculum advocates for torture, executions, and other forms of human rights abuses. Hence, by condoning these atrocious practices, the SOA has perpetuated their existence in South America.
It comes as no surprise, then, that the alumni of SOA include numerous dictators and mass murderers from our neighbors down South. Manuel Noriega, Roberto D’Aubuisson, Hugo Banzer – individuals who comparatively few have spoken of because of their grave human rights violations. Moreover, as the SOA Watch has noted, Colombian paramilitary leaders received training at the School of the Americas. These paramilitary squads have been linked to the deaths of many human rights workers as well as trade unionists. Argentina, Boliva, Costa Rica, Uruguay, and Venezuela, have all sent military personnel to train at the SOA. In other words, the United States is training death squad leaders through military funding.
Robert D’Aubisson planned the assassination of Archbishop Oscar Romero in El Salvador during its civil war. Hugo Banzer and Manuel Noriega have served prison sentences for drug trafficking. Another graduate, General Policarpo Paz Garcia, was a corrupt dictator in Honduras for some time. Of course, these may simply be a coincidence. Yet, the United States cannot condone this violence. At minimum, review of funding towards the SOA must be considered.
Nonetheless, the military-industrial complex threatens to defeat the initiative to end the SOA. To avoid public attention, the Pentagon renamed the SOA to WHINSEC – the Western Hemisphere Institute for Security Cooperation. Instead of taking decisive action, the government has simply swept away the issue, foreclosing political dialogue. Even President Obama, who epitomized the human rights ethic in his 2008 campaign, has dropped the ball on this issue. While American drug policy dictates the spending of millions in Mexico, focus has not been given to those who continue to suffer in South America.
WHINSEC’s most ardent supporters cite the benefits for narcotics policing and leadership. However, the current curriculum is not sufficient. Those who attend are only mandated to receive eight hours of instruction in “human rights, the rule of law, due process…leadership development…[and] disaster relief.” The rest of the time, they are free to receive specialized counter-insurgency and infantry training courses. Thus, more insight and public knowledge must be devoted to this issue. Indeed, in 2007, the McGovern/Lewis Amendment narrowly failed to end funding for WHINSEC by six votes. With a budget crisis plaguing the nation, perhaps a review of the $14 million spent on this facility is in order.
By Ryan Walsh
From the point of view of a Republican voter, Mitt Romney seems to have it all. He is smart, intelligent, and has a history in both business and government. But, for seemingly the perfect presidential candidate, he has a few too many controversial beliefs. He has shown very liberal, and at times, hypocritical beliefs when asked about Obamacare, and was for both gay rights and legal abortion before he was against them. For these reasons, the highly controversial “Tea Party” does not consider him a true conservative.
“Gov. Mitt Romney was all smiles in 2006 as he was about to sign a law making his state the first in the nation to effectively guarantee universal health coverage”, notes Noam Levey, in the LA Times. He would go on to call this law a “landmark”, and “an achievement that comes once in a generation.” This is extremely conflicting with the beliefs he claims to have now, and this is what is angering the Tea Party so significantly. The official view of Mitt Romney, when questioned about Obamacare, is a strict repeal and replace promise. If he is elected, “On his first day of office, he will issue an executive order paving the way for waivers from Obamacare for all 50 states.” It is highly ironic that Romney claims his official position to be that of “repeal and replace”, while he passed a law in his state allowing for the same services, generally speaking. He also is for a tax reform, which would “empower individuals to purchase their own insurance.”
Thus, questions are being raised about his loyalty to his own party, and his beliefs.
“At least Herman Cain is true to his beliefs,” says Foxnews.com. “He is a strong supporter of individual healthcare, because he believed it saved his life when he had cancer.” With this being said, does this make Herman Cain the most forthright G.O.P candidate? Quite possibly. Herman Cain has held true to his very conservative beliefs and values, despite many allegations that he is not educated enough and does not have the experience required to lead this country into a new era of economic advancement, which we so desperately need. In fact, these allegations are completely false. It has been proven that a man with limited political experience can lead our country, an example being President Obama. Before being in the Senate for one year, President Obama was a protest organizer for the City of Chicago, and organized protests for local unions. Does this make him any more qualified than a CEO of a pizza franchise?
There are also many other Republican candidates picking up momentum as the primaries slowly approach. Michelle Bachmann, a Tea Party firebrand, has a good shot at winning over the far-right, or the “extremists”, as many liberals would call them. These “extreme” beliefs include eliminating excessive taxes, and abiding by the Constitution of the United States. Rick Perry has also shown to be a powerful candidate, backed by the fact that he was governor of the nation’s strongest economy.
All in all, the question arises; where does Romney stand? He is definitely a strong contender, but does he have the credentials, or the credibility to become president? There are many strong contenders in the 2012 Republican race, and to pigeonhole Romney as “The Probable” is ill judged. As the primaries approach, one can only sit back and watch as the pandemonium unfolds, because it is truly up for grabs.
1 Levey, Noam N. “Mitt Romney: Massachusetts Healthcare Reform a Double-edged Sword – Los Angeles Times.” Featured Articles From The Los Angeles Times. Los Angeles Times, 11 May 2011. Web. 25 Oct. 2011. .
2 “Cain: I’d Be Dead Under Obamacare – Herman Cain – Fox Nation.” Fox Nation – Hot Headlines, Opinions, and Video from around the Web. Fox News, 22 Sept. 2011. Web. 08 Nov. 2011. .
3 Romney, Mitt. “Policy | Mitt Romney for President.” Mitt Romney for President | Mitt Romney for President of the United States of America in 2012. Web. 08 Nov. 2011. .
4 “Ten Core Beliefs of the Modern Day Tea Party Movement.” Tea Party Movement Platform. The Tea Party Platform, 2011. Web. 08 Nov. 2011. .
By Alex Liao
Amidst a bustling urban metropolis, millions in São Paolo – Brazil’s largest city – have had little access to education and medical services. This deficit has less to do with the infrastructure available and more with a cycle of poverty that has trapped and marginalized families in the lower classes. Of course, schools can always be reformed, hospitals can always invest in new technology, but the poor often have few incentives to seek such care. Why have a six-year old son at school when he can be working a street job to support the family? Why risk the uncertainties of a medical bureaucracy that, to be fair, has never been completely responsible to the poor?
These questions have often been left unanswered, as Brazilian officials have been more willing to pour money into large social development and infrastructure programs which do very little in terms of substantive improvement. Millions of poorly regulated international funds from the World Bank have done little to significantly change the situation. Rather, they have prolonged the dilemma. As the Argentine debt crisis showed, international institutions founded on neoliberal thought could no longer be trusted. Economic recovery would have to come without the West’s overt influence. Nevertheless, while spending has increased, inequities amongst the Brazilian population have increased. During the 1980s – a period of increased social spending following the end of the military regime and the beginning of democratic governance – the Gini coefficient for Brazil climbed from 0.58 to 0.64. The Gini coefficient measures income inequality, where a value of 0 represents total equality and 1 represents total inequality amongst a population. By comparison, the United States’ Gini coefficient is generally around 0.45. Hence, the traditional Keynesian model of government spending and investment did little to uplift the Brazilian poor from economic and social malaise.
The Brazilian dilemma has far-reaching international implications. Developing countries, of which Brazil, as a member of the BRIC nations, is a leader, will shepherd the next era of innovation that can drive the global economy. If poverty and severe economic inequality continue to plague developing nations, they will never advance from their current positions and gain international recognition and power. Social issues are not isolated to Brazil; rather, China, Russia and much of Europe, as well, face burgeoning questions about their youth’s futures. Meanwhile, countries such as Japan and Canada have seen their population densities tilt towards the elderly. If the most fundamental social problem – poverty – continues to linger, the world may no longer be as interconnected and vibrant as it is today. It is surely time for new solutions, one that does not repeat the mistakes of the past but instead opens new doors and opportunities for the global poor.
The age of failed Brazilian social policies is now sounding its death cry. From 2003 to 2010, Lula’s government expanded the Bolsa Família, a conditional cash-transfer initiative which offers incentives in the form of family grants for a variety of social causes. For instance, families who send their children to school, and keep them in school throughout the year, receive small cash payments. Likewise, receiving regular medical check-ups provides more payments for a family. Instead of throwing money at a problem, the Bolsa Família pragmatically provides small payments to optimize social gains. In Brazil, the small payments are enough to tip the scales and place children in the classroom instead of the factory.
Not only has the Bolsa Família reduced economic inequality and reduced the burden of the poor, it has also paved the way for new poverty-reduction measures. For example, payments could be given to those who start small businesses, or those who start small businesses and hire five other workers. Instead of a loan, which can hamper business growth and create a climate conducive to fear rather than confidence, a conditional cash transfer can spur and provide the seeds for an economic recovery. Expanding further, special tax breaks can be carved out for those who contribute to recycling programs, or for those who take classes in emergency care. The kinds of conditional cash transfers we are seeing today are merely the tip of the iceberg; from here, the economic and social spheres can coalesce to augment progress and break cyclical indigence.
Of course, more information and data are needed to ensure the efficacy of future conditional cash transfer programs. Governments should begin trial programs in various cities, to evaluate where and under what conditions they offer the greatest returns. No two cities are perfectly symmetrical; yet, governments, by looking at data from past programs, can and should engineer specialized programs for each city to meet different needs. In this way, dilemmas ranging from environmental degradation to the uneducated workforce can be diminished.
By Joey Walter
As we enter into a new decade rife with challenges, the single country that offers us the most opportunity for meaningful alliance is the newly sprouted Eastern powerhouse, China. The mutual benefits to both of our economies are irrefutable, the existence of “mutually assured destruction” non-ignorable. With that said, this same nation certainly offers the most cause for apprehension, with the United States serving as possibly the last roadblock in China’s path to international hegemonic and military dominance. Thus, a vital question needing to be examined for the sake of our future policy options is, Do China’s actions serve more as a threat or as a sign of future alliance?
The first arena that offers essential evidence on both sides of this issue is the economy. Currently, China stands as the 2nd most powerful nation economically, with The Economist projecting it to have overtaken the top spot by 2020. Of course, this rise to the forefront would not have been possible without the United States acting as the primary buyer of its consumer goods, however America also serves as arguably China’s greatest burden by owing $1.16 trillion in securities that may never see the light of day (following our recent raising of the debt ceiling). Whatever the motives, many suspect that China has begun to engage in covert attempts to undermine U.S.-Sino economic ties through intentional devaluation of its currency. These efforts would yield severe repercussions on America’s economy, and prevent domestic industries from becoming competitive in the global market. Thankfully, economic advisers John Tamny and Dan Celia came to the simultaneous conclusion that “China does what many, if not most, of the countries in the world do. I think we’re doing the same things with quantitative easing…We’re keeping the value of our dollar down, [and] that’s helping our exports.” Thus, remembering that China is not the sole nation with personal interests may help to keep domestic paranoia at bay. What’s more, the very shifting of China’s principles from primarily communist toward a free-market, capitalist economy suggests a clear intent to assimilate itself into Western society in order to further amiable relations.
The second sphere in which China has made astounding strides and devoted considerable efforts has been in human space travel. Over the past few years, following China’s announcement to commence its aspiring human spaceflight program, U.S. policy has served as a narrative of how two contrasting strategies can lead to opposite results in the field of multinational relations. First, NASA administrator Michael Griffin professes, “The Bush Administration’s past failure to approve overtures for U.S.-China cooperation led to a very high level of suspicion and was the direct cause of China’s ASAT demonstration involving the shooting down of a satellite to send a pointed signal to the U.S”. This led a CRS report for Congress and George Washington University Professor Yi Zhao to reach the simultaneous conclusion that “cooperative efforts from the U.S. are necessary to prevent future escalation of direct-ascent satellite attacks towards the U.S.” The Chinese most definitely did not receive the unilateral, one-sided policy President Bush pushed during his administration positively; still, most analysts would agree that today’s situation reveals a nearly opposite tale. After President Obama revised the National Space Policy to include cooperation as a primary goal, numerous steps in the right direction have taken place. Harvard professor of Geology and former astronaut Harrison Schmitt assessed, “With China’s ambitious and difficult human space program focused on exploiting vast quantities of resources on the moon, the U.S. decided on pursuing a cooperative, synergistic effort such as In Situ Resource Utilization that would be necessary for their mission to be a success.” Indeed, the director of China’s National Space Administration himself asserted, “only under the cooperative principle of ” mutual benefit and common development” could China achieve its primary goals in space.” The absence of further tumultuous events beyond the atmosphere has proved America’s strategy of appeasing China to be a success, and is the key for attaining future mutual benefits as well as constraining the rise of a potentially hostile actor in the field of space militarization.
Thus, while China’s surpassing of America in two major areas might not be all that worrisome if we make the right decisions, it would surely still be comforting to know that America retains a strong overall lead in innovative capacity and China has a “long way to go” to close the innovative gap. Keep thinking, America.