Foreign Policy - #170 January-February 2009

5 ECONOMISTS WHO GOT IT RIGHT PREDICT THE WORST IS YET TO COME GLOBAL POLITICS, ECONOMICS, AND IDEAS ® JANUARY/FEBRUARY 2009 ForeignPolicy.com YES, HE DID BUT WHAT IF HE CAN’T? The Trials of Barack Obama: DAVID PETRAEUS on why there’s no quick fix for Afghanistan NOURIEL ROUBINI on what economic doom lies ahead BILL McKIBBEN on how global warming is unstoppable

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Our Change, His Challenge What if he can’t? In the weeks after Barack Obama’s historic win, it’s a question that seemed even down- right impertinent to ask. As the world celebrated the sheer improbability of the young, new American president’s rise—and his stirring promises of change—the conversation has been more “Yes, he did” than “What will he do next?” But this issue of Foreign Policy convenes a provocative cast of writers, thinkers, and doers who suggest, in different ways, why even Obama might not be able to overcome the daunting global challenges he will face. There are few more pressing than global warming. And on this subject, it’s not wrong to call Bill McKibben a prophet; he warned about the Earth’s heating atmosphere before most had heard the words “climate change.” His powerful Think Again overturns what remained of our comforting assumptions about global warming: “Solving this crisis,” McKibben con- cludes, “is no longer an option.” Then there are the grinding wars in Iraq and Afghanistan: Obama comes to office determined to wind down the one and to salvage a flagging effort in the other. America’s warrior-scholars, led by Gen. David Petraeus, are rewriting not just the campaign plan for a losing war in Afghanistan—they’re on a mission to apply Big Ideas about small wars to the entire U.S. military. They are sell- ing the new president on a major strategic shift toward a full- fledged counterinsurgency operation in Afghanistan, designed, as Petraeus told FP days after taking on this next war, “to be seen as serving the population, in addition to securing it.” But Petraeus is also sanguine about the challenge of what he calls the “longest campaign of the long war.” What Obama now faces is the uncomfortable reality that end- ing the war in Iraq may actually be easier than winning the war in Afghanistan. But perhaps even harder than stabilizing Afghanistan will be stabilizing a global econo- my still reeling from a financial crash that took much of the world by surprise. To understand where the economy is headed, we turned to five economists who weren’t surprised, includ- ing New York University’s Nouriel Roubini, whose prescience—captured in an FP cover story last spring—famously earned him the title “Dr. Doom.” The resulting predictions for 2009 are alarming, to say the least: Roubini counts more than a dozen bubbles only begin- ning to burst; Stephen Roach, chief of Morgan Stanley Asia, traces the future arc of the con- tagion around the non-Western world; and Dean Baker of the Center for Economic Policy and Research notes that once all these massive credit and asset bubbles have imploded, the dollar will lose its privileged place in the world economy. With such an agenda, you don’t have to be a skeptic to wonder just what kind of change Obama will be able to deliver. Along with the rest of the world, we’ll be hoping. And start- ing in early January, we’ll be making some dramatic changes of our own: a major relaunch of our Web site, ForeignPolicy.com, to chronicle and interpret the world Obama now faces. We’re creating a daily online magazine for a global era that will be as vibrant and ambitious as its print parent (and just as fervently committed to the principle that serious and boring are not synonymous). We’ll have new columns and blogs by big names, and those about to be, as well as original reporting dedicated to exploring the intersection between Washington and the world as the age of Obama begins. Let us know what you think—the change has just begun. The Editors January | February 2009 1

CONTENTS January|February 2 0 0 9 8 LETTERS Food fight I Speaking the gospel I Small truths I Questioning intervention I Fashion statement. 28 IN BOX India’s new deal I Branded I Grand theft solar I Epiphanies from Tony Blair I An Rx for Chinese health I Plus, FP tests your knowledge of the world. 52 THINK AGAIN Continuity we can believe in: 32 Climate Change Act now, we’re told, if we want to save the planet Why Obama’s foreign policy may be more like Bush’s than from a climate catastrophe. Trouble is, it may be too late. The science is anyone expects. settled, and the damage has already begun. The only question that remains is whether we will stop playing political games and embrace the few imperfect options we have left. By Bill McKibben PRIME NUMBERS 40 The Nuclear Option After a decades-long slowdown, nuclear power once again dominates the global energy debate. But it will not be the miracle cure for energy dependence or global warming that proponents promise. By Charles D. Ferguson and Michelle M. Smith FEATURES 42 How to Win a Losing War Two years ago, a controversial military manual rewrote U.S. strategy in Iraq. Now, its simple, powerful—even radical—tenets must be applied to the far different conflict in Afghanistan. By Nathaniel C. Fick and John A. Nagl I Plus, the FP Interview with Gen. David Petraeus. 52 The Making of George W. Obama The 2008 U.S. election was all about change. But that’s not what we’re going to get on foreign policy, says the longtime speechwriter for Condoleezza Rice. Instead of a radical departure from Bush, we’re likely to end up with a lot more of the same. And that may be just what we need. By Christian Brose 56 The Other Housing Crisis Why can’t Israel and the Palestinians make peace? There are many reasons, but the facts on the ground point to a simple answer: It’s the settlements, stupid. By Gershom Gorenberg 48 AFTER THE CRASH TOP: BROOKS CRAFT/CORBIS; BOTTOM: TRAVIS DAUB Gen. David Petraeus talks to FP about picking his battles. 62 The Worst Is Yet to Come Five economists whose prophetic warn- COVER: CHARLES OMMANNEY/(CONTACT PRESS IMAGES) ings went unheeded preview the next stage of the global financial crisis. 2 Foreign Policy I Warning: More Doom Ahead By Nouriel Roubini I A Lethal Shakeout By Stephen S. Roach I Good Luck, Barack By David M. Smick I Are We There Yet? By Robert J. Shiller I Watch the Dollar By Dean Baker

32 70 Faith in the Market The champions of Islamic finance believe that Hot air: Why climate change is already an emergency. if Islamic principles had been applied to Wall Street, the economic crisis never would have happened. The handful of men who look to the Koran to decide which mortgages, car loans, and credit cards are spiritually sound are cashing in. But critics smell a con. By Carla Power 76 The Poor Man’s Burden The Great Depression changed the way we think about the poor. Now, in the midst of another meltdown, the fear that shocked us into depending on the government to fix poverty is spreading once again—and threatening to undo many of the gains we’ve made. By William Easterly TOP: CHRIS KNORR/DESIGN PICS/CORBIS; BOTTOM: ILLUSTRATION BY KOREN SHADMI FOR FP THE FP INDEX 82 The Think Tank Index It’s no accident that Barack Obama plucked his transition chief from a think tank. The world’s idea factories are charged with brainstorming solutions to everything from global warming to Wall Street’s implosion to terrorism. In the first index of its kind, FP ranks the world’s best think tanks. By James McGann REVIEWS 86 IN OTHER WORDS India’s Chinese Wall By Jeffrey N. Wasserstrom I FP’s new Early Read. 92 NET EFFECT Predicting conflict I The $100 laptop, for $2,600 I 86 User-generated geography I The bull market for cybercrime I Plus, The rise of China, through the finance blogger Barry Ritholtz’s best sources for chart porn. eyes of an envious neighbor. MISSING LINKS 96 An Intellectual Bailout We must add another field to the list of those in need of rescuing—economics itself. By Moisés Naím January | February 2009 3

Meet the Authors Moisés Naím Although global warming now seems a universal, even existential worry, it was just 1989 when environmental journalist EDITOR IN CHIEF Bill McKibben penned the first major book on climate change, Susan B. Glasser The End of Nature. Since then, he’s lent his steady, eloquent voice EXECUTIVE EDITOR to the cause through hundreds of articles, books, and lectures. In 2008, he founded 350.org, the first truly global grassroots climate Kate G. Palmer campaign. | See “Think Again: Climate Change,” p. 32 DEPUTY MANAGING EDITOR Few soldiers know counterinsurgency better than Nathaniel C. Fick and John A. Nagl, right. A U.S. Marine, Fick was featured Christian Brose, Carolyn O’Hara in the book-turned-hbo miniseries Generation Kill. Nagl, a former SENIOR EDITORS lieutenant colonel in the U.S. Army and West Point professor, wrote the acclaimed history of counterinsurgency, Learning to Eat Rebecca Frankel Soup with a Knife. “We have not given the commanders on the ground the resources they need to prevail,” says Nagl. | See “How ASSOCIATE EDITOR to Win a Losing War,” p. 42 Preeti Aroon, Elizabeth Dickinson As the White House passes to Obama, the watchword on foreign policy won’t be “change” as much as it is “continuity,” says ASSISTANT EDITORS Christian Brose, Foreign Policy’s new senior editor. For the Lara Ballou past four years, Brose was Condoleezza Rice’s chief speechwriter and ASSISTANT TO THE EDITOR policy advisor at the State Department, where he worked in a small office down the hall from Rice. “Her office was in what’s called Jerome Y. Chen, David Kenner ‘mahogany row,’” he says. “Mine was in the part that looks like a high school.” | See “The Making of George W. Obama,” p. 52 RESEARCHERS New York University economist Nouriel Roubini has warned Travis C. Daub of economic collapse for years. His March/April 2008 cover story ART DIRECTOR for FP, “The Coming Financial Pandemic,” laid out in grim detail how the worst global economic crisis since the Great Depression Bradley Amburn would play out. Known as “Dr. Doom,” Roubini has little patience for claims that he’s a “perpetual pessimist”—for him, pes- DESIGN & PRODUCTION MANAGER simism is the new realism. “The bubbles,” he now warns, “have only begun to burst.” | See “The Worst Is Yet to Come,” p. 62 Katherine Yester For Gershom Gorenberg, author of The Accidental Empire: PRODUCTION ASSISTANT Israel and the Birth of the Settlements, 1967-1977, swiftly expand- Blake Hounshell ing Israeli settlements in the West Bank are a critical impediment to a two-state solution. Originally from California, Gorenberg WEB EDITOR moved to Israel in 1977 and now blogs for South Jerusalem, named for “the only place in the world where you can be a left- Joshua E. Keating wing, skeptical Orthodox Zionist Jew and feel like you are part of a mass movement.” | See “The Other Housing Crisis,” p. 56 DEPUTY WEB EDITOR London-based reporter Carla Power, who has written about Thomas R. Stec female scholars of the Koran and young Muslim rappers for WEBMASTER Time, Newsweek, The New York Times Magazine, and Forbes, found investigating the world of Islamic finance a challenge. Blaine Sheldon “The rock-star scholars are so sought after,” she says, “that tracking down a few for an interview can be as tricky as pinning WEB DEVELOPER down a pop star—without the publicity machine to help you.” | See “Faith in the Market,” p. 70 CONTRIBUTING EDITORS Jacques Attali, Paris; Jorge I. Domínguez, Cambridge, Mass.; Yoichi Funabashi, Tokyo; Yegor T. Gaidar, Moscow; Gianni Riotta, Rome CONTRIBUTING WRITERS David L. Bosco, Christine Y. Chen EDITORIAL BOARD Morton Abramowitz, John Deutch, Lawrence Freedman, Diego Hidalgo, Stanley Hoffmann, Robert D. Hormats, Thomas L. Hughes, Karl Kaiser, Jessica T. Mathews, Donald F. McHenry, Cesare Merlini, Thierry de Montbrial, Joseph S. Nye Jr., Soli Özel, Moeen Qureshi, John E. Rielly, Klaus Schwab, Helmut Sonnenfeldt, Lawrence Summers, Strobe Talbott, Richard H. Ullman, Stephen M. Walt Foreign Policy 1779 Massachusetts Avenue, NW Washington, DC 20036 Publishing Office: (202) 939-2230 Subscriptions: (800) 535-6343 ForeignPolicy.com © 2009 by Washingtonpost.Newsweek Interactive, LLC. All rights reserved. FOREIGN POLICY and its logo are trade- marks of Washingtonpost.Newsweek Interactive, a subsidiary of The Washington Post Company, which bears no responsibility for the editorial content; the views expressed in the articles are those of the authors. No part of this publication may be reproduced in any form without permission in writing from the publisher. 2007 NATIONAL MAGAZINE ozzie AWARD WINNER GENERAL EXCELLENCE 4 Foreign Policy

\\ CENTRAL INTELLIGENCE AGENCY Because national security depends on economic intelligence. Economic Analyst. Think ahead for your nation while making the most of your expertise and abilities. In this demanding position, you could assess foreign economic policies and foreign financial issues that affect US national security interests.You could also assess illicit financial activities, including networks used by terrorist and criminal groups, financing and procurement of weapons of mass destruction, money laundering, and corruption among foreign governments and companies. To qualify, you need at least a bachelor’s degree in economics or finance, preferably with an international or foreign focus, and exceptional oral and written communication skills. Applicants must have US citizenship and the ability to successfully complete medical examinations and security procedures, including a polygraph interview. An equal opportunity employer and a drug-free work force. For additional information and to apply, visit: www.cia.gov THE WORK OF A NATION. THE CENTER OF INTELLIGENCE.

Amer Yaqub The New ForeignPolicy.com PUBLISHER The world does not stand still, and starting in January, there will be a vibrant daily online magazine to capture it: the new ForeignPolicy.com. We’ll have a whole lot Lynn E. Newhouse more of the great features you already love—and new ventures to places we haven’t taken you before. Here’s a sneak peek at our shiny new design: ASSOCIATE PUBLISHER & GENERAL MANAGER Over the next few weeks and months, [ Our new blogs: Amy Russell we’ll introduce a roster of smart con- tributors to help you navigate and Daniel W. Drezner DIRECTOR OF SALES interpret the world. We’ll feature the ideas shaping the global conversation, On global politics, economics, Maria San Jose as well as daily, original reporting on academia, and pop culture the people and institutions that shape ADVERTISING SALES REPRESENTATIVE foreign policy. We’ll debut a lineup of David Rothkopf plugged-in writers from the world’s Alexia Sagemüller power centers. And we’ll also bring On how the world you the best of what’s already out is really run CORPORATE PROGRAMS DIRECTOR there but is often impossible to find. Consider us your scouts for the com- Stephen M. Walt Sabina Nicholls ing 3.0 world. A realist’s take for an CORPORATE PROGRAMS ASSISTANT This is the beta test for the new ideological age ForeignPolicy.com. We’ll be reinventing Annette Munroe our Web magazine throughout 2009 Shadow and want to hear from you about it: Government CIRCULATION DIRECTOR what works, what doesn’t, what we’re missing, and what you can’t live with- Notes from the loyal Kate Black out. So, send us your feedback and opposition ideas to [email protected]. CIRCULATION ASSOCIATE We’ll be giving you regular updates at The Best Defense the Web site as well as in this space. Robert Essaf Tom Ricks’s daily take [From this issue: on national security BUSINESS ASSISTANT Watch a narrated slide show on Afghanistan with Gen. David Petraeus, … and more. Randolph F. Manderstam John Nagl, Nathaniel Fick, and FP Executive Editor Susan Glasser at: And featuring SYNDICATION COORDINATOR ForeignPolicy.com/extras/petraeus. Passport Jina Hassan A blog by the editors of MEDIA AND PR COORDINATOR Foreign Policy SUBSCRIPTIONS & SUBSCRIBER SERVICES FOREIGN POLICY, P.O. Box 474, Mt. Morris, IL 61054-8499; ForeignPolicy.com; e-mail: [email protected]; (800) 535-6343 in U.S.; (386) 246-0120 outside U.S.; Publications mail agree- ment no. 40778561. Rates (in U.S. funds): $24.95 for one year; $44 for two years. Canada add $12/yr. for postage and handling; other countries add $18/yr. For academic rates, go to ForeignPolicy.com/education. ADVERTISING & FP CORPORATE PROGRAMS Call (202) 939-2243. NEWSSTAND AND BOOKSTORE DISTRIBUTION Curtis Circulation Company, 730 River Road, New Milford, NJ 07646-3048; (201) 634-7400. BACK ISSUES $10.95 per copy. International airmail add $3.00 per copy; online: ForeignPolicy.com; e-mail: [email protected]. MEDIA INQUIRIES Call Jina Hassan at (202) 939-2242; [email protected]. SYNDICATION REQUESTS Contact Randolph F. Manderstam (202) 939-2241; [email protected]. OTHER PERMISSION REQUESTS Copyright Clearance Center, Inc. (978) 750-8400; www.copyright.com. 6 Foreign Policy

The United States Institute of Peace 25 Years of Building Peace 2009 marks the U.S. Institute of Peace’s 25th year as a leader now under construc- in international conflict management and peacebuilding. tion at the northwest corner of the National Created by Congress during the Cold War, the Institute has Mall in Washington, responded to the unique challenges of 21st Century conflict by D.C.—within sight of our developing and applying practical skills in international conflict memorials to the heroism and management. Independent and nonpartisan in its work, the sacrifices of war. Institute is professionalizing the field of peacebuilding, training practitioners, and serving as a convener of parties to disputes With congressional and public support, the head- around the world. quarters building will house offices and conference facilities, professional education and training programs, and a Public The human capacity for conflict is ever-present, but conflicts can Education Center that will reach nearly half a million of those be managed without violence. Building peace requires the skills who visit the “war and peace” corner of the Mall each year. of preventive action, crisis management, and the promotion of reconciliation. The Institute is a national center of innovation Our headquarters will soon be one of the most compelling in such skills, teaching and training in techniques of conflict architectural statements in our nation’s capital of the universal management and deploying staff to international zones of conflict. support for peace. It will express the commitment of the American people to building a less violent world. As we celebrate a quarter century of our work, we look forward to broadening our service to the American people and our interna- Learn more—and support our growth—at www.usip.org tional partners through the Institute’s new headquarters facility, UNITED STATES INSTITUTE OF PEACE 1200 17th Street, NW, Washington, DC 20036 | (202) 457-1700 | www.usip.org

[ ]L E T T E R S Food Fight The generosity of the U.S. government Eric Werker replies: and its citizens would be far better served I agree quite strongly with a number of Eric Werker (“Power to the People,” if more food aid came in the form of Helene Gayle’s points, and I commend November/December 2008) accuses cash. That would give humanitarian aid agencies of adopting a paternalis- agencies the flexibility to respond in the care for abandoning the monetized tic approach that includes “dumping” most efficient and appropriate way to imported food in poor countries. He is each situation. food aid it could receive from the U.S. firing at the wrong target. In fact, a government. number of humanitarian organizations Sometimes the best way to help involves buying food supplies locally or Gayle suggests I demand a change in object to this very practice. care, for regionally, which stimulates production government policy. That is exactly my within developing countries. Werker intention. To put humanitarian-aid example, decided to abandon certain favors vouchers that poor people can decisions in the hands of those who food-aid strategies because they were exchange for whatever assistance they are most affected, we cannot rely on the doing more harm than good. What need most. Vouchers can be a powerful goodwill and coordination of hundreds Werker should demand is a change in of nonprofit actors. Instead, we must government policy. That’s what we’re tool, one that care uses whenever pos- establish systems that give incentives working for. to humanitarian agencies to serve their sible and appropriate. But we can’t make beneficiaries first and foremost, not By law, most U.S. food aid to poor them materialize from nothing. their benefactors. And the only “we” countries must be in the form of U.S.- capable of putting those complex sys- grown food that’s shipped overseas on There is no magic bullet to solve tems in place are governments and U.S.-flagged carriers and then directly the global food crisis. Werker is right multilateral organizations. distributed or sold to generate funds that the aid system badly needs for other development work. Approx- reform, but he should send that mes- Granting humanitarian agencies cash imately 65 percent of the expense goes sage where it might make a differ- instead of food aid would certainly toward transportation and administra- ence—to Washington. afford them more flexibility to meet the tion. This outdated and inefficient sys- needs of crisis victims. But why stop tem is more beneficial to agribusiness —Helene D. Gayle there? Many aid workers advocate giv- and the shipping industry than to the ing cash directly to the victims, rather poor—or to the American taxpayer. President and CEO than whatever else the agency might provide. My proposal for vouchers— CARE USA an intermediate solution, really—takes seriously the notion that humanitarian Atlanta, Ga. organizations have an active role to play in supplying solutions that might UC INSTITUTE ON GLOBAL CONFLICT AND COOPERATION not otherwise be provided through markets alone. IGCC SECURITY POLICY Speaking WORKSHOPS The Gospel SUMMER 2009 John Allen (“Think Again: The Catholic NUCLEAR THREATS Church,” November/December 2008) BIOLOGICAL THREATS makes a number of provocative argu- ments in addressing popular myths For professionals and graduate students ‡ Taught by University of California faculty, about Catholicism. Three of his obser- experts from the national labs, and policymakers ‡ Multidisciplinary approach vations, in particular, warrant more attention from international policy- bridging science and public policy ‡ Issues covered include U.S. and international makers. security policy perspectives, non-proliferation, technological challenges, domestic security threats First, that far from “shrinking,” the For more information or to receive program updates, Catholic Church is actually in a period of email [email protected] enormous growth, particularly in Africa, Asia, and Latin America. Second, the “official positions of the church” are not simply “conservative”; the church con- sistently defends human life and dignity. Third, the church serves poor people throughout the developing world through its “vast network of schools, hospitals, and social service centers.” What lesson should foreign-policy practitioners and policymakers draw from these observations? They should

“Though force can protect in emergency, only justice, fairness, consideration, and cooperation can finally lead men to the dawn of eternal peace.” —Dwight D. Eisenhower INSPIRED BY LEADERS OF THE PAST EDUCATING LEADERS OF THE FUTURE TheElliottSchoolof InternationalAffairs | Asian Studies | European and Eurasian Studies | Global Communication | International Affairs | | International Development Studies | International Science and Technology Policy | International Trade and Investment Policy | | Latin American and Hemispheric Studies | Middle East Studies | Security Policy Studies | www.elliott.gwu.edu

BAKER AT 15 “A bridge between the [ ]Letters world of ideas and the Secretary of State Condoleezza Rice view the Catholic Church as a potential congratulates the Baker Institute world of action.” ally and resource. Catholic social teach- on 15 years of excellence and ing provides a moral framework for important scholarship James A. Baker, III addressing the toughest global challenges, Honorary Chair and the on-the-ground experience of the church can contribute to finding poli- Sacred Policy: JAMES A. BAKER III Stem Cell Theory cies that work more effectively. Religion’s Influence INSTITUTE FOR and Practice: PUBLIC POLICY A Hands-On Science The recent reauthorization of the on Politics and and Policy Short Course U.S. President’s Emergency Plan for the Environment aids Relief is a good example. The Forward Thinking in a Changing World church worked on a bipartisan effort to expand the plan’s funding and For more: expand its reach through a “con- www.bakerinstitute.org science clause” that permits religious institutions to participate in Precision. Motion. Style. hiv/aids prevention, care, and treat- Typical German Engineering ment without violating their moral The new www.Germany.info principles. The church also supported provisions that promote monogamy and other behaviors that research shows are highly effective in reducing hiv infection rates. Hopefully, world leaders will see past the caricature and view the Catholic Church as a powerful ally in building a world of greater justice and peace. —Stephen M. Colecchi Director of the Office of International Justice and Peace U.S. Conference of Catholic Bishops Washington, D.C. John Allen replies: Stephen Colecchi is part of a remark- able brain trust at the U.S. Conference of Catholic Bishops working to bring the Catholic Church’s teaching and human capital to bear on pressing social issues in ways that defy conven- tional partisan ideology. I can only say “amen” to his hope that international policymakers will pay greater heed. Of course, the “caricature” of the church to which Colecchi refers is not entirely the fault of secular commenta- tors. On a wide range of issues, the church itself has not always been effec- tive in communicating its desire for “a world of greater justice and peace” or in mobilizing its resources to achieve it. As Pope Benedict xvi has said, too often the world knows what the church is against, but not what it’s for. This challenge will become steep- er in the United States under the Barack Obama administration, as dif- ferences between church and state over “life issues,” especially abortion, may complicate the effort to find common ground in other areas. Both sides will

Independent thinking on international affairs Chatham House is delighted to Chatham House, in London, has been the have been voted No.1 European home of the Royal Institute of International Think Tank in Foreign Policy’s Index Affairs for over eight decades. Our mission is Ranking of Global Think Tanks to be a world-leading source of independent analysis, informed debate and influential ideas on how to build a prosperous and secure world for all. Research is core to all Chatham House activities and is structured around three areas: Energy, Environment and Resource Governance; International Economics; and Regional and Security Studies, which includes work on Africa, the Americas, Asia, Europe, Global Health, International Law, International Security, the Middle East and North Africa, and Russia and Eurasia. Chatham House hosts high-profile speakers from around the world as part of our programme of events in the UK and overseas. Regular events, often organized specifically for our 5,000 individual and corporate members, are sometimes held under the Chatham House Rule which is invoked to encourage openness and the sharing of information. www.chathamhouse.org.uk

[`jZfm\\i [ ]Letters K_\\ Af_ej ?fgb`ej Le`m\\ij`kp s K_\\ GXlc ?% E`kq\\ JZ_ffc f] 8[mXeZ\\[ @ek\\ieXk`feXc Jkl[`\\j need to look beyond caricatures, and N8J?@E>KFE# ;%:% one hopes that talented Catholic pro- fessionals such as Colecchi will lead 9FCF>E8# @K8CP E8EA@E># :?@E8 the way—not just in calling upon politicians to think in new ways, but J8@J 8ZX[\\d`Z Fggfikle`k`\\j Catholics, too. › D%8% `e @ek\\ieXk`feXc I\\cXk`fej › DXjk\\i f] @ek\\ieXk`feXc Small Truths GlYc`Z Gfc`Zp D%@%G%G% ]fi D`[$ZXi\\\\i Gif]\\jj`feXcj E.J. Graff (“The Lie We Love,” Novem- › G_%;% `e @ek\\ieXk`feXc ber/December 2008) rightly argues that I\\cXk`fej international adoption should serve the best interests of children rather than =leZk`feXc Jkl[`\\j I\\^`feXc Jkl[`\\j the needs of potential adoptive parents. › :feÕ`Zk DXeX^\\d\\ek › 8]i`ZX But she misses the larger picture by › >cfYXc K_\\fip  ?`jkfip › 8d\\i`ZXe =fi\\`^e arguing that the world orphan crisis › @ek\\ieXk`feXc ;\\m\\cfgd\\ek has been invented to meet the › @ek\\ieXk`feXc <Zfefd`Zj Gfc`Zp “demand” of wealthy Westerners. › @ek\\ieXk`feXc CXn  › 8j`X › :XeX[X Graff falsely asserts that children Fi^Xe`qXk`fej › <lifg\\ are manufactured because potential › @ek\\ieXk`feXc Gfc`Zp › CXk`e 8d\\i`ZX adoptive parents are unwilling to › @ek\\ieXk`feXc I\\cXk`fej › D`[[c\\ <Xjk adopt older or special needs children. › JkiXk\\^`Z Jkl[`\\j › Iljj`X  <liXj`X This statement fails to account for the thousands of special needs adoptions NXek kf Befn Dfi\\6 completed each year, including nearly :fekXZk Lj fi M`j`k Fli half the children adopted from China. N\\Y J`k\\ Kf[Xp K_\\ GXlc ?% E`kq\\ JZ_ffc f] Additionally, studies of Romanian 8[mXeZ\\[ @ek\\ieXk`feXc Jkl[`\\j children in institutions and long-term K_\\ Af_ej ?fgb`ej Le`m\\ij`kp foster care show that many physical F]ÔZ\\ f] 8[d`jj`fej and developmental delays emerge after (.+' DXjjXZ_lj\\kkj 8m\\el\\# E%N% a child has lived in an institutionalized NXj_`e^kfe# ;%:% )''*- setting. Based on Graff’s thesis, these )')%--*%,.'' formerly young, healthy children would (%/..%A?L%N8J? L%J% kfcc ]i\\\\ have been adopted immediately as X[d`jj`fej%jX`j7a_l%\\[l “prime candidates” before these con- ditions could develop. nnn%jX`j$a_l&X[d`jj`fej Although it is true that intercountry adoptions into the United States increased earlier this decade, Graff con- veniently does not report that interna- tional adoptions are down nearly 24 percent in the past four years. This decline does not reveal the absence of need; rather, it reflects an increase in reg- ulation and, in some cases, overzealous implementation that spurred countries to halt intercountry adoption altogether. No credible professional who serves children would argue that adoption should be easy, but that does not mean we should shut the door to a viable option for finding children a safe, per- manent, and loving family. No child in need should ever be labeled a myth. —Thomas Difilipo & Joelle Ruben CEO and Director of Education & Research Joint Council on International Children’s Services Alexandria, Va.

CELEBRATING the POWERof IDEAS Gold Prize: $30,000 The Washington Institute Silver Prize: $15,000 BOOK PRIZE Bronze Prize: $5,000 for Nonfiction Books on the Middle East DEADLINE for ENTRIES: MAY 1, 2009 Enq qtkdr `mc dmsqx enql+ uhrhs V`rghmfsnmHmrshstsd-nqf 2009 Summer Seminar in World Religions • Religion and U.S. Foreign Policy The Institute on Culture, Religion & World Affairs (CURA) conducts aged to apply are members of the media, staff at non-governmental an annual summer program, organized and directed by Professor agencies, clergy, government agencies and departments, public Peter L. Berger and co-sponsored with the School of Theology at policy institutes, and academics in higher education, as well as Boston University, under the guidance of Dean John Berthrong and advanced graduate students. with the generous support of the Henry Luce Foundation’s Henry R. Luce Initiative on Religion and International Affairs. The program is taught by a combination of faculty from Boston University and other universities around the world, as well as by The program is an intensive, two-week seminar on special topics active and retired members of the government and public policy in religion and world affairs. This year’s topic is “Religion and U.S. communities. Details on the 2009 summer program are posted on Foreign Policy,” and will run from June 14 to 26, 2009. It is designed the CURA website, www.bu.edu/cura. for professional residents of the United States and international scholars whose work engages them with religion in its political, CURA will provide housing and meals for all participants. Travel economic, and cultural manifestations. Those particularly encour- fellowships will be available on a competitive basis. To apply, send a one-page cover letter of interest, along with a brief CV, to: An equal opportunity, affirmative action institution. Dean John Berthrong Boston University School of Theology 745 Commonwealth Avenue, Room 110, Boston, MA 02215 Phone: 617-353-3050 Fax: 617-353-3061 E-mail: [email protected] With a copy to Ms. Carinne Clendaniel (same address/phone as above) [email protected] Application Deadline: March 31, 2009

AWinning Bet! [ ]Letters Win, Place, Show. Let us show you how our place can put you on the E.J. Graff replies: winning path to achieve your goals. Kentucky's Bluegrass region is known Thomas DiFilipo and Joelle Ruben dis- internationally for raising and training Thoroughbreds. Their individual tort my findings. Yes, there is a world strength and spirit, coupled with the guidance of dedicated and orphan crisis. It has two parts. First, exceptional trainers, have proven an unbeatable combination. The focus millions of families need assistance and is always on the horse and developing its full potential. support to care for their children. Sec- ond, hundreds of thousands of aban- PATTERSON SCHOOL OF DIPLOMACY doned or fully orphaned children—ones AND INTERNATIONAL COMMERCE who are mostly older and have special needs—need homes. I have enormous This same philosophy drives the Patterson School of Diplomacy and admiration for organizations and adop- International Commerce. For nearly fifty years we have kept our tive parents trying to repair, support, or professional program small, select and personal. Our focus is on preparing help these families and children. you for a successful career in international affairs. Admitting just 35 students a year (all resident and full-time) to our 18-month masters The myth is that the world orphan program ensures an exceptional level of attention, interaction and crisis involves healthy babies. Outside China, that is rarely the case. Children instruction. We measure success not by the strength of our generally find their way into institu- numbers, but by the strength of our graduates. tions when they are older or after a crisis, but Westerners mostly seek to If you see your place as out in front, not part of a adopt healthy children 3 and under. pack, the Patterson School will help you develop the skills you need to show your full potential. Place Of course, no one manufactures chil- your bet on us – to WIN. dren, as DiFilipo and Ruben state. What’s manufactured is their “orphan” An equal opportunity university status. Western adoption agencies pour disproportionately large sums into www.PattersonSchool.uky.edu poor, corrupt countries—with few questions asked—in search of such Master of Arts in Diplomacy and International Commerce. healthy adoptable children. That Concentrations in diplomacy, international commerce, money induces some people to take international security, intelligence and development. children away from their families. Yes, international adoption is declin- ing. Apparently, that’s because China (the largest source for international adoptions) is allowing fewer of its chil- dren to be adopted internationally, and the Hague Convention on Intercountry Adoption—though far from perfect— appears to be successfully curbing some of the corruption. As the myth is debunked and regu- latory oversight improves, fewer Western families may be able to adopt foreign children. But at least those who do can be more confident that their children were not bought or stolen. Questioning Intervention I suppose it is too much to expect a reviewer to read my footnotes, but had he done so, James Traub (“A Fight to Pro- tect,” November/December 2008) would not have accused me of passing over non- Western interventions, such as India’s invasion of Bangladesh or the Vietnamese invasion of Cambodia, in my book The Thin Blue Line. As it happens, I also dis- cuss the Indian peacekeeping mission to Sri Lanka at some length.

I simply noted that these actions can- New York is An Affirmative Action/Equal Opportunity Institution not be classified as humanitarian according to the definition that Traub INTERNATIONAL himself uses. If you expand the con- THE NEW SCHOOL cept to include self-justifications by invading states, we would have to is New York accept Russia’s recent intervention in Georgia as humanitarian as well. EARN A MASTER’S DEGREE IN Traub also makes a couple of INTERNATIONAL AFFAIRS notable errors over Somalia, the cause célèbre of humanitarian intervention- Join a community of students from 62 countries—from ists. It is simply not true to say that NGO activists, executives of international organizations, Operation Restore Hope “saved sev- and experts in technology, media, and finance, to returned eral hundred thousand lives.” The Peace Corps volunteers and recent college graduates— famine was abating before U.S. each desiring to effect real change in the world. Here, marines arrived. you’ll combine interdisciplinary study with practical prob- lem-solving skills, and gain new perspectives that can only His blithe dismissal of the view that be found in the world’s most international city. peace will only be restored to that long-suffering country by a process · Work directly with international that engages its traditional clan-based community leaders also contradicts practitioners and scholars the findings of numerous expert stud- ies and most impartial observers. · Explore issues in global economics, These errors mar what is otherwise a poverty and development, cities generally benign review. and urbanization, international institutions, NGOs, human rights, —Conor Foley conflict and security, and media and culture Brasilia, Brazil · Learn from summer fieldwork James Traub replies: It’s true! Footnote 20 of chapter 6 of experiences around the world The Thin Blue Line lists the Bangladesh and East Pakistan inter- Online and on–campus information ventions, as well as Tanzania’s move sessions are held throughout the year. against Idi Amin of Uganda, but it For more about these events and about says they don’t qualify as “humani- the program, call 212.229.5630 or visit tarian,” presumably because of the us online. interveners’ mixed motives. But if we are expected to await the angelic inter- www.newschool.edu/ia15 venor, many people will die in the meantime. What matters, according The New School is a leading university in New to the doctrine of the responsibility York City offering some of the nation’s most to protect, is the obligation of out- distinguished degree, certificate, and continuing siders to act when states are unable or education programs in art and design, liberal arts, unwilling to protect their citizens from management and policy, and the performing arts. atrocities. By the way, International Crisis Group President Gareth Evans reviews each of these three cases in his book The Responsibility to Protect and finds the humanitarian argument for action overwhelming. The interven- ing powers chose not to invoke this rationale, he notes, because of “the absolute primacy of sovereignty claims during this period.” When it comes to Somalia, the fig- ures are disputed. Alex de Waal, who shares Foley’s view of intervention and whom he often cites, claims that Oper- ation Restore Hope had zero impact

SHOWWECBASE [ ]Letters University of Kent on mortality rates. Others cite the Vuitton Malletier was involved in at Brussels “several hundred thousand” figure I some way in its publication. The illus- use. The 1994 report of the Refugee tration, depicting a bearded man Graduate programs in International Policy Group cautiously puts the wearing a turban and robe featuring Relations, International Law, number of lives saved at 110,000. our trademark monogram, might be Perhaps I should have written construed as offensive by people of Conflict Analysis, Political Economy, “100,000 or more.” the Islamic faith. Importantly, this use Migration Studies, Political Strategy, of our monogram design in an illus- Should the United Nations have tration could damage the long- and more in Brussels. followed the advice of Mohamed established relationship we have care- http://www.kent.ac.uk/brussels Sahnoun, its envoy in Somalia at the fully built with the Middle East and time, to work with tribal elders rather its people since the opening of our [email protected] than sending a vast peacekeeping Louis Vuitton stores in the region. operation? Sahnoun’s counsel does look wise in retrospect, though the —Michael Pantalony calamity that occurred makes almost any alternative course of action look Director of civil enforcement for North America preferable. My dismissal of this point should have been less blithe. Louis Vuitton Malletier New York, NY Fashion Statement Foreign Policy welcomes letters to the editor. Readers should address The article “A World Without Islam” their comments to fpletters (January/February 2008) included a @ForeignPolicy.com. Letters should reproduction of our historic and not exceed 250 words and may be highly recognizable registered trade- edited for length and clarity. Letters mark, the Louis Vuitton Monogram sent by e-mail should include a postal Pattern, without our authorization. address. Such use could lead your readers to the mistaken impression that Louis FOREIGN POLICY for the Next President In January, the new U.S. president will Breaking the Suicide Pact: U.S.–China Cooperation be confronted with the longest list of on Climate Change William Chandler severe challenges any president has faced in decades. Prioritizing among them will be Sunset for the Two-State Solution? Nathan J. Brown even more important than usual. In its series, Is a League of Democracies a Good Idea? Thomas Carothers “Foreign Policy for the Next President,” the Asia—Shaping the Future Douglas H. Paal Carnegie Endowment’s experts endeavor to do Engaging Pakistan—Getting the Balance Right Ashley J. Tellis just that. They separate good ideas from dead Iran Says “No”—Now What? George Perkovich ends and go beyond widely agreed goals to Iran: Is Productive Engagement Possible? Karim Sadjadpour describe how to achieve them. Abolishing Nuclear Weapons: Why the United States Should Lead Read the series at George Perkovich www.CarnegieEndowment.org/ Russian–American Security Relations After Georgia nextpresident Rose Gottemoeller Nuclear Renaissance: Is It Coming? Should It? Sharon Squassoni Stabilizing Afghanistan: Threats and Challenges William Maley Syrian–Israeli Peace: A Possible Key to Regional Change Paul Salem Sharing the Burden in the Middle East Marina Ottaway COMING SOON: Voices from China, Russia, and the Middle East



SCHOOL of INTERNATIONAL SERVICE AMERICAN UNIVERSITY preparing leaders largest school of international affairs in the United States giving committed to students the opportunity to earn masters degrees in the following fields of study: developing ideas, promoting Comparative & Regional Studies International Economic Relations Global Environmental Policy International Peace & Conflict Resolution sustainable action, International Communication International Politics and advancing global International Development United States Foreign Policy public service. w w w. a m e r i c a n . e d u / s i s Celebrating 50 Years of International Service eeo/aa eufocus in Foreign Policy A MESSAGE FROM AMBASSADOR JOHN BRUTON Q EU Focus Head of Delegation In-depth treatment European Commission Delegation to the United States of important European issues and the In 2009, we celebrate the ten-year anniversary of the EU’s Economic transatlantic relationship and Monetary Union. In a single decade, the euro—used in 16 Member States—has become one of the world’s most important currencies. Cross- Q This Issue border trade and investment within the EU have increased, and a single monetary policy for the euro area, combined with coordinated national EU Economic and fiscal policies, provides a level of stability for businesses and national econo- Monetary Union: mies in the face of global crises such as the one we are dealing with now. A Framework for Stability A word on the current financial crisis: given how interdependent we have become, protection- Q Comments ism by any one nation could have dire results. We need a global solution to this very big global problem, and such a solution must be agreed quickly and in a E-mail to Delegation-USA- way that preserves an open trading system. If we do not get the [email protected] fundamentals of international finance right, getting interna- tional politics right will be much more difficult. www.eurunion.org

Special Advertising Supplement eufocus| |January2009 EU Economic and Monetary Union: A Framework for Stability “Our economies are too Arguably one of the most important monetary reforms intertwined—we will sink or in the past 50 years, the EU’s Economic and Monetary swim together…Europe can Union (EMU) is unprecedented in modern European propose the principles and rules economic history and has transformed the global that will shape a new global economic landscape. order. We have an opportunity to come forward with proposals A decade after its launch, EMU’s most visible accom- with economic reforms aimed at improving the under- based on European values, plishment, the euro provides stability for businesses and lying competitiveness of European businesses and the based on open societies, and national economies and guards against speculative runs skills of the European labor force. open economies. …In the on national currencies. A single monetary policy for the financial crisis, Europe is 16 euro area Member States, combined with coordinated Tangible Benefits: Ten Years of leading the way toward a national fiscal policies, has fostered macroeconomic Economic and Monetary Union global solution.” stability, spurred the economic integration of Europe, and boosted cross-border trade, financial integration Q Economic stability. During the first decade of European Commission President and investment. Budgetary discipline has improved EMU, inflation averaged just two percent per year, José Manuel Barroso significantly thanks to the rules-based Stability and and nominal interest rates declined to an average of Growth Pact, and the exchange rate realignments that nine percent. inside periodically traumatized European economies have become a thing of the past. Q Jobs. Almost 16 million jobs have been created in the 2 Economic and euro area since 1999, and the unemployment rate has Monetary Union: EMU has also increased the EU’s resilience to adverse dropped to an estimated seven percent in 2008, the a Decade of shocks and fostered the EU’s leadership in the global lowest rate in 15 years. Achievements economy—as demonstrated by its response to the current global financial upheaval. As the impact Q Sound public finances. Public budget deficits fell to 4 The Euro on Europe has intensified, EU leaders rapidly and a record average low of 0.6 percent of GDP in 2007. 6 The European resolutely responded with a rescue plan that allows governments to guarantee interbank lending, provide Q Closer economic and financial integration. Central Bank and short-term liquidity, and buy into banks to increase Internal EU trade now accounts for one-third of the Eurosystem their capital. Member State governments committed GDP, and total private and public investment within 7 Enhanced Financial substantial funding to the EU’s coordinated effort to the euro area has risen to 22 percent of GDP. The Market Integration: restore confidence and stability. euro has also driven the integration of interbank Safeguarding money, bond, and equity markets, and the single Stability and Paralleling its immediate response to the current turbu- currency eliminates transaction costs associated Prosperity in the EU lence, the European Commission (the EU’s executive with currency exchange. 8 EU-U.S. Economic arm) is also taking decisive action to reinforce the and Financial regulatory framework for the future, and has accelerated Q International role of the euro. The euro has rapidly Cooperation implementation of its 2007 Economic and Financial become one of the world’s most important curren- Roadmap designed to address weaknesses in the finan- cies, and has overtaken the U.S. dollar in the inter- cial system. In the longer-term, the best approach is to national bond market. comprehensively rethink regulatory and supervisory rules for financial markets—including banks and other lenders, hedge funds, and private equity—and continue | eufocus 1 |

Special Advertising Supplement Economic and Monetary Union: a Decade of Achievements EU Commissioner for Economic The EU’s Economic and Monetary Union (EMU) are subject to the monetary policy of the European and Monetary Affairs Joaquín encompasses the coordination of economic and fiscal Central Bank (ECB). All EU Member States—with Almunia and European policies, a common monetary policy, and a common the exception of Denmark and the United Kingdom, Commission President currency, the euro. EMU, the culmination of visionary which negotiated “opt-out” clauses—are required to José Manuel Barroso EU leadership over the years, represents a milestone join the euro area once specific economic conver- in advancing European economic integration, a gence criteria are met. EU member countries that “EMU has anchored macroeconomic process begun when the EU was founded. have acceded since 2004 will join the euro area once stability and increased cross-border they fulfill the necessary conditions; Slovenia, Cyprus, trade, financial integration, and EMU, achieved in three main stages, is based on the Malta, and Slovakia have already adopted the euro. investment. For the EU as a whole, concept of a single market for sovereign nations. the euro is a keystone of further During the first stage, beginning in 1990, the EU Economic policy under EMU requires that Member economic integration and a potent ensured completely free movement of capital within States ensure coordination of their economic policies, symbol of our growing political unity. the EU and established the single market. Stage provide for multilateral surveillance of this coordi- And for the world, the euro is a two (1994–1999) included the introduction of the nation, and demonstrate financial and budgetary major new pillar in the international European Monetary Institute (EMI), the precursor to discipline. Monetary policy underpins the single monetary system and a pole of the European Central Bank. The final stage, launched currency’s stability through price stability and respect stability for the global economy.” in 1999, witnessed the birth of both the euro and the for the market economy. European Central Bank’s single monetary policy for —Joaquín Almunia, EU Commissioner the euro area. Fiscal policy (tax and spending) remains in the hands for Economic and Monetary Affairs of individual national governments, as do policies Although all EU Member States are part of the about labor, pensions, and capital markets. However, Economic and Monetary Union, not all EU countries sound public finances and flexible and integrated are part of the euro area, which includes only those product, labor, and financial markets are vital for EMU that have adopted the euro as their currency and to function effectively. Governments commit to respect Economic Governance under EMU: The Players Responsibility for EMU is divided between EU Member States and EU institutions. Q Comprised of EU heads of state and government Q Member States each establish national budgets and the President of the European Commission, within agreed limits for deficit and debt and the European Council defines the EU’s general determine structural policies involving labor, political directions and priorities. pensions, and capital markets. Q The EU’s key legislative decision-maker (along Q The European Commission (EC), the EU’s with the European Parliament), the Council executive arm, monitors performance and of the EU coordinates economic policymak- compliance, and represents the interests of the ing, undertakes economic surveillance, and EU as a whole. Responsibilities include propos- monitors Member States’ budgetary policies ing legislation, managing and implementing EU and public finances; determines whether policies and budget, and enforcing EU law under a Member State has qualified to adopt the the control of the European Court of Justice. euro; and represents Member States through meetings attended by a minister from each Q With price stability as its primary objective, Member State government. the European Central Bank sets the single monetary policy for the euro area, monitors Q The Eurogroup is the key (informal) forum for ERM II, and ensures the coordination of euro area finance ministers to address issues monetary and exchange rate policy and the pertaining to the single currency and coordi- administration of intervention and financing nate policies of common interest for the euro mechanisms specified in the ERM II agreement. area Member States. | 2 eufocus |

Special Advertising Supplement commonly agreed rules on public finances through invest and work through national structural reform “Lisbon won’t free the European adherence to the Stability and Growth Pact (SGP), and programs. By combining economic dynamism with economy from natural business coordinate their structural policies to better achieve sustainable growth through investment in skills and cycles. It won’t bring an end to continental level stability, growth, and development education, leadership in research, and equipping the sort of external shocks we are through the Lisbon Strategy for Growth and Jobs. people for change, the Lisbon Strategy creates an witnessing today. What it can do is environment that fosters creativity, modernization, improve Europe’s growth potential Stability and Growth Pact (SGP). EMU exacts disci- and the capacity of European enterprises to offer more through structural reforms. It can pline from its participants, and in return, it offers innovative products and services more quickly. make our economies more flexible opportunities for economic stability, higher growth, and resilient. And it’s working. 6.5 and increased employment. The Stability and Growth Non-Euro Area Countries and ERM II million new jobs in the last two Pact (SGP) helps to enforce fiscal discipline within Once a Member State adopts the euro, an exchange years. An increase in productivity the EMU and to ensure sound and sustainable public rate is irrevocably fixed between its national currency growth for the first time in 10 finances. The SGP, which applies to all EU countries, and the euro throughout the transition to full use of years. Unemployment the lowest requires governments to maintain an annual budget the single currency. Member States outside the euro in 25 years.” with a deficit no greater than three percent of GDP area can also choose to link their currencies to the and public debt at 60 percent of GDP or less. euro under the Exchange Rate Mechanism (ERM II), —European Commission President in which participating currencies fluctuate within a José Manuel Barroso The SGP operates with both a preventive and a correc- specified margin (+/- 15 percent) around a stable but tive arm. The preventive arm of the SGP works to adjustable central rate. When necessary, a currency avoid excessive deficit procedures and achieve fiscal is supported by intervention (buying or selling) to consolidation through medium-term budgetary maintain the exchange rate within the set limits. objectives set for each Member State. Each country’s particular economic situation and prospects are taken ERM II was established to ensure that exchange rate into account so as to provide a sufficient safety margin fluctuations between the euro and other EU curren- with respect to the three percent of GDP reference cies do not disrupt economic stability within the value and ensure prudent levels of debt. single market, and to help countries prepare to join the euro area. ERM II is a “training ground” for the SGP’s preventive mechanism counts on peer pressure euro, and euro area candidates are required to partici- rather than sanctions to encourage governments to pate successfully in ERM II for at least two years achieve sustainable budgets. Euro area countries draft before joining the euro area to satisfy the conver- annual stability programs—and non-euro countries gence criteria on exchange rate stability. Current prepare convergence reports—for submission to the members of ERM II are Estonia, Latvia, Lithuania, European Commission and Council of the EU to and Denmark. ensure more rigorous budgetary discipline through surveillance and coordination of budgetary policies. On the Web EMU and the Euro Exceeding the deficit and debt ratios can trigger an http://ec.europa.eu/economy_finance/ excessive deficit procedure and require a Member State index_en.htm to take corrective action. SGP corrective mechanisms have sufficient flexibility to consider and make allow- European Central Bank ances for circumstances where excessive deficits may http://www.ecb.eu/home/html/index.en.html be exceptional and temporary and result from a severe economic downturn or an unusual event beyond the Financial Markets government’s control. Euro area countries may also be http://ec.europa.eu/internal_market/ subject to financial penalties as a last resort. top_layer/index_24_en.htm The Lisbon Strategy for Growth and Jobs. First adopted in 2000 and relaunched in 2005, the Lisbon Strategy aims to boost growth, create more and better jobs, and make Europe an attractive place to | eufocus 3 |

Special Advertising Supplement The Euro The most visible symbol of European integration, the Thanks to the euro’s rising international status and the euro was launched as a “virtual currency” on January sheer size of the euro area economy, economic policies 1, 1999, followed by the introduction of banknotes and within EMU increasingly have a global impact, and the coins at the start of 2002. The euro area has expanded euro area has become a pole of stability for Europe and from its initial 11 members to 16 with the January 2009 the world economy. With a credible macroeconomic addition of Slovakia. framework and a sound financial system, the euro area has been contributing to a more orderly evolu- Countries earn their way into the euro area through tion of the global economy, even during this period of adopting the economic, monetary, and fiscal discipline economic turbulence. necessary to comply with the required economic conver- gence criteria (the “Maastricht criteria,\" incorporated in the The euro has not been immune to the last decade’s Treaty on European Union signed at Maastricht in 1992). external shocks associated with the global business cycle. Nevertheless, any ensuing slowdowns in the euro International Role and Impact of the Euro. After area have been considerably more muted than during just a decade, the euro is already the world’s second comparable episodes prior to the adoption of the single most important international currency, after the U.S. currency. Today, the euro once again appears protected dollar. It is the second most actively traded currency from the worst of the global financial turbulence. The in foreign exchange markets worldwide, and is used in anchoring of inflation through the ECB’s centralized more than one-third of all foreign exchange transac- monetary policy for the euro area, along with EMU’s tions. In 2004, euro-denominated international debt coordinated monetary policy for the non-euro Member securities surpassed those of the U.S. dollar. States, has contributed to this improved resilience, as have the reforms carried out under the Lisbon Strategy The official use of the euro has increased, with the world- for Growth and Jobs and the renewed budgetary disci- wide share of disclosed reserves denominated in euros pline of the Stability and Growth Pact. rising from 18 percent in 1999 to more than 25 percent in 2007. Similarly, its role as an invoicing or settlement The Maastricht Criteria currency has increased to cover more than half of the euro area’s external trade. A number of non-EU countries, Five economic convergence criteria must be notably EU candidate and neighboring countries, invoice fulfilled before an EU Member State can adopt approximately 60 percent of their trade in euros. the euro: Q Price stability. The inflation rate should be Slovakia Becomes the 16th Member of the Euro Area no more than 1.5 percentage points above On January 1, 2009, Slovakia adopted the Q Slovakia’s legislation in the monetary the previous year’s rate for the three EU euro as its official currency, having accom- field is compatible with EU legislation. countries with the lowest inflation. plished the hard work of meeting the Q Budget deficit. The national deficit gener- required economic convergence criteria: ally must be below three percent of GDP. Q Debt. National debt should not exceed Q Slovakia’s 12-month average inflation in Slovakia adopts the euro on 60 percent of GDP, although a country March 2008 was 2.2 percent, well below January 1, 2009. with a higher rate can still adopt the euro, the 3.2 percent reference calculated for provided its debt level is falling steadily. the same month. Q Interest rates. Long-term rates should be no more than two percentage points above the Q The deficit (2.2 percent of GDP previous year’s rate in the three EU countries and falling) and debt (24.9 percent with the lowest interest rates. of GDP) in 2007 were well within Q Exchange rate stability. The national acceptable limits. currency’s exchange rate should have remained within the authorized fluctuation Q The average long-term interest rate over margins for two years. the year to February 2008 was 4.5 percent, below the reference rate of 6.5 percent. Q The Slovak koruna participated success- fully in ERM II from November 2005. | 4 eufocus |

Special Advertising Supplement Eurozone Countries “This is a major success for Slovakia, ERM II Members the result of determined policies to Other EU Member States promote convergence over recent years. Slovakia joins the euro area NORWAY FINLAND exactly ten years after its inception. SWEDEN ESTONIA During the last decade the single currency, which is now shared by DENMARK LATVIA some 325 million citizens, has been a remarkable success, and Slovakia LITHUANIA is well placed to benefit from euro area participation. Still…Slovakia RUSSIAN needs to remain committed to sound FEDERATION policies, particularly in the fiscal and structural domain. This is both IRELAND UNITED NETHER- POLAND BELARUS in its own interest and part of the PORTUGAL KINGDOM LANDS responsibility that all members share BELGIUM UKRAINE to ensure that the monetary union GERMANY MOLDOVA functions smoothly.” ROMANIA LUXEMBOURG CZECH —Joaquín Almunia, EU Commissioner REPUBLIC for Economic and Monetary Affairs SLOVAKIA FRANCE SWITZER- AUSTRIA LAND HUNGARY SLOVENIA CROATIA BOSNIA & SERBIA HERZEGOVINA ITALY BULGARIA former YUGOSLAV REPUBLIC OF MACEDONIA MONTENEGRO KOSOVO ALBANIA SPAIN GREECE TURKEY MALTA CYPRUS Economic and Monetary Union—A Timeline 1992 Maastricht 1997 Stability and Growth Pact is agreed upon, ensuring that 1999 Third stage of EMU begins, with the launch of the Treaty is signed, setting Member States maintain budgetary discipline within EMU. euro as a single (virtual) currency for 11 Member States: out an EMU timetable Austria, Belgium, Finland, France, Germany, Ireland, Italy, and the convergence ERM II, the exchange rate mechanism, is developed to link Luxembourg, the Netherlands, Portugal, and Spain. criteria all Member the euro and currencies of non-participating Member States States must meet for (revised in 2006). ECB begins conducting monetary policy for the euro area. participation in EMU. 2001 Greece adopts the euro. 1990 1995 2000 2005 2010 1990 First stage of 1994 Second stage of 1998 European Central 2002 Euro 2007 2009 EMU begins; Member EMU begins, including the Bank begins operation banknotes and Slovenia Slovakia States’ economic creation of the European with the mandate to coins are introduced adopts the adopts the policies are coordi- Monetary Institute (prede- decide and conduct in 12 euro area nated more closely cessor of European Central monetary policy for the Member States. euro. euro. and capital movement Bank). Member States euro area; its primary is liberalized. are now required to fulfill objective is price 2008 five convergence criteria stability. Cyprus and on inflation, interest rates, Malta adopt government deficit and debt, and exchange rate stability. the euro. | eufocus 5 |

Special Advertising Supplement The European Central Bank and the Eurosystem “For nearly ten years, price stability The Eurosystem, comprising the independent European tion. It will continue to exist as long as EU countries has been broadly achieved Central Bank (ECB) and the national central banks remain outside the euro area. despite the fact that strong global (NCBs) of the EU Member States using the euro, is the commodity price increases…have monetary authority responsible for safeguarding price Monetary Policy and Price Stability. A key element affected Europe and the rest of stability in the euro area. The Eurosystem also supports in the ECB monetary policy strategy is its quantitative the world, leading to an average the EU’s general economic policy objectives, including definition of price stability—a year-to-year increase inflation rate that has been slightly sustainable, non-inflationary economic growth and a in the consumer price index of below two percent above two percent since the launch of high level of employment. in the euro area. Over the medium-term, the ECB the euro. This is a remarkable result, aims to maintain inflation rates below but close to two taking into account all the shocks Decision-making in the Eurosystem is centralized, while percent so as to provide a sufficient safety margin to that have marked the period and implementation is decentralized. The ECB focuses on guard against the risks of deflation. the track record of the economies policy formulation and ensures consistent implementa- participating in the euro area.” tion of its decisions by the NCBs, which perform almost A deep and integrated money market, essential for all the operational tasks of the Eurosystem. an efficient monetary policy, ensures an even distri- —Jean-Claude Trichet, bution of central bank liquidity and a homogeneous President of the The ECB’s two main decision-making bodies are the level of short-term interest rates throughout the single Executive Board, which implements the decisions and currency area. The ECB steers short-term interest European Central Bank is responsible for the ECB’s daily management, and the rates through such monetary policy instruments Governing Council, which makes monetary decisions. as open market operations, standing facilities, and reserve requirements. The Executive Board includes the ECB President, Vice-President, and four other appointed members, Banking. Unlike the Federal Reserve in the U.S., the while the Governing Council consists of the members European Central Bank does not have direct responsi- of the ECB’s Executive Board and the governors of bility for bank supervision and financial stability, which the euro area NCBs. The Governing Council meets remain under national jurisdiction in EU countries. monthly to analyze and assess economic develop- ments and the risks to price stability and determine However, the ECB is charged with “contributing the appropriate level for key interest rates. to the smooth conduct of policies… relating to the prudential supervision of credit institutions and the A third body, the General Council, includes the stability of the financial system.” To fulfill this role, ECB President and Vice-President and the gover- the ECB monitors and assesses financial stability at nors of all EU member NCBs, not just those within the euro area level; advises on the design and review the euro area. The General Council’s tasks include of regulatory and supervisory requirements for finan- reporting on non-euro Member State preparations cial institutions; and promotes cooperation between for adopting the single currency, contributing to the central banks and supervisory authorities on issues of ECB’s advisory functions, and helping to prepare the common interest, such as payment system oversight Bank’s annual reports and collect statistical informa- and financial crisis management. Main Tasks of the European Central Bank and the Eurosystem ECB President Jean-Claude Trichet (center), Q Define and implement monetary policy for the euro area; accompanied by European Commission President Q Conduct foreign exchange operations; José Manuel Barroso (far left) and other officials, Q Hold and manage the official foreign reserves of participating EU Member States; celebrates the 10th anniversary of the ECB. Q Promote the smooth operation of payment systems; Q Authorize the issue of banknotes by NCBs in the euro area; Q Contribute to financial stability and supervision through monitoring, assessment, and advice to the national authorities. The European Central Bank, along with the NCBs of all EU Member States, comprise the European System of Central Banks (ESCB). As long as EU states remain outside the euro area, the ESCB and the Eurosystem will co-exist. | 6 eufocus |

Special Advertising Supplement Enhanced Financial Market Integration: Safeguarding Stability and Prosperity in the EU By eliminating exchange rate risk in cross-border Q Ensure proper valuation of assets, focusing on “MiFID has largely been a success. financial activities throughout much of the EU, the consistent application of international accounting Markets have become more euro has acted as a powerful catalyst to financial market standards vis-à-vis all financial intermediaries; competitive, service providers are integration in Europe. Financial markets are crucial to able to move around Europe more the functioning of modern economies, and the more Q Strengthen the prudential rules for banks in the easily, the integration of European integrated they are, the more efficient the allocation of context of managing liquidity risk, concentration capital markets has been promoted, capital and long-run economic performance will be. risk, and off-balance sheet exposures; and the investor protection innovations in MiFID are generally The EU’s Financial Services Action Plan (FSAP) laid the Q Investigate structural market issues, including the being welcomed by both industry foundation for a strong financial market in the EU, and role played by credit rating agencies and their poten- and investors. Together with the has already resulted in many positive changes despite tial failures in the context of the financial turmoil. other parts of the EU Financial the turbulent global environment. Completing the Services Action Plan, MiFID is single market in financial services is an EU priority, and The Roadmap includes key elements designed to expected, over time, to lower the the EU aims to achieve an integrated, open, inclusive, safeguard the financial sector and the economy by cost of capital and to bring major competitive, and economically efficient Union by: bolstering confidence, containing risk, and introduc- benefits for the European economy.” ing greater efficiency and openness in the banking and Q Implementing, enforcing, and evaluating existing investment sectors. —Charlie McCreevy, legislation, and ensuring that future initiatives are EU Commissioner for based on rigorous impact assessment and thorough The Single Euro Payments Area (SEPA) is a market- Internal Market and Services consultation; led initiative aimed at removing technical, legal, and commercial barriers against smooth cashless Q Removing any remaining barriers to the free provi- cross-border payments in euro. By November 2009, sion of financial services and circulation of capital, SEPA will enable the banking industry to shift from eliminating unnecessary costs and delivering high 31 national payment systems to an integrated euro levels of financial stability and consumer protec- payment area. tion and benefits; In force since November 2007, the Market in Financial Q Enhancing supervisory cooperation in the EU, Instruments Directive (MiFID) grants exchanges, deepening relations with other financial market- multilateral trading facilities, and investment firms in places internationally, and strengthening Europe’s Member States a “single passport” to operate throughout global influence. the EU based on authorization in their home country. Countering the Financial Crisis: A proposed revision to an existing EU directive on Economic and Financial Roadmap deposit guarantees will raise the minimum level of deposit guarantees throughout the EU from €20,000 The European Central Bank has reacted quickly and to €50,000 in the first year and to € 100,000 thereafter, effectively from the start of the financial turmoil that while reducing the payout period from three months began in the U.S. sub-prime mortgage market in 2007, to three days in the event of a bank failure. providing additional liquidity for the EU financial system. Additionally, in October 2007 the EU devel- A proposed revision to the EU’s capital requirements oped the “Ecofin Roadmap,” comprising approximately for banks would reinforce the stability of the financial 40 measures designed to address the main weaknesses system, reduce risk exposure by imposing limits on perceived in the financial system. loans to any one party, and increase the supervision of banks that operate in more than one EU country. The Roadmap seeks to: Q Improve financial transparency in the market by Proposed adjustments to accounting standards will ensure that assets are valued according to their intrin- requesting that financial institutions reveal all areas sic value over time, rather than just the current market where they are exposed to risk, provide basic statis- price. EU rules will align with those in other jurisdictions tics on these markets, and furnish investors with to avoid any competitive disadvantage for EU banks. more and better information; Proposed legislation requires legally binding registra- Q Enhance financial reporting and valuation of finan- tion of Credit Rating Agencies (CRAs), as well as an cial products to give investors more detailed infor- external oversight regime whereby European regulators mation on individual deals; will supervise the policies and procedures followed. | eufocus 7 |

Special Advertising Supplement EU-U.S. Economic and Financial Cooperation “In light of the considerable differences The $4 trillion EU-U.S. transatlantic economy is the EU-U.S. Financial Market Dialogue. Established in that exist between financial market largest, most integrated economic relationship in the 2002, the emphasis has shifted from tackling existing structure and regulation on both world, and is a key driver of global economic growth, frictions to looking ahead to common goals such sides of the Atlantic, and given the trade, and prosperity. Together, the partners represent as the equivalence and convergence of accounting consolidation underway globally approximately 12 percent of the world’s population, standards internationally, and ensuring that trans- and transatlantically in this sector, close to 40 percent of global trade, and nearly 60 atlantic markets operate as openly and efficiently we resolve to take steps, towards the percent of world GDP. as possible and contribute to further integration of convergence, equivalence, or mutual global financial markets. recognition, where appropriate, of In this interdependent, globalized age, it is vital regulatory standards based on high to support open trade and investment by coopera- As each partner considers whether to introduce new quality principles.” tively addressing unnecessary regulatory burdens regulations, or strengthen existing rules and enforcement, and promoting recognition of mutually accept- the Dialogue has proven to be a flexible and pragmatic —2007 EU-U.S. Summit able standards. Since 1990, the EU and the U.S. forum for exploring new ideas and approaches, while have held annual presidential summits, with avoiding unnecessary regulatory conflicts. It is led by successive meetings clarifying the details of the the European Commission (EC) and the U.S. Treasury bilateral relationship. Department and includes the U.S. Securities and Exchange Commission, Federal Reserve Board of the United States, The Framework for Advancing Transatlantic and representatives of the EC’s internal market. Economic Integration, signed by the EU and the U.S. at the 2007 summit, achieved closer transatlan- Transatlantic Economic Council (TEC). Established at tic economic integration and growth by promoting the 2007 EU-U.S. summit, the TEC oversees, guides, and regulatory cooperation, capital markets integration, accelerates the implementation of work designed to more investment, and innovation, and by supporting the closely integrate the EU and U.S. economies, bringing protection of intellectual property rights and facilitat- together those members of the European Commission ing secure trade. Specific transatlantic structures and and U.S. Cabinet who carry the political responsibility for dialogues have evolved to treat economic and finan- closer economic ties. Topics include investment, financial cial issues relevant to both the EU and the U.S. markets, and reducing regulatory burden. Euro Challenge EU Focus is published bi-monthly The Euro Challenge is an innovative academic prize awards for the winning team. More information by the Delegation of the European competition that tests U.S. high school students is available online at http://euro-challenge.org. Commission to the United States. about their knowledge of European economic affairs and the euro. Student teams make presenta- Anthony Smallwood tions on specific aspects of the European economy Spokesman and Head of Press and the EU’s single currency. They are also asked to select one euro area country, examine an economic & Public Diplomacy problem at the country level, and identify appro- Editor-in-Chief priate policy solutions. Stacy Hope Editor Now in its fourth year, the Euro Challenge will Ambassador John Bruton (center back) and Melinda Stevenson continue to expand nationally with as many as 100 the 2008 EuroChallenge champions, from Writer/Assistant Editor teams competing from various regions throughout the Rumson-Fair Haven High School in Rumson, NJ. ISSN: 1830-5067 U.S. The program was developed and is supported by Catalogue No.: IQ-AA-09-01-EN-C the European Commission’s Washington Delegation, with technical support provided by the Federal Reserve Delegation of the European Bank of New York. The Moody’s Foundation funds Commission to the United States 2300 M Street, NW For further information: http://www.eurunion.org/eufocus Washington, DC 20037 202.862.9500 www.eurunion.org email:[email protected] | 8 eufocus |

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IN incredibly, it could affect nearly 70 percent of India’s 1.1 billion citizens. BOX What makes the program truly excep- tional is its transparency. Regular, India’s New Deal public reviews of all documents— wage cards and bank records, engi- On a recent morning in a village in neers’ reports and work completion eastern India, Hirya Devi, a rail- papers, for example—ensure that thin woman in a tangerine sari, told a laborers are being paid fairly. If shady crowd of a few hundred poor laborers practices occur, villagers like Devi can how she came to participate in the air their grievances at village meetings. largest employment program in human history. For two months last year, Devi For many of India’s rural poor, worked on a government-funded well access to regular work is a life- construction project as part of India’s changing development. “It’s not the National Rural Employment Guarantee end of poverty,” says Jean Drèze, one Act, which promises 100 days of of India’s most famous social activists employment each year to the head of and a chief architect of the program, every rural household. Since the pro- “but it means the kind of extreme gram began in 2006, 90 million Indians insecurity that people live in today is have been temporarily put to work, basically not there anymore.” usually on road and well construction projects, earning minimum wages of What’s more, the program’s New hires: Putting 90 million Indians to work. about $1.60 a day. attempts at accountability represent a radical, game-changing agenda in a contractor. “I’m an old woman,” Devi The program isn’t simply extraordi- country where local politicians and explained. “I don’t have money to go nary because of its scale—though, businessmen often collude for kick- run after government officials.” backs. As such, there has been a fair Although the top district official lis- amount of backlash from local leaders, tened patiently, Devi likely won’t receive who contend that public access to doc- her lost wages. No one expects such a uments challenges their authority. large government program to be free of Many villagers complain bitterly that corruption overnight, but the fact that the program itself has become corrupt. a chauffeur-driven bureaucrat showed That’s what brought Devi to the up to listen to poor villagers surely sug- front of the crowd that morning. After gests that men and women like Devi two months of hard work, she had are learning they are entitled to more been denied her wages by a thieving than just a handout. —Daniel Pepper Branded Running a country is a lot like managing a business: Reputation is everything. So, TOP: JEREMY HORNER/CORBIS; BOTTOM, FROM LEFT TO RIGHT: CORBIS, ISTOCKPHOTO.COM, CORBIS what can you do if your national image has been sullied—whether by war, drugs, or just bad neighbors? Break out a new branding campaign. The slogan: “The Winner Is Georgia” The slogan: “Korea, Sparkling!” The slogan: “Colombia Is Passion” The architect: Bahrain office of The architect: New York’s BCA The architect: Independent consultant London’s M&C Saatchi Marketing Communications David Lightle The pitch: Georgia lost decisively in its short war with Russia last summer, but don’t tell that to the The pitch: In October, South Korean President The pitch: Cocaine trafficking, guerrillas, and government’s PR people. “The Winner Is Georgia” Lee Myung-bak voiced what many of his citizens assassinations color much of the world’s view of campaign pits the country against other nations— privately feared: Their neighbor to the north, Kim this war-scarred nation. But as the country’s Georgia vs. France, Georgia vs. China, Georgia vs. Jong Il, was tarnishing South Korea’s reputation civil conflict winds down, the Colombian Australia—and asserts that when it among tourists and investors. So, to counter government wants its rep to be among the first comes to the best place to do business or to visit, Kim’s moves, South Korea’s spin doctors are things to change. The solution? Play up the Georgia wins—even if not on the battlefield. pushing an effervescent new slogan to win over people’s passion “for life, for family, for nature, skeptics: “Korea, Sparkling!” and . . . for peace,” according to the campaign. 28 F o r e i g n P o l i c y

Grand Theft 1999 and 2005, elec- Solar tricity generated from Lincoln Dahl, managing director of a company that markets alterna- solar power increased tive energies to African businesses, recently stepped into a used solar panel 300 percent in India. shop in Ouagadougou, Burkina Faso. He had come in to scope out his com- Across Africa, it petition’s wares. A few of the shop’s solar panels looked stolen, still bearing jumped 2,500 percent, the nameplates of their original owners. “Theft is a problem,” Dahl says. “We compared with just 11 find that to be a compliment—that means that there’s a demand.” percent in North Amer- After years of slow growth in solar use, ica. “Due to the lack a rash of solar panel theft on five conti- nents suggests that the alternative power of infrastructure, some- source may finally be catching on. Missing panels have been reported this times solar is the only year in Australia, Spain, and the United States, but it’s in the developing world alternative for people where solar theft has been most glaring. In July, South Africa scrapped a year-old in these countries,” program to install solar-powered traffic lights throughout the country because of Bisetti explains. their vulnerability to theft. Streetlight panels in Calcutta also went missing, Light it up: Solar use has skyrocketed in poorer countries. To ward off thieves, leading city leaders to abandon a plan to expand their use. And throughout Latin many solar companies America, thieves frequently plunder banks of mountain-top solar panels that power telecom and Internet services. now recommend antitheft protection, “They end up destroying the system,” from barbed-wire fences to elaborate complains Romulo Bisetti, regional sales surveillance systems. In South Africa, director for Kyocera, a tech company one of the most popular methods is to that produces solar products. paint the unused side of the panels Construction of the panels is com- neon pink or orange to tip off police to plex, so thieves are unlikely to melt theft. More bright ideas are sure to them for minerals or metals. Instead, follow if solar power remains the rage. the stolen panels are most often sold on FOR THE FIRST TIME the black market and reused. In poorer countries where electricity is expensive or scarce, the panels have grown in popularity thanks to their rep- The world’s developing utation as reliable energy sources—use- economies will provide ful for resurrecting dead car batteries, 100 percent of any global recharging cellphones, and fueling a economic growth this year. night of television viewing. Between FROM TOP TO BOTTOM: MALCOLM LINTON/GETTY IMAGES; ISTOCKPHOTO.COM; ISTOCKPHOTO.COM; JASON DECROW/AP PHOTOS Epiphanies: Tony Blair I WENT TO SEE Gen. [Pervez] Musharraf in THE BIG THING FOR ME [as Middle East stop the resolution because they know the Islamabad about four years ago. I remember envoy] has been to go there and experience the symbolic power of peace. They know that if going into his room, just the two of us. We life of the Israelis, the life of the Palestinians. It’s America and Europe were involved in peacemak- were trying to get Pakistan’s help in the war only when you get out, and you see it with your ing between Israel and Palestine, it’d be very against terrorism. And I said to him, ‘So, own eyes and hear it with your own ears, and hard to rouse up their people against the what can we do to help you?’ And he just you touch and feel and smell the politics, that iniquities of America. said, ‘Palestine. A peace between the Israelis you get a sense of how to resolve [the problem]. THE PROBLEM FOR THE WORLD today is that and the Palestin- THE FIRST THING you’ve got to contradict is globalization is pushing people together. Actually, ians.’ I expected the belief that [Middle East peace] is I think that’s a good thing. There will, however, to hear that in hopeless. The second thing you’ve got to be reactionary forces against that. And if Riyadh or contradict is the belief that if you lock people religious faith becomes the focal point of Cairo or in a room, they’re going to come out with [a] reaction, it would be very dangerous. So, to me, Ramallah, peace settlement. They’re not. It’s gone too [interfaith dialogue] is a major part of making but I didn’t far for that. the world work. expect to hear that in [WHAT DO I MISS LEAST?] You mean, besides I ENTERED POLITICS because I realized I was Islamabad. Prime Minister’s Questions? not going to play for Newcastle United and I was never going to be Mick Jagger. THERE’S MASSIVE SYMBOLIC POWER in resolving this dispute. Elements within the Tony Blair, special envoy to the Middle East, was prime minister of Britain from 1997 to 2007. region and within Palestine try so hard to J a n ua ry | F e b r ua ry 2 0 0 9 29

[ ]In Box An Rx for Frustration with the high cost and Chinese Health low quality of care has recently For decades, China has been con- tent to let the invisible hand of reached fever pitch. Healthcare the market work its magic on the coun- try’s economy. But there’s one area grievances have been at the heart of where the government wants to reassert state control: healthcare. The govern- thousands of organized protests ment recently developed a strategy to provide affordable medical insurance to countrywide in recent years. Some 90 percent of its population by 2010 and 100 percent by 2020. hospitals have even had to hire Today, 500 million Chinese—or police to protect medical staff from nearly 40 percent of the population— can’t afford to see a doctor. Respon- angry mobs. The dissatisfaction has dents in a January 2008 poll of 101,000 households around the country named caught the attention of the govern- healthcare their top worry. Since the free market reforms initiated by Deng ment, which is beginning to address Xiaoping in 1978, out-of-pocket health- care payments have ballooned from 20 social development now that it has percent of medical spending in 1980 to 49 percent in 2006. By comparison, met many of its economic goals. Japanese pay just 15 percent of their medical spending out of pocket. The In an unusual sign of its com- average hospital stay in China costs nearly as much as an individual’s annu- mitment, the government posted al per capita income in the country. its “Healthy China 2020” plan online in October and allowed pub- lic comments until November 14. “To meet the demand of the public, the government this time tried to please the public, say[ing], ‘We want to release this draft reform Out of reach: 500 million Chinese can’t pay for a doctor. plan, seek your comments and sug- gestions, and try to be more demo- Many of the comments are personal cratic,’” says Shenglan Tang of the stories, especially from farmers, of frus- World Health Organization’s Beijing trating experiences with the healthcare office. More than 25,000 comments system. Addressing such woes is bound were left online, and the government to give any government a headache. plans to synthesize them into a report Still, the effort might be just what the for the State Council. doctor ordered. Are you a globalization junkie? Test your knowledge of global trends, economics, and politics with 8 questions about how the world works. 1 After the United States and India, which 5 How many countries do not have country has the world’s largest film industry? standing armies? Britain 9 Brazil 24 Nigeria 45 2 Other than the United States, how 6 How many trees per person many countries use the U.S. dollar are there in the world? as their official currency? 0.6 6 61 2 7 12 7 How many of the corporations on TOP: AFP/GETTY IMAGES; ALL QUIZ IMAGES: ISTOCKPHOTO.COM 3 What percentage of the world’s Fortune’s 500 List are run by women? seafood comes from farms? 4 12 36 21 percent 33 percent 8 What is the world’s most popular newspaper? 42 percent Bild (Germany) Yomiuri Shimbun (Japan) 4 How much of an increase in cocaine People’s Daily (China) seizures has Africa seen since 2000? 5x 15x 30x For the answers, turn to page 94. 30 F o r e i g n P o l i c y

The World Economic Forum is an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. Incorporated as a foundation in 1971, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests. GLOBAL LEADERSHIP FELLOWS The World Economic Forum is selecting exceptionally talented individuals to join its organization for a three-year Master’s programme in Global Leadership. The 2009 cohort will start its academic sessions as of next September. As a Global Leadership Fellow, you are fully integrated in the World Economic Forum and benefit from an intensive work and learning experience intended to develop and train future leaders of global enterprises and international organizations. The Global Leadership Programme (www.weforum.org/glf) is designed by the World Economic Forum in collaboration with Columbia University, INSEAD, London Business School and the Forum’s worldwide network of distinguished experts and leaders. Upon successful completion of the programme, you will receive a Master’s in Global Leadership and will be provided assistance in identifying career opportunities at, but not limited to, the World Economic Forum. We are looking for outstanding individuals, who demonstrate a high level of energy and a strong commitment to our mission, to take up positions such as Community Managers, Regional Relationship Managers, Project Managers, Knowledge Managers and Programme Managers. We expect you to exhibit demonstrated leadership capabilities, excellence in a particular field or discipline and proven interest in global affairs. You possess a broad intellectual background with a Master’s degree (or equivalent) in science/engineering/economics/business/public policy/public administration. You have a minimum of three years of professional experience, two of which are in business. You are fluent in English and at least one other language. A regularly updated list of open Global Leadership Fellows positions can be found at www.weforum.org/careers. Please apply online and provide us with a cover letter, your curriculum vitae, the contact details of three references and an 800-word personal essay on what you would like to achieve in your life and what your motivations are for joining the Global Leadership Programme.

THINK AGAIN By Bill McKibben Climate Change Act now, we’re told, if we want to save the planet from a climate catastrophe. Trouble is, it might be too late. The science is settled, and the damage has already begun. The only question now is whether we will stop playing political games and embrace the few imperfect options we have left. “Scientists Are Divided” No, they’re not. In the early years of the it is “very likely” (defined as more than 90 percent certain, or about as certain as science gets) that heat- global warming debate, there was great controver- trapping emissions from human activities have caused sy over whether the planet was warming, whether “most of the observed increase in global average humans were the cause, and whether it would be a temperatures since the mid-20th century.” significant problem. That debate is long since over. Although the details of future forecasts remain If anything, many scientists now think that the unclear, there’s no serious question about the gen- ipcc has been too conservative—both because mem- eral shape of what’s to come. ber countries must sign off on the conclusions and because there’s a time lag. Its last report synthe- Every national academy of science, long lists of sized data from the early part of the decade, not the Nobel laureates, and in recent years even the science latest scary results, such as what we’re now seeing advisors of President George W. Bush have agreed that in the Arctic. we are heating the planet. Indeed, there is a more thor- ough scientific process here than on almost any other In the summer of 2007, ice in the Arctic Ocean issue: Two decades ago, the United Nations formed melted. It melts a little every summer, of course, but the Intergovernmental Panel on Climate Change this time was different—by late September, there was (ipcc) and charged its scientists with synthesizing 25 percent less ice than ever measured before. And it the peer-reviewed science and developing broad-based wasn’t a one-time accident. By the end of the summer conclusions. The reports have found since 1995 that season in 2008, so much ice had melted that both the warming is dangerous and caused by humans. The Northwest and Northeast passages were open. In panel’s most recent report, in November 2007, found other words, you could circumnavigate the Arctic on open water. The computer models, which are just Bill McKibben is scholar in residence at Middlebury College and a few years old, said this shouldn’t have happened author of Deep Economy: The Wealth of Communities and the until sometime late in the 21st century. Even skeptics Durable Future (New York: Times Books, 2007). can’t dispute such alarming events. 32 F o r e i g n P o l i c y

Tall order: It may already be too late to save the planet from a human-made catastrophe. “We Have Time” MOMATIUK: EASTCOTT/CORBIS Wrong. Time might be the toughest part of the to make fundamental reforms by 2012 or watch the climate system spin out of control; nasa scientist equation. That melting Arctic ice is unsettling not James Hansen, who was the first to blow the whis- only because it proves the planet is warming tle on climate change in the late 1980s, has said that rapidly, but also because it will help speed up the we must stop burning coal by 2030. Period. warming. That old white ice reflected 80 percent of incoming solar radiation back to space; the new All of which makes the Copenhagen climate blue water left behind absorbs 80 percent of that change talks that are set to take place in December sunshine. The process amps up. And there are many 2009 more urgent than they appeared a few years other such feedback loops. Another occurs as north- ago. At issue is a seemingly small number: the level ern permafrost thaws. Huge amounts of methane of carbon dioxide in the air. Hansen argues that long trapped below the ice begin to escape into the 350 parts per million is the highest level we can atmosphere; methane is an even more potent green- maintain “if humanity wishes to preserve a planet house gas than carbon dioxide. similar to that on which civilization developed and to which life on Earth is adapted.” But because Such examples are the biggest reason why many we’re already past that mark—the air outside is experts are now fast-forwarding their estimates of currently about 387 parts per million and growing how quickly we must shift away from fossil fuel. by about 2 parts annually—global warming sud- Indian economist Rajendra Pachauri, who accept- denly feels less like a huge problem, and more like ed the 2007 Nobel Peace Prize alongside Al Gore on an Oh-My-God Emergency. behalf of the ipcc, said recently that we must begin J a n ua ry | F e b r ua ry 2 0 0 9 33

[ ]Think Again “Climate Change Will Help as Many Places as It Hurts” Wishful thinking. For a long time, the Of course, there are a few places we used to think of as possible winners—mostly the far north, where winners-and-losers calculus was pretty standard: Canada and Russia could theoretically produce more Though climate change will cause some parts of the grain with longer growing seasons, or perhaps explore planet to flood or shrivel up, other frigid, rainy regions for oil beneath the newly melted Arctic ice cap. But would at least get some warmer days every year. Or even those places will have to deal with expensive so the thinking went. But more recently, models have consequences—a real military race across the high begun to show that after a certain point almost every- Arctic, for instance. one on the planet will suffer. Crops might be easier to grow in some places for a few decades as the danger Want more bad news? Here’s how that Pentagon of frost recedes, but over time the threat of heat stress report’s scenario played out: As the planet’s carrying and drought will almost certainly be stronger. capacity shrinks, an ancient pattern of desperate, all-out wars over food, water, and energy supplies would A 2003 report commissioned by the Pentagon reemerge. The report refers to the work of Harvard forecasts the possibility of violent storms across archaeologist Steven LeBlanc, who notes that wars over Europe, megadroughts across the Southwest United resources were the norm until about three centuries States and Mexico, and unpredictable monsoons ago. When such conflicts broke out, 25 percent of a causing food shortages in China. “Envision Pakistan, population’s adult males usually died. As abrupt climate India, and China—all armed with nuclear weapons— change hits home, warfare may again come to define skirmishing at their borders over refugees, access to human life. Set against that bleak backdrop, the shared rivers, and arable land,” the report warned. Or potential upside of a few longer growing seasons in Spain and Portugal “fighting over fishing rights— Vladivostok doesn’t seem like an even trade. leading to conflicts at sea.” “It’s China’s Fault” Not so much. China is an easy target to What’s more, unlike many of their counterparts in the United States, Chinese officials have begun a con- blame for the climate crisis. In the midst of its certed effort to reduce emissions in the midst of their industrial revolution, China has overtaken the United country’s staggering growth. China now leads the States as the world’s biggest carbon dioxide pro- world in the deployment of renewable energy, and ducer. And everyone has read about the one-a-week there’s barely a car made in the United States that can pace of power plant construction there. But those meet China’s much tougher fuel-economy standards. numbers are misleading, and not just because a lot of that carbon dioxide was emitted to build prod- For its part, the United States must develop a ucts for the West to consume. Rather, it’s because plan to cut emissions—something that has eluded China has four times the population of the United Americans for the entire two-decade history of the States, and per capita is really the only way to think problem. Although the U.S. Senate voted down the about these emissions. And by that standard, each last such attempt, Barack Obama has promised that Chinese person now emits just over a quarter of the it will be a priority in his administration. He favors carbon dioxide that each American does. Not only some variation of a “cap and trade” plan that would that, but carbon dioxide lives in the atmosphere for limit the total amount of carbon dioxide the United more than a century. China has been at it in a big States could release, thus putting a price on what has way less than 20 years, so it will be many, many until now been free. years before the Chinese are as responsible for glob- al warming as Americans. Despite the rapid industrialization of countries such as China and India, and the careless neglect of rich ones 34 F o r e i g n P o l i c y

There are nearly 7 billion reasons to study international affairs at Fletcher. The Fletcher School provides a comprehensive approach to understanding how the world works. We combine D ULJRURXV \\HW ÁH[LEOH VWXG\\ RI LQWHUQDWLRQDO DIIDLUV ZLWK D GLYHUVH VWXGHQW ERG\\ RI LQGLYLGXDOV FRPPLWWHG WR XQGHUVWDQGLQJ WKH P\\ULDG FRPSOH[LWLHV RI WKH ZRUOG 2XU GHGLFDWHG IDFXOW\\ DUH UHFRJQL]HG DV OHDGHUV LQ WKHLU UHVSHFWLYH ÀHOGV DQG WHDFK \\RX KRZ WR ZRUN LQ D JOREDO arena to get things accomplished. ([SHULHQFH WKH ZRUOG DW )OHWFKHU Contribute to the world with Fletcher. Master of Arts in Law and Diplomacy (MALD) Doctor of Philosophy (PhD) Master of International Business (MIB) Master of Arts (MA) Global Master of Arts Program (GMAP) Executive Education (non-degreed) Master of Laws in International Law (LLM) Summer School (non-degreed) 9LVLW ÁHWFKHUWXIWVHGX RU FDOO

[ ]Think Again such as the United States, climate change is neither any one makes eminent moral and practical sense and could prob- country’s fault, nor any one country’s responsibility. It will ably be structured so as to bolster emerging green require sacrifice from everyone. Just as the Chinese might energy industries in the West. But asking Americans to pay have to use somewhat more expensive power to protect to put up windmills in China will be a hard political sell the global environment, Americans will have to pay some in a country that already thinks China is prospering at its of the difference in price, even if just in technology. Call expense. It could be the biggest test of the country’s it a Marshall Plan for the environment. Such a plan political maturity in many years. “Climate Change Is an Environmental Problem” Not really.Environmentalists were the first to issue we face. (You were thinking terrorism? It’s hard to figure out a scenario in which Osama bin Laden sound the alarm. But carbon dioxide is not like tra- destroys Western civilization. It’s easy to figure out ditional pollution. There’s no Clean Air Act that how it happens with a rising sea level and a wrecked can solve it. We must make a fundamental trans- hydrological cycle.) formation in the most important part of our economies, shifting away from fossil fuels and on Expecting the environmental movement to lead to something else. That means, for the United this fight is like asking the usda to wage the war in Iraq. States, it’s at least as much a problem for the It’s not equipped for this kind of battle. It may be ready Commerce and Treasury departments as it is for to save Alaska’s Arctic National Wildlife Refuge, which the Environmental Protection Agency. is a noble undertaking but on a far smaller scale. Unless climate change is quickly de-ghettoized, the chances of And because every country on Earth will have to making a real difference are small. coordinate, it’s far and away the biggest foreign-policy “Solving It Will Be Painful” It depends. What’s your definition of painful? would, net, save more money than they cost. The ipcc included a cost estimate in its latest five-year On the one hand, you’re talking about transforming update on climate change and looked a little further the backbone of the world’s industrial and consumer into the future. It found that an attempt to keep car- system. That’s certainly expensive. On the other hand, bon levels below about 500 parts per million would say you manage to convert a lot of it to solar or wind shave a little bit off the world’s economic growth—but power—think of the money you’d save on fuel. only a little. As in, the world would have to wait until Thanksgiving 2030 to be as rich as it would And then there’s the growing realization that we have been on January 1 of that year. And in return, it don’t have many other possible sources for the eco- would have a much-transformed energy system. nomic growth we’ll need to pull ourselves out of our current economic crisis. Luckily, green energy should Unfortunately though, those estimates are proba- be bigger than it and biotech combined. bly too optimistic. For one thing, in the years since they were published, the science has grown darker. Deep- Almost from the moment scientists began study- er and quicker cuts now seem mandatory. ing the problem of climate change, people have been trying to estimate the costs of solving it. The real But so far we’ve just been counting the costs of fix- answer, though, is that it’s such a huge transformation ing the system. What about the cost of doing nothing? that no one really knows for sure. The bottom line is, Nicholas Stern, a renowned economist commissioned the growth rate in energy use worldwide could be by the British government to study the question, cut in half during the next 15 years and the steps 36 F o r e i g n P o l i c y

The Whitney and Betty MacMillan Center for International and Area Studies at Yale @EK<IE8K@FE8C I<C8K@FEJ › 8=I@:8E JKL;@<J › <8JK 8J@8E JKL;@<J › <LIFG<8E 8E; ILJJ@8E JKL;@<J <eh Z[YWZ[i\" OWb[ Kd_l[hi_jo ^Wi X[[d Wj j^[ Ykjj_d] [Z][ e\\ _dj[hdWj_edWb WdZ Wh[W ijkZ_[i [ZkYWj_ed\" jhW_d_d] \\kjkh[ b[WZ[hi \\eh WYWZ[c_Y\" feb_j_YWb\" Xki_d[ii\" WdZ ded#fheÇj b[WZ[hi^_f$ Master of Arts Degree Programs K_\\ DXZD`ccXe :\\ek\\iÀj ^iX[lXk\\ gif^iXdj `e @ek\\ieXk`feXc I\\cXk`fej# 8]i`ZXe Jkl[`\\j# <Xjk 8j`Xe Jkl[`\\j# Xe[ <lifg\\Xe Xe[ Iljj`Xe Jkl[`\\j j\\\\b _`^_cp hlXc`È\\[ jkl[\\ekj n_f nXek kf glijl\\ k_\\ Z_Xcc\\e^\\j f] X ZXi\\\\i `e `ek\\ieXk`feXc X]]X`ij `e XZX[\\d`Z Xe[ \\[lZXk`feXc j`k\\j# dlck`cXk\\iXc Xe[ eXk`feXc ^fm\\ied\\ekj# Ylj`e\\jj# Xe[ efe$gifÈk fi^Xe`qXk`fej Xifle[ k_\\ nfic[% K_\\j\\ É\\o`Yc\\ dXjk\\iÀj gif^iXdj \\eXYc\\ jkl[\\ekj kf glijl\\ _`^_cp `e[`m`[lXc`q\\[# p\\k ^l`[\\[# Zflij\\j f] jkl[p [iXn`e^ fe k_\\ n\\Xck_ f] `ek\\ieXk`feXc i\\jfliZ\\j Xk PXc\\ Le`m\\ij`kp% Joint Degree Programs with the Professional Schools K_\\ DXZD`ccXe :\\ek\\i ZfccXYfiXk\\j n`k_ ]fli f] PXc\\Àj gif]\\jj`feXc jZ_ffcj » k_\\ CXn JZ_ffc# k_\\ JZ_ffc f] DXeX^\\d\\ek# k_\\ JZ_ffc f] =fi\\jkip Xe[ <em`ifed\\ekXc Jkl[`\\j# Xe[ k_\\ JZ_ffc f] GlYc`Z ?\\Xck_% Fli af`ek [\\^i\\\\ gif^iXdj \\eXYc\\ jkl[\\ekj kf Zfee\\Zk knf [\\dXe[`e^ Zflij\\j f] jkl[p n_`c\\ Xcjf ]lcÈcc`e^ k_\\`i j\\gXiXk\\ i\\hl`i\\d\\ekj% N_\\k_\\i kiX`e`e^ kf dXeX^\\ _\\Xck_ gif^iXdj `e 8]i`ZX fi kf glijl\\ Ylj`e\\jj fggfikle`k`\\j `e :_`eX# k_\\ af`ek gif^iXdj Xi\\ `[\\Xc ]fi jkl[\\ekj j\\\\b`e^ ^i\\Xk\\i \\og\\ik`j\\ `e Xe X[[`k`feXc gif]\\jj`feXc È\\c[ Y\\pfe[ `ek\\ieXk`feXc X]]X`ij% Specialization through Graduate Certificates 8ep [fZkfiXc# dXjk\\iÀj# fi ^iX[lXk\\ gif]\\jj`feXc jkl[\\ek Xk PXc\\ ZXe [\\m\\cfg kXi^\\k\\[ \\og\\ik`j\\ k_ifl^_ fe\\ f] k_\\ DXZD`ccXe :\\ek\\iÀ j`o ^iX[lXk\\ Z\\ik`ÈZXk\\j f] ZfeZ\\ekiXk`fe » @ek\\ieXk`feXc ;\\m\\cfgd\\ek Jkl[`\\j Xe[ @ek\\ieXk`feXc J\\Zli`kp Jkl[`\\j# Xj n\\cc Xj ]fli i\\^`feXccp ]fZlj\\[ Z\\ik`ÈZXk\\j `e 8]i`ZXe Jkl[`\\j# <lifg\\Xe Jkl[`\\j# CXk`e 8d\\i`ZXe Xe[ @Y\\i`Xe Jkl[`\\j# Xe[ Df[\\ie D`[[c\\ <Xjk Jkl[`\\j% Exceptional Resources and Facilities N_\\e pfl af`e Xep f] k_\\ DXjk\\iÀj gif^iXdj f] k_\\ DXZD`ccXe :\\ek\\i# k_\\ n_fc\\ f] PXc\\ Le`m\\ij`kp `j XmX`cXYc\\ kf pfl% PXc\\Àj _`jkfip Xe[ i`Z_ kiX[`k`fej Zfdgc\\d\\ek X ki\\d\\e[flj n\\Xck_ f] i\\jfliZ\\j XZZ\\jj`Yc\\ kf Xcc jkl[\\ekj n`k_`e k_\\ DXZD`ccXe :\\ek\\i Zfddle`kp% Jkl[\\ekj Xi\\ ^`m\\e dXep fggfikle`k`\\j kf kXb\\ X[mXekX^\\ f] k_\\ m`YiXek Xe[ [`m\\ij\\ `ek\\cc\\ZklXc# jfZ`Xc# Xe[ ZlckliXc c`]\\ `ek\\^iXc kf k_\\ PXc\\ \\og\\i`\\eZ\\% K_\\ DXZD`ccXe :\\ek\\i f]]\\ij X iXe^\\ f] ]\\ccfnj_`gj Xe[# n`k_ Èm\\ ]\\[\\iXccp ]le[\\[ EXk`feXc I\\jfliZ\\ :\\ek\\ij# Xcjf jlggfikj L%J% Z`k`q\\ej \\eifcc\\[ `e ^iX[lXk\\ [\\^i\\\\ gif^iXdj n`k_ `ek\\ej`m\\ cXe^lX^\\ jkl[p% KF C<8IE DFI< 89FLK K?< D8:D@CC8E :<EK<I 8E; @KJ D8JK<IÀJ ;<>I<< GIF>I8DJ# M@J@K www.yale.edu/macmillan/degrees

[ ]Think Again concluded that the costs of climate change could even- increased costs of natural disasters begin to compound. tually reach the combined costs of both world wars and The diminishing time between monster storms in places the Great Depression. In 2003, Swiss Re, the world’s such as the U.S. Gulf Coast could eventually mean that biggest reinsurance company, and Harvard Medical parts of “developed countries would experience devel- School explained why global warming would be so oping nation conditions for prolonged periods.” Quite expensive. It’s not just the infrastructure, such as sea walls simply, we’ve already done too much damage and against rising oceans, for example. It’s also that the waited too long to have any easy options left. “We Can Reverse Climate Change” If only.Solving this crisis is no longer an option. and floods are increasing dramatically. Just look at the record levels of insurance payouts, for instance. Mos- Human beings have already raised the temperature quitoes, able to survive in new places, are spreading of the planet about a degree Fahrenheit. When peo- more malaria and dengue. Coral reefs are dying, and ple first began to focus on global warming (which is, so are vast stretches of forest. remember, only 20 years ago), the general consensus was that at this point we’d just be standing on the None of that is going to stop, even if we do every- threshold of realizing its consequences—that the big thing right from here on out. Given the time lag changes would be a degree or two and hence several between when we emit carbon and when the air heats decades down the road. But scientists seem to have up, we’re already guaranteed at least another degree systematically underestimated just how delicate the of warming. balance of the planet’s physical systems really is. The only question now is whether we’re going The warming is happening faster than we expect- to hold off catastrophe. It won’t be easy, because ed, and the results are more widespread and more the scientific consensus calls for roughly 5 degrees disturbing. Even that rise of 1 degree has seriously more warming this century unless we do just about perturbed hydrological cycles: Because warm air holds everything right. And if our behavior up until now more water vapor than cold air does, both droughts is any indication, we won’t. [ ]Want to Know More? Bill McKibben’s classic work The End of Nature (New York: Anchor Books, 1989) remains required reading for anyone interested in the causes and consequences of climate change. In “Carbon’s New Math” (National Geographic, October 2007), he suggests how policymakers can fight back. The Intergovernmental Panel on Climate Change’s latest assessment, Climate Change: 2007 (Nov. 17, 2007), offers a sobering diagnosis of the ways humans are harming their planet. In “Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies” (Science, Aug. 13, 2004), authors Stephen Pacala and Robert Socolow argue science already has the tools it needs to fight climate change. The Council on Foreign Relations’ online section “Crisis Guide: Climate Change” offers an interac- tive database of climate change commentary, background, and news analysis. The American Meteorological Society runs a climate change blog, climatepolicy.org, as do a group of American and European scientists at realclimate.org. McKibben argues that the world must draw a firm line on carbon emissions in “21 Solutions to Save the World: 450 Ways to Stop Global Warming” (Foreign Policy, May/June 2007). In “How Cap-and-Trade Could Replace Foreign Aid” (ForeignPolicy.com, February 2007), Alex Evans suggests that a carbon-trading policy could make poor countries rich. 38 F o r e i g n P o l i c y

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PRIME NUMBERS The Nuclear Option A fter a decades-long slowdown, nuclear power once again dominates the global energy debate. Dozens of Nuclear Power Use countries are vying to join the nuclear power club and hundreds (as a percentage of domestic electricity use) of new reactors are on the drawing board. But despite the hype, Germany Russia it will not be the miracle cure for energy dependence or global Ukraine warming that boosters promise. United States By Charles D. Ferguson and Michelle M. Smith France 27% 16% Atoms at Work 19% 77% 48% China A country’s use of nuclear power has much to do Mexico India 2% Japan with government intervention, whether through state 5% 3% 28% Brazil loans or streamlined regulations. Brazil, China, and 3% India rely on reactors for just tiny fractions of their energy needs, but their dependence will likely grow if the many plants they’ve proposed are completed. A few of the barriers Estimated Project Qualified to building: reactor cost: completion personnel needed per $5-9 time: reactor: billion 9-12 2,400 years Countries with Nuclear Power Countries with Stated A Nuclear GRAPHICS BY DAVE MERRILL Plans to Acquire Family SOURCES: IAEA-PRIS; AUTHORS’ CALCULATIONS; WNA; U.S. STATE DEPARTMENT # of Nuclear Reactors Under Construction Nuclear Power # of Reactors Proposed After more than 30 years without building a nuclear 1 plant, U.S. utility companies are seeking licenses for over 7 1 37 30 new reactors. In addition, more than 300 reactors have 22 6 1221 3 been proposed worldwide. Ukraine 13 Some 40 reactors are already under construction, though 32 2 1 12 many have been underway Bulgaria 3 100 for decades with no end in sight. Countries such as 2 Taiwan 7 Egypt, Nigeria, Saudi Arabia, and Venezuela are among the 25 South more than 30 countries with 4 Korea serious plans to build their Pakistan first nuclear plant. 5 25 2 40 F o r e i g n P o l i c y

Power Trip Nuclear power’s champions promise many things, but two above all: that nuclear power is a major solution to the world’s growing electricity needs, and that increased nuclear use can substantially lower greenhouse gas emissions and fight climate change. For either to be true, the world would have to embark on an unrealistic reactor-building spree. Can Nuclear Power Provide More Electricity? Can Nuclear Power Reduce Emissions? Global electricity demand is estimated to nearly Annual emissions of greenhouse gases are double by 2030, with nuclear power currently similarly expected to double by 2050, from a accounting for about 15 percent of global use. current 7 billion tons of carbon dioxide each year to more than 14 billion tons. Global Electricity Demand (in billion kilowatt hours) 15% Global Emissions (in billions of tons) 2005 15,750 Nuclear 2010 19,050 2015 21,700 2000 6.7 2010 7.8 2020 24,370 2020 9.1 2030 10.5 2025 27,130 2040 12.2 2050 14.2 2030 30,120 15% } For nuclear to do nothing For nuclear energy to offset 1 billion more than maintain its just a small fraction of tons current share of global those additional 7 billion electricity to 2030—15 tons—say, 1 billion tons percent—a 1,000-megawatt by 2050—a 1,000- reactor must be built … megawatt reactor will need to come online … SOURCES: AUTHORS’ CALCULATIONS; EIA; OAK RIDGE NATIONAL LABORATORY …every …every 16 days 14 days for the next 21 years. between now and 2050. Charles D. Ferguson, the Philip D. Reed senior fellow for science and technology, and Michelle M. Smith, research associate for nuclear policy, work on the Council on Foreign Relations’ Nuclear Energy Education in the 21st Century Project. J a n ua ry | F e b r ua ry 2 0 0 9 41

THE U.S. ARMY MARINE CORPS Counterinsurgency Field Manual AFGHANISTAN EDITION BY NATHANIEL C. FICK AND JOHN A. NAGL WITH AN INTERVIEW OF GEN. DAVID H. PETR AEUS Ue.vSTen.wnesogrtalryeadectiatecergadsyl—aciongtnoeI,fnrlaaiectqtsc.oimnNnutAorsowftgvb,heetarhsnaiepiasdpltaolminceit.dlriiPttnaoleur’tyssh,mseDimafaanpvrulideda,ilfPpfreeoetrwwreanreeotruftauesnl—d talks to FP about how to win a losing war.

SCOTT NELSON FOR GETTY IMAGES For the past five years, the fight in Afghanistan has been hobbled by strategic drift, conflicting tactics, and too few troops. The chairman of the Joint Chiefs of Staff, Adm. Michael Mullen, got it right when he bluntly told the U.S. Congress in 2007, “In Iraq, we do what we must.” Of America’s other war, he said, “In Afghanistan, we do what we can.” It is time this neglect is replaced with a more creative and aggressive strategy. U.S. Central Command, which over- sees operations in Afghanistan and Paki- stan, is now headed by Gen. David Petraeus, the architect of the U.S. mil- itary’s counterinsurgency strategy widely credited with pulling Iraq from the abyss. Many believe that, under Petraeus’s direction, Afghanistan can similarly pull back from the brink of failure. Two years ago, Gen- eral Petraeus oversaw the creation of a new counterinsurgency field manual for the U.S. military. Its release marked a definitive break with a losing strategy in Iraq and reflected a creeping realization in Washington: To avoid repeating the mistakes of the Vietnam War, the U.S. military would have to relearn and institutional- ize that conflict’s key lessons. At the time, the doctrine the manual laid out was enormously contro- versial, both inside and outside the Pentagon. It remains so today. Its key tenets are simple, but radical: Focus on protecting civilians over killing the enemy. Assume greater risk. Use minimum, not maximum force. For a military built on avoiding casualties with quick, decisive victories, many believe such precepts veer far too close to nation-building and other political tasks soldiers are ill-equipped to handle. Still others attack the philosophy as cynically justifying the United States’ continued presence in Iraq—neocolonialism dressed up in PowerPoint. Either way, the manual’s critics rec- ognize a singular fact: The new counterinsurgency doctrine represents a near total rethinking of the way the United States should wage war. But such a rethinking has never been more necessary. Technological advances and demographic shifts point to the possibility of an increasingly disorderly world—what some military strategists are calling “an era of persistent irregular warfare.” The United States’ conventional military superiority has pushed its enemies inevitably toward insurgency to achieve their objectives. And in a multipolar world where small wars proliferate, there is reason to believe that this doctrine will shape not only the next phase of the fights in Afghanistan and Iraq, but the future of the U.S. military. The surge in Iraq has been a primary consequence of the new counterinsurgency doctrine’s influ- ence, and it has clearly succeeded in improving security there. The conventional wisdom about what Nathaniel C. Fick, a fellow at the Center for a New American Security, served as a U.S. Marine infantry officer in Afghanistan and Iraq. John A. Nagl, a senior fellow at the Center for a New American Security, served as a U.S. Army officer in Iraq and helped write The U.S. Army/Marine Corps Counterinsurgency Field Manual. J a n ua ry | F e b r ua ry 2 0 0 9 43

[ ]How to Win a Losing War HANS STAKELBEEK/FMAX FOR THE NETHERLANDS MINISTRY OF FOREIGN AFFAIRS to do in Afghanistan is now coalescing around two courses of action that mirror steps taken during the past 18 months in Iraq: a similar surge of more troops and a willingness to negotiate with at least some of the groups that oppose the coalition’s presence. If it is true that a new plan is needed in Afghanistan, it is doubly true that Afghanistan is not Iraq. Conflating the two conflicts would be a dangerous oversimplifi- cation. The Iraq war has been mostly urban, largely sectarian, and contained within Iraq’s borders. The Afghan war has been intrinsically rural, mostly confined to the Pashtun belt across the country’s south and east, and inextricably linked to Pakistan. Because the natures of the conflicts are different, the strategies to fight them must be equally so. The very fact that Pak- istan serves as a sanctuary for the Taliban and al Qaeda makes regional diplomacy far more nec- essary than it was in Iraq. Additional troops are certainly needed in Afghanistan, but a surge itself will not equal success. Two myths persistently hamper U.S. policy in Afghanistan. First is the notion that the notorious border region between Pakistan and Afghanistan is ungovernable. The area, whose terrain resembles the front range of the U.S. Rocky Mountains along a border roughly the distance from Washington to Albuquerque, New Mexico, is home to the international headquarters of al Qaeda as well as much of the Taliban insurgency. However, the absence of a Western-style central government there should not be misconstrued as an absence of governance. The Pashtun tribes along the border have a long history of well-developed religious, social, and tribal structures, and they have developed their own governance and methods of resolving disputes. Today’s instability is not the continuation of some ancient condition; it is the direct result of decades of intentional dismantling of those traditional structures, leaving extremist groups to fill the vacuum. Re-empowering local leaders can help return the border region to an acceptable level of stability. Second, Afghans are not committed xenophobes, obsessed with driving out the coalition, as they did the British and the Soviets. Most Afghans are desperate to have the Taliban cleared from their vil- lages, but they resent being exposed when forces are not left behind to hold what has been cleared. They also cannot understand why the coalition fails to provide the basic services they need. Afghans are not tired of the Western presence; they are frustrated with Western incompetence. On a recent helicopter flight above the razor-sharp ridges of the Afghan southeast, a U.S. gener- al noted to one of us that, just as the United States had failed to conduct counterinsurgency in Iraq effectively until 2007, it had similarly failed in Afghanistan by focusing too much on the enemy and not enough on providing security for the Afghan people. It is almost too late. In the next phase of the Afghan war, the U.S. military must finally do what it has often failed to do in the past: follow some of the basic precepts of counterinsurgency, as detailed in the field manual, no matter how paradoxical they may appear. 44 F o r e i g n P o l i c y

Paradox 1: Some of the best weapons do not shoot. 1-1. Afghanistan is one of the poorest and least developed countries in the world. Per capita gdp is $350, just one tenth of Iraq’s. Life expectancy is 44 years. Nearly three quarters of the population is illiterate. The country has 50 percent more land than Iraq, but a fifth of the paved roads. Security is crucial, but it is development—enabled by responsible governance—that will secure a lasting peace. 1-2. Afghans’ greatest concerns, according to polling by the Asia Foundation, are access to electricity, jobs, water, and education. Those who think the country is moving in the right direction can rightly cite instances of successful reconstruction efforts as the primary cause for optimism. For these reasons, secu- rity must not be seen simply as a necessary precondition for development efforts. Development often creates security by bolstering people’s confidence in their government and providing a positive, tangi- ble alternative to the Taliban. Take the National Solidarity Program. Under this initiative, villages elect a community council to oversee a development project chosen by village vote. Local people contribute a portion of the capital, labor, or materials, and allocated aid funds are distributed transparently. The results of this bottom-up process have been remarkable: Although the Taliban has burned hundreds of schools across Afghanistan, almost no schools built under this program have been destroyed, largely because the Taliban knows it would win no allies by destroying them. 1-3. Although all development is critical in this impoverished country, roads are the single The U.S. general pointed at Afghanistan’s ring road most important path to success in Afghanistan. In Ghazni from his Black Hawk helicopter and declared, province last summer, one of us ‘Where the road ends, the Taliban begins.’ spoke with an Afghan road builder whose shirt was covered in dried blood. He’d been shot by the Taliban a day earlier for working with the coalition, but he was back the next morning with his paving crew because he thought that finishing that road was the best way to bolster security in his village. Indeed, the U.S. general who was critical of U.S. counterinsurgency efforts in Afghanistan point- ed at Afghanistan’s ring road from the window of his Black Hawk helicopter, and declared, “Where the road ends, the Taliban begins.” Paradox 2: Sometimes the more you protect your force, the less secure you may be. 2-1. The U.S. military, designed to inflict overwhelming and disproportionate losses on the enemy, tends to equate victory with very few body bags. So does the American public. The new counterinsurgency doctrine upends this perceived immunity from casualties by demanding that manpower replace fire- power. Soldiers in Afghanistan must get out among the people, building and staffing joint security stations with Afghan security forces. That is the only way to disconnect the enemy from the civilians. Persistent presence—living among the population in small groups, staying in villages overnight for months at a time—is dangerous, and it will mean more casualties, but it’s the only way to protect the popula- tion effectively. And it will make U.S. troops more secure in the long run. 2-2. This imperative to get out among the people extends to U.S. civilians as well. U.S. Embassy staff are almost completely forbidden from moving around Kabul on their own. Diplomacy is, of course, about relationships, and rules that discourage relationships fundamentally limit the ability of American diplo- mats to do their jobs. The mission in Afghanistan is to stabilize the country, not to secure the embassy. J a n ua ry | F e b r ua ry 2 0 0 9 45

[ ]How to Win a Losing War POOL PHOTO/GETTY IMAGES 2-3. Counterinsurgency strategy suggests that victory requires 20 to 25 counterinsurgents for every 1,000 residents. Current troop strength in Afghanistan, including Afghan forces, are about a third of that level. The stark alternatives are to deploy more troops or to change the mission. Paradox 3: The hosts doing something tolerably is often better than foreigners doing it well. 3-1. The United States and its allies cannot remain in Afghanistan indefinitely. Building a capable Afghan security force and a credible Afghan government is the fastest, most responsible exit strategy. U.S. efforts so far have been mixed. An army can only be as good as its government, and the government of President Hamid Karzai has been crippled by cor- ruption and connections to narcotrafficking. His recent decision to replace the much-reviled minister of the interior is a sign that persistent U.S. com- plaints about poor governance might be getting through. National elections scheduled for this year provide an incentive for the Afghan government to continue to improve, and serve as a major point of leverage for U.S. policy. 3-2. At the end of the day, the coalition’s performance is less important than how well the Afghans themselves perform. Every coalition decision and every operation should be guided by two ques- tions: Does this further the legitimacy of the Afghan government? And is that government deserv- ing of our support? As tribal elders in Ghazni province recently said, they feel “slapped on one cheek by the government, and on the other cheek by the Taliban.” The United States can and should take the lead in training Afghan soldiers and bureaucrats to be more effective, but even this task is not being given the commitment it deserves. Currently, the U.S. teams advising the Afghan Army are staffed at just half their authorized strength; the police mentor teams are manned at barely a third of the necessary staff. The low priority assigned to this keystone of any successful counterinsur- gency strategy is an unacceptable flaw of U.S. policy to date. Paradox 4: Sometimes the more force is used, the less effective it is. 4-1. In 2005, the coalition conducted 176 close air support missions (in which aircraft conduct bomb- ing or strafing in support of ground troops) in Afghanistan. In 2007, it completed 3,572 such mis- sions. Bombs—even “smart” bombs—are blunt instruments, and they inevitably kill people other than their intended targets. Each civilian death at the hands of the coalition further diminishes the finite amount of goodwill toward the United States among the Afghan people. Each civilian death undermines the legitimacy of the Afghan government the United States seeks to support. Each civil- ian death, when refracted through the Taliban’s propaganda campaign, strengthens the narrative of America’s enemies. 46 F o r e i g n P o l i c y

4-2. If military units commit to using less force, then it is imperative that others on the battlefield, par- ticularly civilian security contractors, do the same. One of us had a nightmarish experience recently while riding in a convoy protected by Afghan security contractors on a dark highway near Jalalabad. We repeatedly hurtled through national police checkpoints without stopping and finally crashed into a stopped minibus filled with people. The momentum of our heavily armored suv threw the bus off the roadway, but the guards refused our orders to stop and help, citing fears of ambush. Afghan civil- ians do not distinguish between excessive force used by soldiers and excessive force used by contrac- tors. In a war where perception creates reality, we all suffer the consequences. Paradox 5: Sometimes doing nothing is the best reaction. 5-1. Cross-border raids into Pakistan to pursue insurgents have strained U.S. relations with Pakistan at this critical juncture in the Afghan campaign. Pakistan is, of course, inextricably connected to the Afghan insurgency. The Pashtun belt, as the border area between the two countries is known, con- stitutes the real battleground in this war. Counterinsurgency operations in Pakistan, therefore, are a necessary component of any strategy in Afghanistan. Without Pakistani support, however, unilateral cross-border raids will create more blowback than they are worth. 5-2. A better strategy for persuading Pakistan to act as an ally—and not a spoiler—in Afghanistan involves giving up the short-term tactical gains of such raids in favor of the regional diplomacy nec- essary to broaden and deepen the U.S.-Pakistan relationship. Even after Islamist extremists bombed the Marriott Hotel in Islamabad in September in an attempt to assassinate the new civilian leader- ship of Pakistan, the Pakistani Army remains more focused on the perceived threat from India than on the actual threat from inside its own country’s borders. U.S. and international efforts to broker confidence-building measures between India and Pakistan are likely to have a far greater impact on Pakistani counterinsurgency efforts than any number of unilateral U.S. raids. 5-3. More U.S. troops are absolutely necessary to turn the tide in Afghanistan, but American troops are a short-term answer to a lasting set of problems. Supporting Afghan and Pakistani governments that can meet the needs of their own people—including security—must be the long-term solution. The paradoxes of counterinsurgency detailed here, counterintuitive though they may be, provide the best guideposts on the rocky trail toward success. It will not be the death or capture of every last enemy fighter that wins this war, but creating a position of strength from which to negotiate a last- ing political solution to a cycle of conflict with no other end in sight. [ ]Want to Know More? Nathaniel Fick’s One Bullet Away: The Making of a Marine Officer (Boston: Houghton Mifflin, 2005) offers an account of the wars in Iraq and Afghanistan from a soldier’s perspective. In “Knowing the Enemy” (The New Yorker, Dec. 18, 2006), George Packer wonders how social sciences will transform the U.S. military’s counterinsurgency strategies. Steve Coll explains Afghanistan’s struggles in the run-up to 9/11 in Ghost Wars (New York: Penguin Press, 2004). In “Taliban Propaganda: Winning the War on Words?” (Brussels: July 24, 2008), the International Crisis Group warns that the Taliban has adeptly manipulated pub- lic opinion against the Afghan government. Linda Robinson explains which lessons of Iraq should be applied to Afghanistan—and which should be left behind—in “What Petraeus Under- stands” (ForeignPolicy.com, September 2008). J a n ua ry | F e b r ua ry 2 0 0 9 47

[ ]How to Win a Losing War has been progress in a number of these areas and many others since 2001. The General’s One cannot adequately address the challenges in Next War Afghanistan without adding Pakistan into the equa- tion. In fact, those seeking to help Afghanistan and Pakistan need to widen the aperture even farther, to encompass at least the Central Asian states, India, Iran, and even China and Russia. FP: Defense Secretary Robert Gates has said that U.S. efforts in Afghanistan were really on the verge of fail- ure. What’s your incoming assessment? The FP Interview DP: I told [then] Secretary Donald Rumsfeld in Sep- tember 2005 that Afghanistan would be the longest with campaign in the so-called ‘long war.’ That judgment was based on an assessment I conducted in Afghanistan Gen. David H. Petraeus on my way home from my second tour in Iraq. And having been back to Afghanistan twice in recent As America’s most famous warrior-scholar looks to months, I still see it that way. Progress there will export his Big Ideas about fighting wars from Iraq require a sustained, substantial commitment. That to the arguably even tougher battlefield of commitment needs to be extended to Pakistan as well, Afghanistan, FP’s executive editor, Susan Glasser, though Pakistan does have large, well-developed secu- spoke with him in the Pentagon days after he took rity institutions and its leaders are determined to over his new command. employ their own forces in dealing with the significant extremist challenges that threaten their country. Gen. David Petraeus: In looking at which lessons learned in Iraq might be applicable in Afghanistan, it FP: I was rereading an account of an Afghan veteran is important to remember a key principle of coun- from Soviet operations there. After every retaliatory terinsurgency operations: Every case is unique. That strike, he said, ‘Perhaps one mujahideen was killed. The is certainly true of Afghanistan (just as it was true, of rest were innocent. The survivors hated us and lived course, in Iraq). While general concepts that proved with only one idea—revenge.’ Clearly [U.S.] engagement important in Iraq may be applicable in Afghanistan— in Afghanistan didn’t start out in the same way as the concepts such as the importance of securing and serv- Soviets’ did, but one of the questions is whether all these ing the population and the necessity of living among occupations wind up similarly after seven years. the people to secure them—the application of those ‘big ideas’ has to be adapted to Afghanistan. The ‘opera- DP: A number of people have pointed out the sub- tionalization’ will inevitably be different, as stantial differences between the character of Soviet Afghanistan has a very different history and very dif- involvement in Afghanistan and that of the coalition ferent ‘muscle memory’ in terms of central gover- forces in Afghanistan, especially in the circumstances nance (or lack thereof). It also lacks the natural that led to the respective involvement, as well as in resources that Iraq has and is more rural. It has very the relative conduct, of the forces there. Foremost different (and quite extreme) terrain and weather. And among the differences have been the coalition’s it has a smaller amount of educated human capital, due objectives: not just the desire to help the Afghans to higher rates of illiteracy, as well as substantial unem- establish security and preclude establishment of ployment, an economy whose biggest cash export is extremist safe havens, but also to support econom- illegal, and significant challenges of corruption. Final- ic development, democratic institutions, the rule of ly, it lacks sufficient levels of basic services like elec- law, infrastructure, and education. To be sure, the tricity, drinking water, and education—though there coalition faces some of the same challenges that any of the previous forces in Afghanistan have faced: the 48 F o r e i g n P o l i c y same extreme terrain and weather, tribal elements