Tag Archives: india

BRIC building: the future of Brazil, Russia, India and China

Summary: Today we have a follow-up by Paul Schulte to Does corruption limit China’s growth, or pose a threat to its existence? He looks at the leading emerging nations, comparing them to the US and UK at similar point in their evolution to greatness.

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BRIC building: the future of Brazil, Russia, India and China

By Paul Schulte
Institutional Investor magazine, in press
Republished here with his generous permission.

The challenge of the BRICs

The November/December 2012 edition of Foreign Affairs Magazine had an article called “How the BRICS Are Crumbling” by Ruchir Sharma (head of Emerging Markets at Morgan Stanley). The tone of the article seems off the mark. The BRICs {Brazil, Russia, India, China} are slowing because they are trying to slow credit growth due to the links of their currencies to the US dollar. They are trying to slow down credit growth while the West desperately uses zero interest rates to accelerate credit growth. So, the West and the BRICs are operating at cross purposes.

The BRICs countries have dollar-linked currencies, so when interest rates are zero in the West and high in BRICs countries they will be bombarded with capital seeking a higher return. This causes their currencies to appreciate, jeopardizing growth. Or, the BRICs countries must intervene domestically to force banks to slow credit growth as these banks fill with cash. Either way they encounter forces which cause their currencies to rise and credit growth to accelerate. This is a classic cocktail for a real estate bubble and accelerating inflation.

Brazil and China are experiencing the same phenomenon now. Both are essentially trying to slow down their respective economies, although China has been more successful.

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What happens when a nation gets nukes? Sixty years of history suggests an answer.

Summary:  The drive for war comes from hawks’ terrifying forecasts of what a nuke-armed Iran will do.  Similar warnings were made in the past about today’s nuclear powers.  What does history tell us?  Eight in a series; at the end are links to the other chapters.

“The US is almost certain to be the first superpower to need to launch strategic weapons (particularly if not exclusively, in response to some galloping disaster in Europe).”
— Colin S. Gray (strategy expert, Hudson Institute), letter to the New York Times, 11 October 1977

Contents

  1. They’ll use nukes!  (“they” = our enemy due jour)
  2. The history of nukes — risky but so far a stabilizing force
  3. Examples:  India/Pakistan, North Korea
  4. Other posts in this series
  5. For more information
  6. Other posts about Iran

(1)  They’ll use nukes!  (“they” = our enemy due jour)

A commonplace of the atomic era are warnings by hawks that our enemy due jour will attack first with nukes (ignoring that our behavior was often equally aggressive).  This simple if baseless technique kept hysteria high during the Cold War.  For an example of confident wild guessing of that period see “Why the Soviet Union thinks it could fight and win a nuclear war“, Richard Pipes (Prof Russian History at Harvard), Commentary, July 1977.

Similar warnings about Iran do the same today.  But the Soviet Union was a large power wielding terrifying weapons whose application nobody understood.  Now we repeat that history, but with a small and poor nations — whose conventional military power is inferior to Israel’s, and nothing compared to ours.

(2)  The history of nukes — risky, but so far a stabilizing force

(a)  Nuclear Weapons as a stabilizing element

Despite the hawks warnings, some geopolitical experts saw that nuclear weapons would limit war.  One of the first was Bernard Brodie in The Absolute Weapon (1946).  And so it has proven to be, as he explained in “The development of nuclear strategy“, International Strategy, Spring 1978:

The notion that in an extremely tense crisis, which may include an ongoing theater war, any useful purpose is likely to be served by firing off strategic nuclear weapons, however limited in number, seems vastly to underestimate both the risks to the nation and the burden upon the person who must make the decision.  Divorced from consideration of how human beings actually behave in a crisis, it fits Raymond Aron’s definition of “strategic fiction”, analogous to “science fiction.”

(b)  Fears that other nations (not us) will use nukes irrationally

The claims that Iran will irrationally use the bomb repeat similar fears concerning China, India, and Pakistan.  Martin van Creveld describes the actual history of nukes (so far) in the conclusion to Nuclear Proliferation and the Future of Conflict (1993):

Nevertheless there seems to be no factual basis for the claims that regional leaders do not understand the nature and implications of nuclear weapons; or that their attitudes to those weapons are governed by some peculiar cultural biases which make them incapable of rational thought; or that they are more adventurous and less responsible in handling them than anyone else.

… An even more critical reason why regional leaders tend to be at least as careful in handling nuclear weapons as those of the superpowers is the fact that many of these countries are quite small, adjacent to each other, and no separated by any clear natural borders; often they share the same local weather systems and draw their water fro the same river basin.

… Much of the literature on proliferation appears to be distorted, ethnocentric, and self-serving.  it operates on the principle of beati sunt possedentes (blessed are those who are in possession); like the treaties to which it has given rise, its real objective is to perpetuate the oligopoly of the “old” nuclear powers.  To this end regional powers and their leaders have been described as unstable, culturally biased, irresponsible, and what-not.  To this end weapons seen as stabilizing in the hands of the great powers were suddenly described as destabilizing when they spread to other countries.

In practice, the leaders of medium and small powers alike tend to be extremely cautious with regard to the nuclear weapons they possess — the proof being that, to date, in every region where these weapons have been introduced, large-scale interstate warfare has disappeared. … This has been true even when the weapons have been few in number; even when delivery vehicles and methods of command and control were comparatively primitive; even when very great asymmetries existed in the forces of both sides; and even when the entire process was covert rather than overt.

… the virtual disappearance of large-scale interstate warfare from the regions in question does not mean that they are going to be free of armed conflict … The rise in these regions of Low Intensity Conflict represents the sound tactician’s response to nuclear proliferation.  If one cannot bear one’s enemy in a straightforward contest, one can seek to undermine him.

(3)  Examples:  India/Pakistan, North Korea

(a)  Fears that India and Pakistan will nuke each other (14 years later no nukes used)

Nuclear Anxiety, the Rivalry: South Asian Arms Race: Reviving Dormant Fears of Nuclear War“, New York Times, 29 May 1998 — Excerpt:

In a matter of weeks, covert nuclear programs in India and Pakistan, rivals who have three times gone to war, have turned into an open nuclear arms race, raising alarms about what comes next — and where.  Diplomats and arms control experts see this arms race as particularly dangerous because Pakistan and India, unlike the United States and Russia during the cold war, have not held serious negotiations over outstanding problems for decades or concluded agreements that reduced the number of weapons aimed at each other.

These experts now fear that Pakistan and India could be drawn into a nuclear war over Kashmir, a territory that has been in dispute since the two countries gained independence in 1947.

… ”We are at perhaps the most dangerous period since the beginning of the nuclear age — with the exception of the Cuban missile crisis,” said Thomas Graham, a former negotiator for the United States Arms Control and Disarmament Agency who is now president of the independent Lawyers’ Alliance for World Security.

(b)  North Korea

Iran and the Nuclear Paradox“, Robert Farley, World Politics Review, 16 November 2011 — Excerpt:

Existing nuclear powers fear that new entrants will act unpredictably, destabilize regions and throw existing diplomatic arrangements into flux. These predictions almost invariably turn out wrong; nuclear weapons consistently fail to undo the existing power relationships of the international system.

The North Korean example is instructive. In spite of the dire warnings about the dangers of a North Korean nuclear weapon, the region has weathered Pyongyang’s nuclear proliferation in altogether sound fashion. Though some might argue that nukes have “enabled” North Korea to engage in a variety of bad behaviors, that was already the case prior to its nuclear test. The crucial deterrent to U.S. or South Korean action continues to be North Korea’s conventional capabilities, as well as the incalculable costs of governing North Korea after a war. Moreover, despite the usual dire predictions of nonproliferation professionals, the North Korean nuclear program has yet to inspire Tokyo or Seoul to follow suit.

The DPRK’s program represents a tremendous waste of resources and human capital for a poor state, and it may prove a problem if North Korea endures a messy collapse. Thus far, however, the effects of the arsenal have been minimal.

(4)  Other posts in this series

  1. Is the War on Terror over (because there are no longer two sides)?, 3 September 2008 — Rumors of covert ops by us against Iran, including aid to terrorists
  2. Iran’s getting the bomb, or so we’re told. Can they fool us twice?, 16 January 2009
  3. Iran will have the bomb in 5 years (again), 2 January 2010 — Forecasts of an Iranian bomb really soon, going back to 1984
  4. About the escalating conflict with Iran (not *yet* open war), 4 January 2012
  5. Have Iran’s leaders vowed to destroy Israel?, 5 January 2012 — No, but it’s established as fact by repetition
  6. What do we know about Iran’s nuclear ambitions?, 6 January 2012 — US intelligence officials are clear:  not as much as the news media implies
  7. What does the IAEA know about Iran’s nuclear program?, 9 January 2012 — Their reports bear little resemblance to reports in the news media
  8. What happens when a nation gets nukes?  Sixty years of history suggests an answer., 10 January 2012
  9. What happens if Iran gets nukes? Not what we’ve been told., 11 January 2012
  10. Status report on the already-hot conflict with Iran – and the looming war, 12 January 2012
  11. Continuity and dysfunctionality in US foreign policy (lessons for our conflict with Iran), 13 January 2012 — Insights about today from Cold War strategist Colin Grey
  12. What the conflict with Iran teaches us about modern State-to-State war, 16 January 2012
  13. Has Iran won a round vs. the US-Israel?, 17 January 2012
  14. Is Killing Iranian Nuclear Scientists Terrorism?, 19 January 2012

(5)  For more information

  1. The Spread of Nuclear Weapons: More May Better“, Kenneth Waltz, Adelphi Papers #171 (London: International Institute for Strategic Studies, 1981) — Events of the past 30 years have impressively validated his theory!
  2. Evaluating the Nuclear Peace Hypothesis – A Quantitative Approach“, Robert Rauchhaus (Prof of Political Science, UC Santa Barbara), Journal of Conflict Resolution, April 2009
  3. The Spread of Nuclear Weapons and International Conflict – Does Experience Matter?“, Michael Horowitz (Prof of Political Science, U Penn), Journal of Conflict Resolution, April 2009
  4. Recommended:  Debunking Myths About Nuclear Weapons and Terrorism“, Stratfor, 29 May 2009
  5. How do states act after they get nuclear weapons?“, James (Prof Political Science, Berkeley), The Monkey Cage, 29 January 2012

(6)  Other posts about Iran

For the full list see the FM Reference Page Iran – will the US or Israel attack Iran?

  1. Stratfor’s analysis of US reasons for invading and occupying Iraq , 4 March 2008
  2. More post-Fallon overheating: “6 signs the US may be headed for war in Iran” , 18 March 2008
  3. A militant America, ready for war with Iran , 6 May 2008
  4. ISIS: “Can Military Strikes Destroy Iran’s Gas Centrifuge Program? Probably Not.”, 8 August 2008
  5. Is the War on Terror over (because there are no longer two sides)? Part 1, 3 September 2008 — Rumors of covert ops by us against Iran.
  6. Update on the prospects of war with Iran, from Stratfor, 6 September 2008
  7. “Iraq Endgame” by George Friedman, 22 August 2009
  8. Stratfor: “Two Leaks and the Deepening Iran Crisis”, 7 October 2009
  9. This is how a nation thoughtlessly slides into stupid wars, 25 July 2010
  10. America takes another step towards war with Iran, towards the dark side, 3 September 2010

Every day the new world emerges, yet we see it not. Like today, as Europe begs China for loans

Summary:  A crisis strips away our pretences, the no longer true beliefs to which we clutch out of fear — from our unwillingness to face the future.   Today we have a fine example as Europe begs for loans from China and the other emerging nations.  The new world order emerges before our eyes.

America loves our status as a superpower.  Europe and Japan relish their status as great powers.  We are all broke.  America has borrowed trillions from the emerging nations, but retains the delusion of hegemony.  Now Europe faces its test, and turns to the new great powers for aid.  Not Japan.  Not America.

BRICS in Talks to Buy Euro Bonds to Help Ease Crisis “, CNBC, 13 September 2011 — Opening:

The BRICS major emerging markets are in initial talks about increasing their holdings of euro-denominated bonds in an effort to help ease the euro zone debt crisis, a Brazil government official told Reuters on Tuesday. The talks are still in a “preliminary stage,” said the source, who asked not to be identified because the negotiations were ongoing. The BRICS countries are Brazil, Russia, India, China and South Africa.

With almost 3 trillion euros in reserves, the BRICs have the ability to rescue the European Monetary Union (i.e., BRICs means China plus the others; China’s reserves are almost 3x the other’s combined total).  Doing so would rebuild the global financial system, creating at last a system to replace the long-dead Bretton Woods framework.  But what would the BRIC nations get from this deal?

What do they want?  Probably leadership, or at least a voice commensurate with their growing power.  The BRICs have 14% of the votes in the IMF.  Increasing that would be a logical step, one that’s inevitable eventually.  That’s probably the least they will ask for.  As Europe’s crisis seems almost certain to deepen in the next few months, we (or at least western governments) will soon see their demands.

My guess:  the price might be hidden (much like the deal settling the Cuban Missile Crisis), but it will be high.  Perhaps very high.  The BRICs have no need to hurry, as Europe’s need for loans will only grow — unless (until) its leaders abandon for now the unification project.

Putting the above in perspective

The BRICs are a disparate group.  Very different internal conditions, few common interests, no signs of acting together.

China remains a poor nation, despite its rapid growth.  For example, despite China’s high levels of investment (too high say critics) it’s per capita capital stock is aprox 1/8 that of the US (at PPP, per GaveKal), aprox 1/5 that of Japan (where Japan was circa 1970).

The growing in the BRICs –esp China — lies in the future.  The shift of power has just started.  America’s political dysfunctionality accelerates that process (as our rich increasingly work to further concentrate power and wealth rather build America).

For more information

For all posts about this, see the FM Reference Page End of the post-WWII geopolitical regime.

About China:

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Stratfor takes a closer look at India’s Naxalite threat

Summary:  India’s Nalalite insurgency is important and undercovered by US media.  Stratfor gives its typically thorough analysis.

A Closer Look at India’s Naxalite Threat“, Fred Burton and Ben West, Stratfor, 8 July 2010 —  This report is republished with permission of STRATFOR

On July 6, the Indian government issued a warning to railroad operators and users after Maoist rebels — known as Naxalites — declared a “bandh,” a Hindi word meaning stoppage of work, in eastern India. When a bandh is declared by the Naxalites, it carries with it an implied threat of violence to enforce the work stoppage, in this case against the public transportation system over a two-day period. It is widely understood that trains and buses in eastern India during this time would be subject to Naxalite attack if they do not obey the call for a shutdown.   

Naxalites are an array of armed bands that, when combined, comprise the militant arm of the Communist Party of India-Maoist (CPI-M). Some of the most violent attacks conducted by the Naxalites have been against freight and police transport trains, killing dozens of people at a time. Civilians have typically not been targeted in such attacks, but they have been collaterally killed and injured in the mayhem. Whether targeted or not, civilians generally believe that Naxalites always follow through on their threats, so strike warnings are enough to dissuade people from going about their daily lives. The Naxalite “bandh” is a tactic that shows just how powerful the rebels have become in the region, and it demonstrates their ability to affect day-to-day activity merely by threatening to stage an attack.

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China moves to the center of the world. America moves to the edge

American tend to see ourselves as white knights.  Selflessly defending nations like the EU and Japan that will not defend themselves.  A force for morality — banning bribery, pushing feminism and other western values (which we call “human rights).  Meanwhile we beg for lower oil prices and borrow like an tramp on a street corner.

Much of the world finds this a pain in the ass, but until now has had no alternative leader.   Someone to provide leadership — political and economic coordination, loans and aid, military protection — without America’s moralizing, without America’s erratic behavior.  Just business.

There was no alternative leader.  Until now.  And the shift of leadership has already begun.  In the daylight.  In the news papers.  Today’s reading is from the Financial Times.  As usual it accurately reports events but remains clueless about the deeper causes.

America is losing the free world“, Financial Times, 4 January 2010 — Excerpt:

Ever since 1945, the US has regarded itself as the leader of the “free world”. But the Obama administration is facing an unexpected and unwelcome development in global politics. Four of the biggest and most strategically important democracies in the developing world – Brazil, India, South Africa and Turkey – are increasingly at odds with American foreign policy. Rather than siding with the US on the big international issues, they are just as likely to line up with authoritarian powers such as China and Iran. The US has been slow to pick up on this development, perhaps because it seems so surprising and unnatural.

… The latest example came during the Copenhagen climate summit. On the last day of the talks, the Americans tried to fix up one-to-one meetings between Mr Obama and the leaders of South Africa, Brazil and India – but failed each time. The Indians even said that their prime minister, Manmohan Singh, had already left for the airport.

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Updates about hot issues discussed on the FM website

Some articles about themes discussed on the FM website.

  1. Demographics, shaping our world
  2. India
  3.  Japan
  4. American’s greatest enemy
  5. America’s rotten boroughs — States with 2 Senators, but few people

(1)  About Demographics

Excerpt from “Falling fertility“, The Economist, 29 October 2009 — “Astonishing falls in the fertility rate are bringing with them big benefits”

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Bad news for India, probably for China, perhaps for the US as well

Peak water might be a more serious problem — and perhaps happening sooner — than peak oil.  NASA satellites provide more evidence of the danger.   But as the comment at the end notes, profitable but unsustainable agriculture is the underlying cause of the problem — and ending it will be the eventual result (but hardly a solution).

As SOP on the FM site, here is a general explanation plus an abstract of the article.

  1. NASA Satellites Unlock Secret to Northern India’s Vanishing Water“, NASA, 12 August 2009
  2. Satellite data show Indian water stocks shrinking“, Quirin Schiermeier, Nature, 20 August 2009
  3. Conclusions — about shockwaves
  4. Afterward and For More Information

Excerpts

(1)  NASA Satellites Unlock Secret to Northern India’s Vanishing Water“, NASA, 12 August 2009 — Excerpt:

Beneath northern India’s irrigated fields of wheat, rice, and barley — beneath its densely populated cities of Jaiphur and New Delhi, the groundwater has been disappearing. Halfway around the world, hydrologists, including Matt Rodell of NASA, have been hunting for it.

Where is northern India’s underground water supply going? According to Rodell and colleagues, it is being pumped and consumed by human activities — principally to irrigate cropland — faster than the aquifers can be replenished by natural processes. They based their conclusions — published in the August 20 issue of Nature — on observations from NASA’s Gravity Recovery and Climate Experiment (GRACE).

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