Does capitalism make a constructive difference?

One of the ethical debates around business and capitalism arises from a skepticism that profit-seeking, driving market behaviors and resting on private property can ever achieve moral outcomes for society.

I argued in my book Moral Capitalism that human dignity, morality, ethical behaviors, can't happen very well in a society that has no private property to support individual autonomy and self-reliant decision-making. Moreover, a life in poverty has fewer opportunities for personal achievement and service than a life lived in more comfortable circumstances where access to various forms of power is more readily at hand.

A recent news story on Russia, I thought, made a similar point about the constructive advantages of capitalism.

From 1999 - after its financial collapse - to 2007, the Russian stock market total capitalization rose from US$60 billion to US$ 1 trillion, it was reported. At US$1 trillion of market cap, a society can have many investors and a middle class worth notice.

Russia, now a more market grounded society, has been growing in wealth at 10% a year in real terms. Russians are becoming home owners. They are nearing the European standard of living - for the first time in history.

Russia is now a country with widespread property ownership and has millions of consumers brimming with confidence.

While such growth and its distribution has not solved all Russia's problems and has not of itself generated a viable multi-party electoral democracy, Russia can never be the same as it was under the Tzars or the Commissars.

Something fundamental has changed in the circumstances of the Russian people thanks to early stage capitalism and so significant political/cultural changes will not be that long in coming as well.

Can the United States Ever Partner with Islam for the common good of humanity?

My country, the United States, is entering the last lap of a fateful presidential election. Should Barack Obama become the next President of the United States, the burden of moral evil infesting our culture from the legacies of slavery, then Jim Crow segregation, and, more recently, from well-intentioned welfare-state dependency, will be lifted in historically significant ways.

But in this election the other moral challenge for Americans is what to do about the War on Terror?

Finding a way forward with respect to Osama Bin Laden and similar terrorists that will be both just and successful, demands an American reconsideration of how to engage with Islam.

To date, I would argue, there has been no substantive American moral engagement with Islam, with American policies and attitudes shaped more by distance and fear than by respect and appreciation.

I do not believe that the conceit of war is appropriate for the kind of relationship that is needed in a supposed clash of civilizations. The United States can not really withdraw into a Fortress America only to sally forth on occasion to kill, capture, and intimidate those who are feared as enemies and so expect to win its War on Terror.

America should not withdraw from the world. Nor should it turn its back on all of Islam out of disappointment and petulance. As a Muslim scholar recently said to me “Your President is our President too – for better or worse.”

Wisdom in the use of power brings not only respect but also success. Rule by fiat - the essence of relationship by war – that reflects only unilateral considerations of right and justice, may impose a government’s will for a time as long as conditions remain favorable.

As Thucydides wrote about Athenian arrogance at its height, “the strong do what they will, the weak what they must.” But such rule can never sustain political authority for the duration of an age. America can accomplish more, and faster, if it has good friends and willing supporters than if it must bribe and bully its way through history.

Furthermore, any arrogant use of power contradicts the core American moral tradition in politics of seeking in Christian Biblical terms to be a “City Upon a Hill” to which the eyes of the world will turn in honor and admiration.

To look up to such a City or not to look is an act of choice on the part of the beholder; prospective admirers can always turn away and look elsewhere for inspiration or leadership. Americans do understand that it is up to those who rule to win obedience through the convincing moral quality of their actions in holding public office.

This vision of government as a public trust, as a shepherd for the flock, is ancient. In the books of prophets from the Judeo-Christian Old Testament it is written in 1 Samuel, that setting up human institutions of despotic rule – kingship – is a turning away from God. The prophet Ezekiel said “Woe unto the Shepherds of Israel who have fed themselves and not the flock.”

And in the Christian New Testament, the Gospel stories of Jesus rejecting Satan’s offer of rule over powers and principalities are telling commentaries on the dangers inherent in selfish appropriation of earthly power and misuse of office.

The Qur’an is no different. Rule is a trust, an amanah from God to be used wisely with care and concern. “Verily, Allah likes not the Mufsidun (those who commit great crimes and sins, oppressors, tyrants, mischief-makers, corrupters)” 28/Al-Qasas 77

What the world needs, therefore, are wise Americans, good stewards of power, whose policies will reveal thoughtful reflection on the ends of human society and the dangers inherent in human willfulness. Such Americans would seek a different approach to ending terrorism originating within the Muslim world than just war alone.

Replacing the War on Terror

The Bush Administration’s declared War on Terror has not gone as well as many Americans had hoped after the murderous attack on the World Trade Center towers on September 11, 2001. The War has not been well or appropriately fought because its strategy and tactics were not based on wise principles of stewardship.

Extracting an eye for an eye, a tooth for a tooth, at the cost of innocent lives lost in collateral damage may not be the most effective response to terrorism. Such violence is neither redemptive nor dispositive; it is only a prelude to more violence, which in turn will again be neither redemptive nor dispositive in seeking its own account.

In the case of Iraq, it is true that Saddam Hussein was brutal and oppressive, but the climate of fear and the other consequences that followed on American application of a doctrine of pre-emption and unilateral military predominance has also been very harsh on the people of Iraq.

Though America’s War on Terror has been ongoing for six years and at the expense of hundreds of billions of dollars, Osama Bin Laden has not been brought to justice. Iraq has suffered many dead and still lacks effective government. Two million Iraqis have fled their homeland. Sectarian warfare has broken out between Sunni and Shi’a believers in one Qur’an. Violence in Iraq continues apace; the supposedly very secure Green Zone is mortared regularly; sectarian militias control much the population through mafia-like intimidation. The Iraqi people suffer from too little electricity, too much fear, and a massive failure of government services.

Violence is rising in Pakistan, encompassing the assassination of Benazir Bhutto, and continues in Afghanistan – all killings set in motion by unreconciled Taliban leaders hiding in their foreboding mountain sanctuaries. Terrorists guided by their interpretations of Qu’ran strike in Great Britain and destabilize southern Thailand.

Nor have the war in Iraq and the more global War on Terror brought brighter prospects for the long-term security of Israel, an important American strategic objective. The Israeli invasion of Lebanon (strongly endorsed by the Bush Administration) did not cripple the Shi’ite Hezbollah movement; Israeli actions in Gaza and the West Bank have not undermined the appeal of Hamas for a significant number of Palestinians. Time is on the side of Israel only as long as American might is available for its defense in depth. American military action against Iran is now urged to protect Israel yet again.

History teaches us that extreme political movements that use violence to promote a self-righteous ideology do indeed fade away when their teachings are rejected by the majority of their neighbors, relatives, race or co-religionists. . Isolation from community, evaporation of financial support, withdrawal of moral support, the falling off of volunteers, all these inexorably force violent minorities into withering away into irrelevance.

Armed repression alone rarely succeeds in quickly stopping terrorists and determined insurgents. War is of limited utility when abandonment of fixed and, to them, sacred beliefs is required on the part of the enemy

In Northern Ireland in recent years, we have seen a remarkable conversion of the IRA from terrorism to full participation in electoral politics and surrender of their weapons. It was not British armed might that secured this very constructive outcome but a more complex process of reforming the police while promoting a re-evaluation of ancient fears and hatreds among both Catholics and Protestants.

A new American strategy is needed if the threat from Islamist extremists is to be more successfully overcome. Simply put, the War on Terror must be replaced with a strategic alliance with Islamic Civilization.

How can this be done? With whom could America partner?

The answer is rather obvious: with those Muslims who find their faith compromised by misinterpretations and misunderstandings of Qur’anic guidance. America, in my judgment, can make itself – and the world - more secure against terrorism by working with the global Ummah under principles of Islam Hadhari then it can by fighting extremists largely on its own without the full support of the Ummah.

Those who kill in the name of the Qur’an are not only the enemies of America and other free peoples; they are apostates to Islam as well. In Islam because the doors of Ijtihad or moral reasoning from revelation remain open, reasoned appreciation of the Qur’an cannot lead any of us to the contemporary inhumane actions of terrorists where the innocent are killed in the name of a merciful and compassionate God.

It is the God-given amanah of pious Muslims to correct those who stray from the true guidance. Correction and redemption of those who are angry and bitter can happen most effectively within the community of Muslims. Terror arising within Islam is best ended with the application of Qur’anic guidance; it will not be effectively subdued by outsiders using bombs and bullet, renditions, torture, and harsh internment facilities.

Muslims have a Qur’anic duty, it would seem, to clear away the confusion created by people who carry out heinous deeds and later claim them to be part of an ‘Islamic religious obligation”. The United States would, therefore, be well advised to bring its efforts to thwart any criminal asserting Islamic justification for his or her terrorist actions within the scope of Islamic aspirations for peace, compassion and justice.

All Muslims hold themselves as an Ummah – a collective that seeks to foster right guidance among human kind. “Let there become of you a community that shall call for righteousness, enjoin justice, and forbid evil.” (3 The Imrans 105) It is the Ummah that must conciliate its stray sheep and return them to the flock where they can rise up in the sight of God and man as devout servants of Islam Hadhari.

In Malaysia’s Prime Minister Abdullah Badawi, both Americans and Muslims can find a proponent of Islam Hadhari as an approach to Qur’anic Guidance which seeks to bring the Islamic community back to fundamentals. Islam Hadhari seeks not only to keep Muslims on the true path of their faith but also to bring them towards inter-cultural respect and parity within the global community of humanity.

According to Prime Minister Badawi, Islam Hadhari focuses on enhancing the quality of life via mastery of knowledge and the development of the individual and the nation. For the individual – equally for men and women – Islam Hadhari provides a way through intelligence, knowledge and reason to piety that embraces noble values, honesty and trustworthiness.

Prime Minister Badawi believes that for any Muslim nation Islam Hadhari leads to a dynamic economic, trading and financial system and balanced development based on the application of science to human needs and the use of technology to bring fruitfulness to all of God’s creation. Furthermore, Islam Hadhari requires a politics of responsible stewardship and governance by the highest standards of accountability and transparency.

At the core of Islam Hadhari is the Qur’anic vision of human subservience to the will of God and to God’s purposes. Qur’an teaches that God created all that is for benevolent purposes. The natural order in which we make our way through life was thus created by God that humanity might be able to flourish as his dutiful vice-regent on earth.

Qur’an says that “Truly, we did give Al-Amanah (the trust or moral responsibility that God has bestowed on those who live) to the heavens and earth and the mountains, but they declined to bear it and were afraid of Allah’s torment. But man bore it.” (33/Al Ahzab 72)

Individuals thus hold an amanah placed directly by God in their hands, hearts and minds. They – men and women - are each called to service in being thoughtful and prudent in the execution of that holy office. They should be pious and honest; upright and decent; moral and compassionate; thoughtful and growing in capacity for implementation of God’s will.

Life on this earth is a journey that requires us to discharge our responsibilities towards society in an honest, transparent, and trustworthy manner. In this way, Qur’an teaches are we to carry out our trust from God.

Those who govern nations also hold an amanah from God. As their capacity for doing harm with their powers is great, so too is the enhanced responsibility expected from them as rulers and administrators. As a check on their selfish inclinations, Qur’an instructs leaders to govern through Shura or consultation with the wise and the experienced and also with those who will be affected by their actions.

An old Muslim folk saying has it that “The most fearsome beast on earth is a ‘Khalifa’ (ruler) who does not remember that he is also an “Abdullah” (servant of God)”.

National development as well requires effort, assumption of responsibility and determined application of human ingenuity. “Verily, never will Allah change the condition of a people until they change it themselves (with their own souls).” (13/Al Ra’d, 11) Under the principles of Islam Hadhari, national development is a special kind of personal struggle or Jihad to benefit from God’s manifold blessings. Peoples as well as individuals and leaders are called by God to make something good of themselves.

Islam Hadhari consists of 10 main principles for action:

1) Faith in Allah and piety

2) A just and trustworthy government

3) A free and independent people

4) A vigorous pursuit and mastery of knowledge

5) A balanced and comprehensive economic development

6) A good quality of life for the people

7) The protection of the rights of minority groups and women

8) Cultural and moral integrity

9) Safeguarding of natural resources and the environment

10) Strong defense capabilities

These principles, it might be noted, would not be inappropriate as the platform for an American political party.

The first principle of faith in God and piety in personal deportment actually embraces important goals of many prominent American founders like George Washington and Benjamin Franklin. The principle resonates as well in the character of Abraham Lincoln and can be heard in the words of his Second Inaugural Address. The remaining nine principles have been the bread and butter of American democracy since George Washington subscribed to them in his First Inaugural Address. Thus I see no impediment to a close collaboration between the United States and Islam Hadhari.

What is there to fear from Islam Hadhari?

Closer cooperation between the United States and its allies in the War on Terror with the Islamic Ummah would not expose the United States to acquiescence in standards of bad government and human rights violations. Cooperation would be based on the aspirational principles of Islam Hadhari not on the past failures of many state regimes ruling over Muslim societies to live up to Qur’anic expectations.

Many shortcomings await remediation within the Muslim Ummah. For example, Malaysia’s Prime Minister Badawi believes that the sheer weight of the problems that confront the Muslim world today is tremendous. He admits that many Muslim countries have become synonymous with poverty, illiteracy and malnutrition. Some even stand out as a result of oppression, tyranny, and injustice. But this historical reality does not comply with Quranic standards he argues. Moral leadership is an essential prerequisite for a government that upholds Islamic principles and values, honesty and integrity, a passion for justice and a sense of fairness, a love of the people, especially the poor, and a willingness to listen to their grievances, and a readiness to seek counsel from the wise and the learned. The Prime Minister reminds all of us that these qualities were some of the attributes of leadership and good governance outlined by famous Islamic thinkers such as Al-Farabi, Al-Mawardi, Al-Ghazzali, and Ibn Khaldun.

It is because justice is to pivotal to good governance that concepts such as “equality before the law” and “the rule of law” were given so much importance in early Islamic jurisprudence. It is significant to note that more than 1,400 years ago the fourth Caliph, Ali ibn Abi Talib, declared that judges should be “above every kind of executive pressure or influence, fear or favor, intrigue or corruption.”

The political counsel that has virtue in the eyes of God is only that which enjoins charity, kindness and peace among men. (4/Al-Nisa 114). God, Qur’an tells us, does not love arrogant and boastful men. (4/Al-Nisa 36) “Do not transgress; God does not love the transgressors. Eat of the lawful and wholesome things which God has given you,” adds the Qur’an. (5 The Table 87) These are expectations of stewardship, not arbitrary dictates, that are reflected in the contemporary philosophy of Islam Hadhari.

This Islamic legal tradition of interpretation of Qur’anic guidance, called Shariah, is not an obstacle to just constitutionalism with check and balances, the Rule of Law, and stewardship of the people according to their wishes. The Shariah is more that a set of black letter laws. It is also a system of values, where the specific black letter rules are only manifestations of those overriding values. What is important for Muslims, therefore, is al-maqasid al-Shariah, or understanding the purposes and goals of Shariah, which are life, intellect, faith, property and progeny. Other scholars have added justice, human dignity, and even economic development (the call for Zakat or uplifting the poor so that they can become fully engaged members of the Ummah). The science of al-maqasid al-Shariah allows Muslims to focus on a more fundamental notion of religion, freeing members of the Ummah from excessive literalism and legalisms.

Islam Hadhari is a guide towards constitutional democracy for Muslim societies. Follow it and responsible government is found. Like George Washington and Abraham Lincoln, Islam Hadhari looks upon public office as a public trust.

The Qur’an says: “Allah doth command you to render back your trusts to those to whom they are due; and when ye judge between man and man, that ye judge with justice.” (4/

Al-Nisa, 58)

A program for Islamic Economic Development

Central to a possible partnership between the United States and the Muslim Ummah would be American support for institutions of Islamic Banking.

Only five out of the 57 Muslim-majority countries are deemed to have high human development by the UN Development Program. Twenty four more countries are in the medium-development category and twenty eight, or roughly half the Muslim world, are classified as having low human development.

Only five countries in the Muslim world enjoy a GDP per capita above US$10,000. Thirty Muslim countries have a GDP per capita of les than US$1,000. In one third of Muslim countries more than half the population lives on US$2 a day.

Promoting robust economic development is a must for Muslim nations. Not only private sector financial houses but the World Bank should open Islamic Banking windows. This is actually starting to happen with international financial markets buying Sukhut bonds that abide by Qur’anic concerns for excessive power in the hands of creditors. American leadership promoting Islamic Banking would bring about more rapid economic development in Muslim communities and would show the Ummah respect for its values and traditions on the part of the greatest Western superpower. It would be a quid-pro-quo for the Ummah to work closely with the United States in achieving global peace and justice.

Qur’an forbids certain debtor-creditor contracts out of concern for abuse of power that such contracts place in the hands of creditors. These contracts place too much risk on the debtor. Qur’an requires more mutuality in the allocation of risk in business ventures. The Qur’anic injunction is against riba, or loans where fixed interest is charged and the creditor can obtain return of the principal amount lent out of any of the debtor’s possessions, regardless of the circumstances. Debtors who encounter bad luck or unexpected losses caused by forces beyond their control nevertheless must shoulder all the risk of such misfortunes. There is a resulting lack of balance with their creditors that upsets Qur’anic principles of equity and fair opportunity to succeed in life.

Islamic Banking starts from the premise that creditors must accept some share of entrepreneurial risk. Such legal arrangements have been a commonplace in Western law since Roman times. They are hardly unusual or strange. Nor are they religious in origin. In the more familiar terms of western contracts, Islamic Banking can be understood as resting on joint venture contracts or partnerships. The allocation of profit and loss is shared between the partners.

Islamic Banking instituted on a global basis would attract the savings of millions of Muslims. It would also provide acceptable forms of capital investment in new enterprises in Muslim societies, leading to the growth of entrepreneurial middle classes throughout the Ummah from Nigeria to Kazakhstan.

Large scale use of Islamic Banking would finally bring modern forms of private sector led economic development into Muslims societies helping them achieve parity with other nations in reaping the benefits of the industrial and post-industrial revolutions in production and wealth-creation. It also justifies in my mind the opening of an Islamic Banking window by the World Bank. In that way it could attract new capital from Muslim economies and contribute to higher levels of productive investment in Muslim societies. Islamic Banking blends rational economic considerations with Qur’anic piety in very constructive ways.

Conclusion:

There is a better way than the current War on Terror for the world community to confront and eliminate those who justify their criminal acts of violence with quotations from the Qur’an. It is to engage the world-wide Muslim Ummah in a program of renovation and renewal based soundly on Qur’anic principles of amanah.

what makes for leadership?

Well, in the United States, Super Tuesday is over. The primaries and caucuses in 22 states have brought forward the people's preferences for president.

This year, more than most I believe, the candidates are presenting themselves as models of leadership styles. Leadership, not policies, is of concern to the people.

Hillary Clinton is the candidate of effective, insider power; she will be "ready on day one."

Barack Obama is the candidate of vision, hope, inclusion, inspiration, rising about race and partisanship to be American in the best sense of the term.

John McCain is the warrior - tough, determined, relentless, "take the hill", "get the job done."

Mitt Romney is the manager - deliberate, builder of administrative teams and employer of experts, not flashy but steady.

Mike Huckabee is the candidate of faith - inspired by his God to serve God's purposes on earth.

So what is leadership?

What do people want? That is one thing. What they deserve might be something else.

In democratic politics, we often deserve better than we get.

What we get reflects the trials and tribulations of our passions, our selfishness, our fears, the shallowness of our institutions and cultural conventions.

The Caux Round table, I think, recognizes these limitations in leadership and administration - both in business and government. That is why we advocate certain principles: we want aspriations for the better to penetrate into our actions - both individual and collective and so lead to better outcomes from private and public descision-making.

Our core observation is that good leadership comes from knowing acceptance of trust responsibilities - of stewardship.

Here in Bangkok, His Majesty yesterday on Feb 6th accepted a new cabinet to govern Thailand.

In his remarks to the new Prime Minister and Ministers, His Majesty said from the point of view of a thoughful Theravada Buddhist monarch that words must be matched with actions and deeds.

"Words," His Majesty said "are honorable if they are matched by action because if you speak without doing, your words will carry no honor."

The proof of the pudding is in the eating.

Leadership is accepting personal responsibility for results and then seeking to obtain results.

"The buck stops here" said American President Harry Truman.

Corporate social responsibility, business ethics, public service, are all in the doing, not the talking.

With a little help from my friends

The title of a notable Beatles song came to mind here in Bangkok as I read a short report in the Nation newspaper.

A recent public opinion poll obtained results that more than half of surveyed Thai citizens would accept a corrupt government if it would make their lives better.

Here is living cultural evidence of consequentialist thinking in ethics - the greater good washes away concern for sin.

The survey found that 50.5% of those polled would accept a corrupt government if it made their lives better.

With respect to business ethics, 62.9% of those polled would not behave honestly in their profession if they deemed it necessary. Some 78.1% of respondents showed a tendency to let their actions be dictated by prevailing public sentiment. On the question of diligence, 68.2% admitted that their willingness to work depended on their mood, 62.65% tended to use emotions rather than reason in solving problems and 61.8% felt shy when they had to help others.

In short, promotion of business ethics and corporate social responsibility may face some challenges in such a cultural context.

Is the solution mass conversion of Thais to some alternate culturally derived disposition of personality?

I am reminded of the American protestant missionary sent to Siam in the 1850's. When questioned by his patrons in Boston, he wrote back that it was true that after 2 years of effort he and his colleague had converted only 2 Siamese to Christianity. But, he admitted, his work would go faster if "only the Siamese believed in sin."

the Urge to Cheat

A news story this week out of Los Angeles reports that federal investigators applied for search warrants to follow up on suspicions of illicit activity at four museums.

It was alleged in affidavits related to the search warrants that staff at two museums looked at artifacts in the possession of a smuggler and meet with the sellers of stolen goods, knowing that the objects headed their museums might be tainted.

In an odd twist of fate, one collection of materials acquired by the Pacific Asia Museum came from Ban Chiang in Thailand, a bronze age site that I discovered in 1966.

Patty Gerstenblith, a law professor, commented that “by not thinking about what they buy, they are putting money into an international network of smugglers, looters, thieves and destroyers. As educational institutions, museums have a responsibility to look beyond that particular object that they may be acquiring.”

In short, overlooking all the circumstances, not taking long-term factors into account, is unethical for museums and their staff as well.

It seems that the urge to cheat, to profit selfishly at the expense of others, is not limited to participants in business and market transactions.

Another corporate scandal – this time its worse!

On January 17^th, Merrill Lynch announced its largest loss ever – US$9.8 billion dollars for the 4^th quarter of 2007. This came as a result of a write down of the value of certain assets held by the company – US$16.7 billion loss in book value. The assets had been purchased as part of the subprime mortgage bonanza of a few years ago.

The subprime “bonanza” first turned into a “mess” then to a “crisis” and now has pushed the entire US economy to the tipping point of “recession”.

Wall Street stock prices are down – the necessary consequence of any major market miscalculation by business. President Bush is suddenly talking of a huge financial stimulus package from the federal government budget into the pockets of American consumers. When Republicans talk about dumping billions of federal dollars into consumer hands, you know they are worried about prospects for economic well-being.

These results should come as no surprise. We are living through yet another cycle of irresponsible corporate decision-making. Bad ethics – selfish exploitation of immediate advantage in disregard of long-term consequences – has once again led to bad economics.

The mismanagement of subprime lending has all the hallmarks of a classic business scandal. Truth about risk was not made transparent; too much capital was invested seeking easy returns causing an excess of activity which, self-evidently could not be sustained; and wheeler-dealers seeing fees drove the process.

On the other hand, this business scandal does not have the features of intentional fraud in manipulation of earnings reports that marked the Enron/WorldCom era. Nevertheless, it has resulted from the same character flaws in decision-making as the previous episode of financial malfeasance.

Products were prepared to be sold in our financial markets to meet investor appetite.

Then it was stock in supposedly high-growth companies. Now it was supposedly low risk, higher return mortgage products.

The dysfunction in both scandals was intentionally separating those who carried the risk from those who stood to profit, a violation of fundamental equitable principles of capitalism. In capitalism, those who hope to get the lion’s share of returns should shoulder the lion’s share of risk.

In Enron/WorldCom, risk was put on purchasers of stock and returns were earned by insiders. In the subprime mess, risk was put on low-income, poor credit rated mortgage borrowers and on the purchasers of interests in derivatives collateralized by such subprime mortgages. Fees were earned by originators of the mortgages and sellers of the derivatives who assumed no long term risk of loss.

This pushing off of risk to those who either could not bear it or who did not know about it was socially irresponsible corporate behavior.

In both the subprime mess and in Enron/WorldCom, the perpetrators of the scandals were the best and the brightest minds in our financial markets.

It is only just that now some investment chickens have come home to roost with Bear Sterns, Citibank and Merrill Lynch. But at a serious cost to the rest of us who are entirely innocent and don’t deserve to live in stressful economic conditions not of our own making.

The Enron/WorldCom cycle of scandal did not pose as much of a threat to average Americans as this malfeasance in the use of capital has. Housing prices are down; the equity wealth of most Americans is therefore down; consumer spending is down with impact on production and employment; the economic is facing a general recession.

2007 - a year of transition

What strikes me in looking back on 2007 are the fundamental geo-political trends that emerged more clearly in view. These forces are to me natural; they embody potentials and demands deep within natural and human reality; they are to be ignored at our peril for they will not go away.

Some are new and some are re-emerging, shaking off past constraints and containments.

We saw an acceleration of the break-up of the 19^th century international order of nation states.

The European Union is becoming a new force in history, larger and more powerful than any previous integration of European peoples under the Romans, Charlemagne, Napoleon or Hitler. The effective presence of the EU is embodied in its single currency the Euro, which by the end of the year was worth more than the US dollar.

Tribalism returned in Kosovo, Iraq with rival Sunni, Shi’a and Kurdish zones of control, the fragmentation of Somalia, regionalism in Georgia, the division of the Palestinians into two rival zones of control, breakdown in Lebanon, presidential rivalries in Kenya, the success of Scottish nationalists – even perhaps the political division of the United States into Red and Blue states, mimicking the old division between Union and Confederacy during the Civil War. Thinking in terms of tribal rivalries provides a compelling explanation of the unremitting tension between Israel and the Palestinians allied with Hezbollah.

Religious fundamentalism within Islam is also a kind of tribalism where loyalty is to the brotherhood, the band, the sect and not to wider, more inclusive, pluralistic communities.

Convergence around cultures, ethnic identities, religions rather than citizenship in 19^th century states and empires is the predominant driver of politics.

In its own way, economic globalization and the continual expansion of a single, integrated financial system is taking power away from political elites administering national state structures. The world’s financial centers are nodes in one network, doing business 24 hours a day.

To make the point, Islamic banking, once seen as sectarian and inappropriate for the rational pursuit of profit, is being absorbed into the world’s financial system.

The decline of the dollar is another marker of a changing global order. The United States spends too much on the wrong things, adding to its indebtedness; it is losing ground relative to other fecund centers of economic wealth and growth.

This past year saw the end of the Bush/Blair/Howard imperial attempt to impose a political order in Iraq. Blair left office, Howard was rejected by Australian voters, and Bush is sliding to the end of his term as president without the trappings of accomplishment as a world leader. The Iraqis are making their own destiny through ethnic and sectarian cleansing and the end game as they want it looks like some form of partition – an arrangement that perhaps should have been made right after World War I in the breakup of the Ottoman Empire at the hands of the British and the French.

Oddly, last year saw the definitive rise of Russia and China as great national power, very much in the 19^th century pattern of hegemonic advance. Russia under Putin is orderly and growing in economic power after its long experiment with Communist internationalism.

Similarly, China has recovered from 150 years of weakness under the Manchu’s and war lord leaders and from its experiment with Mao’s form of Communism. It is once again a great regional power militarily and a rising world power intellectually and economically.

The parallel rise of Russia and China has an inevitable feel about it.

In Latin America, 2007 did not bring to the fore any significant trend, only further oscillation between conservative and populist (colonialist and nativist) approaches to political and social justice. Populism advanced under Chavez of Venezuela with his oil money, Morales in Bolivia, and Lopez-Obrador in Mexico. But the tide of populism hit a beach wall of opposition. Lopez-Obrador narrowly lost the presidential election; Chavez lost a referendum designed to make him a Napoleonic caudillo for life and Morales’s effort to revise Bolivia’s constitution was stalled.

Latin America still needs to find a balance way towards growth and middle-class social sensibility.

Overriding all the ups and downs of elite politics was global warming. Great natural forces heating up the climate. Under the specter of climate change, worries about political order and who’s on first base seem trivial.