Friday, March 19, 2010

Is Google Greater than God?

It is difficult for 81 million web-browsing Indians even to imagine a life without Google. Indians, like billions of other web users around the world, are so addicted to Google that it is actually difficult for them to replace the search engine giant in their online expeditions. If John Lennon, who unleashed an uproar by saying, “Beatles are more popular than Jesus”, was alive today, he would have sung ‘Google is Greater than God’. But for the godless Chinese, Google is just a search engine.

Now it’s almost certain that the US Internet giant will shut its Chinese search engine, Though the company has not confirmed its pullout from the world’s largest Internet market, China’s state-controlled official media have reported that it will happen in April. Whether Google will shut its entire China operations or just pull the plug on and let its other operations continue is not yet clear. The search engine is expected to unveil its plans on March 22.

The crisis started two months back when Google threatened to pull out of China, a market of around 400 million web users, accusing Chinese hackers backed by the government of attacking its email system. The US internet giant, which launched to provide censored search services for Chinese users in 2006 said it detected “highly sophisticated” attack on its email services originating from China. These attacks and the Chinese government’s attempts to “limit freedom of speech on Internet” led Google to adopt a “new approach” to the Dragon, the company’s chief legal officer David Drummond wrote on his blog on January 12.

China rejected the allegations, but defended its censoring, saying Google has to obey the rules of the land. The US soon seized the opportunity to score against its global rival and asked Google to refuse “politically motivated” censoring. Rights groups around the world once again deplored the “Great Firewall of China”. Well, what will happen if Google pulls out?

Lose-lose scenario
According to analysts, it would be a lose-lose scenario. "If Google leaves, it`s a lose-lose scenario, instead of Google loses and others gain," Edward Yu, president of Analysys International, a Beijing research firm, told Associated Press. China sans Google will stand increasingly isolated in a rapidly expanding web world. Popular social networking sites like Facebook and Twitter, and Google’s Youtube are already banned in China. It’s still unclear how China’s educated, outward looking middle class youth would respond to the disappearance of the “all-loving” Google in their web space.

Google’s withdrawal will also hit the Chinese mobile market, which is highly dependent on the search engine. China Mobile Ltd, the world’s largest telecom service provider with 527 million subscribers, uses Google for mobile search and maps. Google’s android operating system is also popular among mobile phone users in China.

So what will China do? Despite this expected setback, the Chinese authorities appear to be defiant in dealing with Google. The reason, many think, is the (over)confidence that the local search engine, Baidu, would be able to rise up to the occasion if Google leaves. China has developed domestic equivalents of all the major popular internet companies -- Baidu for Google, Taobao for eBay, Renren for Facebook, QQ for instant messaging, games and social networking. The Economist magazine, a severe critic of China’s web censoring policies, admits these companies “are doing well”.

On the other hand, the end of operations in China will lead to a sharp fall in Google’s net revenue. Therefore, according to reports, Google will likely shut only its Chinese search portal and continue other services, leaving some options on the table for a possible future reconciliation. Apart from its search and mobile phone applications, the US firm has two research and development facilities in China and is running a popular music portal.

The Chinese government’s tough stand vis-à-vis Google is also a strong message to other companies operating in the country. If the Communist Party-led government is not ready for an inch of compromise on “sensitive issues” like censoring with a giant like Google, other companies will be thrown out of the mainland even without a negotiation if they avoid Beijing’s diktats. Most of them are more interested in the vast potential of Chinese market than the so-called liberal principles. Google was also not different till January 12, 2010.

Will China survive the departure of Google, the God of the Web World? Well, that could be the most interesting question of coming years.

Friday, March 12, 2010

Consistent Inconsistency

The Suez crisis of 1957 marked the beginning of a new era in the US’ Middle East policy. The British debacle in the Suez and President Dwight Eisenhower’s decision to have deeper engagement with the Middle East seemed to bring in changes in the political landscape of the region. However, that did never happen. Despite being the largest power in the post-war world, the US has never shown strong will to bring in peace into the region even as the policy makers in Washington seemed to have obsessed with the security fears of Israel, the most reliable Middle Eastern ally of the US, writes Patrick Tyler in his book, “A World of Trouble: America in the Middle East”. Tyler, an experienced journalist, who has covered the Middle East politics for years for the New York Times and Washington Post, writes in rich details in the over 600-page book how the “inconsistent” US policy in the Middle East was caught between Washington’s aspirations for a higher position in the Muslim World and its ideological commitment towards the Zionist state.

The book covers the US involvement in the Middle East during 10 presidents – from Eisenhower to George W Bush. According to Tyler, Washington’s policy towards the Middle East, a strategically important region for the superpower, was “consistently inconsistent”. President Eisenhower had pragmatic vision about the region. He wanted peace between the Arabs and the Israelis and more prosperity and development in the region. But he could not make any effective move towards those goals after an intelligent intervention during the Suez crisis. But the successive presidents did not share this vision. President Lyndon Johnson did not do anything when Israeli’s occupied Palestinian land during the Six-Day war and Henry Kissinger’s pro-Israeli policies did harm in the long term to the US interests in the region. During the Yom Kippur war, President Nixon sent Kissinger to Soviet leader Brezhnev with a message, calling for a joint super power action to end the war and find a “just” settlement for the Palestinian issue. However, Kissinger, in pursuit of an entirely different outcome to the Middle East conflict, dumped his president’s message. A joint super powers’ intervention, writes Tyler , would have left Israel with a less powerful position, making it easier for world powers to seek peace in the region. However, Kissinger tactfully undermined this move and even encouraged the Israeli leadership to violate the ceasefire terms to better its military position. Nixon’s statesmanship was further battered by the Watergate scandal.

Jimmy Carter’s Middle East policy was more peace-oriented than his predecessors. He even secured peace between Israel and Egypt. But the Iranian revolution and the subsequent US embassy siege destroyed the Middle East policy of the Carter administration. In a radically changing Middle East, Washington had to make policy priorities to secure its own interests. Iran, one of its trusted allies in the region till the other day, turned out to be the worst enemy. When Iran-Iraq war broke out, Reagan supported Iraq, a country against which his successor George Bush launched a major offensive. President Clinton tried for peace in the Middle East, but he lost focus after the Levinsky incident and did not use his firm hand to make the Israelis compromise. And George W Bush made everything worse.

Tyler says Washington was not singlemindedly supporting the Israeli lobby always. There were clashes of interests and hard maneuvers within administrations. It was this contradiction that made the Middle East policy of the US inconsistent. If the occupants of the White House could think beyond Israel while taking key policy decisions, the US’ position in the Muslim world would have been better.

Tyler version of history is largely based on personal interviews and declassified documents. While Tyler keeps the sharpness of a journalist in narrating incidents that shaped the US Middle East policy in the post-war world, the in depth analyses of an academic is missing. Though the security of Israel is one of the key driving factors of the US foreign policy, from the US’ point of view, the strategic importance of the Middle East is beyond Israel. All presidents except Bush Junior gave utmost importance for America’s relationship with the friendly countries like the Gulf monarchies and there was a continuity in this “friendship”. Above all, the civilisational angle plays a key role in the estranged relationship between the Middle East and the US. This was evident during the George Bush II presidency.

The book ends abruptly. The last chapter deals with the policies of Bush II, whose unwise and unimaginative moves made the US-Middle East relationship complicated than ever. The fact that President Obama had to start his Middle East venture with a confidence building speech in Cairo underscores Tyler’s analysis that Washington has to seek a new paradigm and build trust to deal with a changing Middle East. More errors will make things more complicated. Good luck, President Obama.

Patrick Tyler (2009), “A World of Trouble: America in the Middle East”, London: Portobello Books, Pages: 638 (Reviewed for Purple Beret)

Wednesday, March 10, 2010

China: The new economic hegemon

When it comes to economics, the last thing the Chinese rulers will do is boasting. They usually avoid rhetoric while making key policy announcements, and set lower-than-expected targets for coming years. Prime Minister Wen Jiabao’s annual speech in the Great Hall of the People Friday was not different. "We must not interpret the economic turnaround as a fundamental improvement in the economic situation," said a cautious Wen to nearly 3,000 party-appointed members of the National People’s Congress (NPC). He further set a target of 8 percent growth rate for the current year.

Many experts feel Chinese economy can grow much faster than the government projection. Contrary to what Wen told the NPC, there are fundamental improvements in the Chinese economy. The country has seen 8.7 percent growth in 2009, a rate beyond the imagination of many advanced developed countries. According to most analyses, the unique economic model of China has helped the country weather the global economic crisis effectively and it is set to become the second largest economy in 2010 surpassing the crisis-struck Japan. Its exports, after 13 straight months of fall, started growing again from December, making the country the world’s second largest exporter.

Beijing Consensus
China is among a few countries that weathered the global economic meltdown. Despite embracing free market policies three decades earlier, the unconventional approach of the state towards the economy helped country decouple itself from the great collapse of the global finances. Joshua Cooper Ramo, the former editor of Time Magazine, calls this unconventional policy making “Beijing Consensus” -- a combination of mixed ownership, basic property rights, and heavy government intervention.

Will the Beijing Consensus prevail? The history of China’s economic expansion shows this approach has had astonishing results. Ever since China started opening up its Socialist economy in 1978, it has grown at nearly 10 percent every year. China’s per-capita GDP is now 12 times greater than it was three decades ago. It’s now the world`s second-largest recipient of foreign direct investment. According to Goldman Sachs, China will overtake the US as the largest economy in the world by 2027. Renowned British thinker Martin Jacques writes in his latest book, ‘When China Rules the World’, China is on its way to replace the US as the world’s greatest super power. Robert Fogel, recipient of the Nobel Memorial Price for Economics in 1993, recently wrote in Foreign Policy magazine that China “goes from a poor country in 2000 to a super rich country in 2040”.

It seems everybody except the Chinese leadership is busy forecasting where China would stand some 20-30 years from now. China’s speedy recovery from the Great Recession even when the entire Europe is still battling has prompted many to rethink about the prospects of the Dragon. The crisis has indeed left China more powerful and relatively stronger than many other Western powers, which till the other day were considered key players in global politics. It may be ironic that China, a country ruled by Communist dictatorship, stands tall in a world where Communism’s death was celebrated years ago.

The Bliss is missing
But the bliss is missing in Beijing. The policy makers remain wary even when the whole world says China is rising. It’s true that Chinese economy has spawned miracles, set new standards and proved many predictions wrong. But it all came with riders. The Chinese Communist Party is still suffering from a “deficit of legitimacy” in a world where liberal democracy is considered the ideal governing system. The Beijing Consensus has been under attack from within as the social balance of Mao’s China was disrupted with the rise of a new super rich class in the supposedly socialist society. China is now a country with the largest rural-urban income disparities.

This is one of the utmost concerns of the government, which still claims to be Socialist. If the rich-poor divide gets widened, the very claims of socialism from which the state draws legitimacy will be in trouble. The government’s efforts to spread the fruits of development to inner areas were hit by several limitations. Moreover, China’s decision to keep its currency’s rate fixed against US dollar – a move to help its crisis-hit exporting community -- has drawn flak from many quarters. This has prompted Paul Krugman, a severe critic of neoliberal economics, to write that “China is not behaving as a great power”.

So far the coastal areas are the most developed regions in the mainland China. Many fear one of the end results of the Beijing Consensus is this widening disparity. Stratfor founder George Freedman writes in his latest book, ‘The Next 100 Years’, that this widening contradiction will lead to the eventual collapse of the Chinese state in 2020s.

So, there’s no cakewalk for China, as many of us think, to the super power’s slot. Of course the Dragon is rising, but its challenges are too.

Friday, March 5, 2010

Politics, Populism and Partnership

Sachin Tendulkar’s legendary innings against South Africa might have occupied most of the front-page space of every newspaper Thursday, leaving Mamata Banerjee’s Rail Budget to a corner, but the celebratory mood over the maestro’s iconic double century should not discourage us from taking a critical look at the Budget Banerjee presented in Parliament.

Now that the proposals and the minister’s future plans for the Railways are out in the open, as a routine the Congress, the ruling party, has welcomed the Budget, while the Left, Mamata’s bête noire, and the BJP, her former ally but now opposition, have criticised it. The key feature of the Budget, as the media have already reported, is the minister’s decision to hold the fares and freight charges. She even cut the freight rate of some essential commodities -- grains and kerosene – keeping in mind the rising food inflation.

This was widely expected. Though the Planning Commission had recommended a revision of the fares to streamline the railway’s revenues, Banerjee, already in an election- mood for the Left-controlled West Bengal, avoided biting the bullet. Speaking to reporters at the Rail Bhavan before the Budget presentation, Banerjee used the famous Lincoln quote to express her “generosity” towards the public: “Railways is of the people, by the people and for the people,” said an upbeat Banerjee, dressed in white cotton sari and with a cream shawl over her shoulders.

Did she keep her promises? From a common man’s point of view, the minister’s decision to leave the fares untouched is a great relief. Furthermore, the cut in freight rates on essential commodities will likely lead to an ease in the food inflation, which is hovering around 18 percent now. Banerjee has also announced 52 new long distance trains and most of the new trains she announced in her last budget will be flagged off by March this year. Moreover, the Railways plans to add 1,000 km of tracks every year (pretty ambitious, isn’t it considering the current average of 180kms?) and 25,000 km by 2020.

Where’s the fund?
So far so good. But what about the Railway’s modernization? From where will the ministry mobilize resources to expand the world’s second largest rail network? What plans does Banerjee have to stabilise the finances of the public sector undertaking, the largest employer in the country? Sorry to say that Banerjee left many key questions unanswered. “In China, the railway system becomes bigger every year, in India, Railways Minister’s speeches become longer by the year,” writes a Business daily in its editorial on Banerjee’s budget, painting the grim picture of the Indian Railways.

It’s worth noting that the Budget comes almost three months after China, the largest Asian economy and a potential competitor for India in many fields, launched the world’s fastest train. Though Banerjee has announced 10 more Durontos, she failed to roll out any massive plan to modernise the railways and improve the security of the passengers. Instead of focusing the security issue, he’s proposed to spend massively on non-core areas like setting up sports academies, cultural centres and bottling water plants. Banerjee’s decision to slash the Railway Safety Fund by Rs 597 crore from last year has also drawn flak from political quarters.

Moreover, several of the key infrastructure projects the minister announced are for West Bengal – over half a dozen factories and workshops, two museums, and one cultural centre among others. In a bid to keep the Congress leadership in good rapport, Banerjee has proposed a coach factory in Rae Bareli, the Lok Sabha constituency of the UPA chairperson Sonia Gandhi and a drinking water plant in Amethi, which the Congress heir apparent Rahul Gandhi represents in the House.

Financial mismatch
The financials are also not so promising. The Railway’s net revenue after dividend is expected to fall to a mere Rs 951 crore this fiscal from the earlier budget estimation of Rs 2,642 crore and from Rs 4456 crore during Lalu’s time. The operating ratio (working expenses as a portion of traffic receipts) for 2009-10 is 94.7 percent, up from 92.5 percent projected earlier. This stands is in sharp contrast to 75.9 percent in 2007-08.

Her tilt towards public-private partnerships and appeal to the private sector to come forward to make investments expose the financial limitations of the railways. But how is Banerjee going to woo them is still not clear.

In summary, Banerjee appears to have failed to walk a tight rope. And the problem of falling revenues and the challenge of modernisation of the Railways, which according to her own words is the “lifeline of the country’s economy”, will continue to haunt Banerjee and her successors. It’s high time the ministry came out with the strategic plan to make over the railways.