Risk Analysis: Sierra Leone and Cambodia

The following write up is a simulated risk analysis written from the point of view of a private sector corporation after a 1994 fire at a cotton t-shirt manufacturing plant in Bangladesh.  The write-up is a risk analysis on the states of Sierra Leone and Cambodia, presented to the board of directors, for the possible opening of a new cotton t-shirt manufacturing plant in those states:

Introduction

                After extensive research on possible alternative states to establish a manufacturing factory for the production of cotton t-shirts and various other cotton-based products after the abrupt closure of the Bangladesh factory and the negative public affairs coverage associated with that closure, the following risk analysis report on the states of Sierra Leone and Cambodia has been comprised to assist the Chairman of the Board and the board of directors in the decision-making process for establishing a new manufacturing factory that shall be beneficial and economically profitable for the corporation, along with assisting in the reestablishment of the corporation’s positive image throughout the international media and various consumer populations. 

Political Stability

                Sierra Leone has transformed itself since 1991 into a state that has made “considerable progress in improving governance, respect for human rights, and the rule of law” (Freedomhouse, 2012).  The “1991 constitution provides for the separation of executive, legislative and judicial powers with provisions for oversight and accountability for excessive exercises of power” (Freedomhouse, 2012) and “protects the freedom of expression and the press” (Freedomhouse, 2012), which will provide ample opportunity for capital investment into the press for positive public relations on behalf of the corporation.  The state of Sierra Leone saw stints of political violence through 2011, but the major political parties signed an agreement “committing to free, fair, and peaceful elections, and no major incidents of political violence were reported after the agreement was signed” (Freedomhouse, 2012).  In 2012, the United Nations Security Council commended “Sierra Leone for the conduct and successful conclusion of Presidential, Parliamentary, district, and local elections” (UNSC, 2012) and the “people of Sierra Leona for their large turnout in the elections, which showed their strong commitment to democracy” (UNSC, 2012).  The recent results of elections in Sierra Leone were very promising for the expanding democratic values, and are strong indicators for further political liberalization and globalization.

                The government of Cambodia is a “multiparty democracy under a constitutional monarchy” (CIA, 2013) and also has distributive branches of government separating executive, judicial, and legislative powers.  The legislative branch is bicameral, containing a sixty-one seat Senate and a one hundred and twenty-three seat National Assembly, and predominantly controlled by the Cambodian People’s Party with the next elections not scheduled until 2018 (CIA, 2013).  The stability of six year terms indicates that major changes in legislation involving restrictions on foreign investment are not likely to deteriorate.  It should be noted that political violence broke out between the Cambodian People’s Party and the Cambodia National Rescue Party in September 2013 (ANN, 2013).  The potential for further political unrest in Cambodia over the upcoming five year period appears minimal, but is an existing possibility. 

State Debt to GDP Ratio

                Sierra Leone holds several positive economic factors that include a projected true GDP “increase from 6 percent in 2011 to 21.3 percent in 2012” (IMF & IDA, 2012, p.  8) with the stock of public debt “forecast to fall from 41 percent of GDP in 2011 to 34 percent in 2017, and to stabilize around 40 percent over the long run” (IMF & IDA, 2012, p. 10).  Baseline macroeconomic assumptions for Sierra Leone predict strong growth prospects, improved fiscal position, and a flexible exchange rate policy under an increase of “exports of agriculture and extractive industries” (IMF and IDA, 2012, p. 7).  Sierra Leone is heavily dependent on the mining industry which “should theoretically promote GDP growth, employment, downstream economic growth, infrastructure development, technology transfer, poverty reduction and development” (Zulu & Wilson, 1103), but “the agricultural sector proves to be the most vibrant contributor to GDP as its share averaged 44.0 per cent per annum” (Kargbo  & Egwaikhide, 434).   Sierra Leone is a member of the United Nations, the International Monetary Fund, and the World Trade Organization.  

                Cambodia, which has become “one of the highly dollarized economies” (Lay, Kakinaka, & Kotani, 65), appears to be in a similar position as Sierra Leone in the category of economic factors.  At the end of fiscal year 2011, Cambodia’s external public debt stood at approximately “US$3.8 billion or 30 percent of GDP” (IMF, 2012, p. 2) and “has virtually no domestic public debt” (IMF, 2012, p. 2).  While the economic projections for Sierra Leone rely heavily on Iron ore exports, the state of Cambodia relies heavily on “robust garment exports, particularly to the European Union” (IMF, 2012, p. 3).  Cambodia’s “real GDP is projected to grow 6½ percent in 2012, a slight moderation from last year, but would reach its potential of about 7½ percent by 2017” (IMF, 2012, p. 3) and “debt-to-GDP, debt-to-exports, and debt-to-revenue ratios are expected to decline “ (IMF, 2012, p. 4) over a twenty year period.  Cambodia is a member of the United Nations, the International Monetary Fund, and the World Trade Organization.

Standard of Living

                Sierra Leone has made strides in the standard of living category since the destabilizing civil war ended,  and areas where this can be seen are “Sierra Leone’s life expectancy at birth increased by 5.0 years, mean years of schooling increased by 2.3 years” (UNDP, 2013, p. 2).  On the other hand, economic and gender inequalities still trouble the social fabric of Sierra Leone.  In 2008 economic inequality levels showed that “77 percent of the population lived in multidimensional poverty” (UNDP, 2013, p. 5).  Such poverty rates indicate that wage requirements will be beneficially cost efficient for maximizing manufacturing profits within Sierra Leone.  The differences in poverty reduction between agricultural rural areas and mining-based urban areas show that “rural poverty declined from 78.3 to 77.1 per cent in 2003–07, versus a drop from 47.3 to 35.4 per cent for urban areas” (Zulu & Wilson, 1110). The gender inequalities in Sierra Leone offer a solid opportunity for positive international public imaging for the corporation through highly publicized hiring of women employees, providing financial grants for secondary education for women, and for providing financial support to future female candidates for parliamentary seats.  Currently, “12.9 percent of parliamentary seats are held by women, and 9.5 percent of adult women have reached a secondary or higher level of education compared to 20.4 percent of their male counterparts” (UNDP, 2013, p. 4).

                Cambodia has also made strides in the standard of living category, but does not suffer from such drastic levels of economic and gender inequality problems found in Sierra Leone.  Over the last 23 years, “Cambodia’s life expectancy at birth increased by 24.9 years, mean years of schooling increased by 0.8 years and expected years of schooling increased by 4.0 years” (UNDP, 2013, p. 2).  In Cambodia in 2010, “45.9 percent of the population lived in multidimensional poverty” (UNDP, 2013, p. 5) and “18.1 percent of parliamentary seats are held by women, and 11.6 percent of adult women have reached a secondary or higher level of education compared to 20.6 percent of their male counterparts” (UNDP, 2013. P. 4).

Labor Laws - Children

                Labor laws in Sierra Leone are not overly oppressive as “the minimum age for employment is 15 years, although at 13 years children may perform light work, defined as work that is likely not to be harmful to a child or interfere with schooling” (USDL, 2009) and “the minimum age for a child to engage in hazardous work is 18 years” (USDL, 2009).  Sierra Leone defines hazardous work “as work that is dangerous to a child's health, safety, or morals, and includes activities such as going to sea; mining and quarrying; carrying heavy loads; working in bars; and working in environments where chemicals are produced or used and machinery is operated” (USDL, 2009) and all labor opportunities extending from a new factory in Sierra Leone would be considered hazardous labor.  Should Sierra Leone be chosen for the location of the new factory, the corporation will need to ensure that no children under the age of 18 be hired under false documents as this could be an international public relations liability in the eyes of consumer states where our product will be sold.

                The child labor problem is statistically worse in Cambodia with an alleged “52 percent of 7-14 year-olds, over 1.4 million children in absolute terms, were economically active in the 2001 reference year” (UCW, 2006) which is a “percentage is very high relative to other countries with similar levels of income” (UCW, 2006).  While this information is somewhat alarming, it is also misleading as “About 90 percent of economically active children work for their families as unpaid labour” (UCW, 2006, p. 2) and child labor in manufacturing plants in Cambodia are not excessively higher than other lesser developed countries.

 

Corruption Levels

                The government of Sierra Leone has made concrete efforts to decrease corruption within state borders and has passed 39 countries in the Transparency International's Corruption Perception Index (CPI) rankings over  the last five 5 years from 158 in 2008 to 119 in 2013 (Tarawallie, 2013).  Corruption is a correlation to economic inequality and therefore the government of Sierra Leone will need to “be committed to a high level of integrity and patriotism in the execution of their duties, and to demonstrate the willingness to curb corruption to ensure that the country's development process will be meaningful to every Sierra Leonean” (Tarawallie, 2013) with the ultimate goal of improved collective standard of living levels and a drastic decrease to current poverty levels.  One of the largest issues that hinder the governmental battle against corruption in Sierra Leone is that “mistrust in institutions is so strong that people often refrain altogether from turning to the police or courts” (Mieth, 17).

                Corruption in Cambodia is also a problematic area as “corruption continues to rage and negatively impact all sectors in Cambodia. The cycle of the powerful exploiting the weak, stealing state resources for the benefit of a few, resulting in officially-budgeted amounts not reaching intended beneficiaries” (Barisoth, 2010, p. 53) contributes to economic inequality, which can produce periods of instability or violence with little or no warning.  Cambodia has not made progress in combating corruption and moving up the Transparency International’s annual Corruption Perceptions index.  The state was ranked 166 out of 180 countries in 2008, 162 out of 180 countries in 2007, and 151 out of 160 countries in 2006 (Barisoth, 2010, p. 53).  Whether the board of directors selects Sierra Leone or Cambodia as a location for the proposed manufacturing plant, possible corruption aimed at the corporation will be an extremely important factor to prevent.  In addition, any manufacturing plant facilities will need to be located near an urban center in order to attract workers with low-wage requirements, but it should be contemplated that civil unrest is always a possibility in poverty-stricken areas when economic and political elements become combustible within a state.  It should also be noted that a trend exists in Cambodia concerning currency usage that “the riel remains the currency of the poor in rural regions, while the U.S. dollar is mostly used by the rich in urban regions” (Lay, Kakinaka, & Kotani, 74).

Conclusion

                The author of this risk analysis views the risks in political stability, debt to GDP ratio, standard of living, children’s labor laws, and corruption to be similar between the states of Sierra Leone and Cambodia.  The opening of a manufacturing factory in either of these two states is liable to run into issues that could result in a loss of profits and poor public image portrayals for the corporation.  It is the author’s recommendation to minimize short-term and long-term risks by reducing projected profit projections in exchange for a minimum risk environment for long-term production, even if that environment required the hiring of laborers demanding higher wages.  It is this author’s recommendation to open the new manufacturing factory in the United States where the opening of a factory will be viewed in a highly favorable manner by consumers and laborers.

References

Australian Network News.  2013.  “Cambodian leaders meet after violent protests”, September 17, 2013.Accessed Decmber 15, 2013.  http://www.abc.net.au/news/2013-09-16/an3a-cambodia27s-leaders meet-amidst-violent-protests/4960620

Barisoth, Sek.  2010.  “Mechanisms to address corruption in Cambodia.”  Article 2 9, no. 1 (March 2010): 53-61.  Accessed December 15, 2013.  http://www.article2.org/pdf/v09n01.pdf

Brima Ibrahim Baimba Kargbo and Festus O. Egwaikhide.  “Tax Elasticity in Sierra Leone: A Time Series Approach.” International Journal of Economics and Financial Issues 2, no. 4 (2012): 432-447.

Central Intelligence Agency.  2013.  World Fact Book: Cambodia.  Accessed December 15, 2013.  https://www.cia.gov/library/publications/the-world-factbook/geos/cb.html

Freedomhouse.  2012.  Countries at the Crossroads 2012: Sierra Leone.  Accessed on December 15, 2013.  http://www.freedomhouse.org/sites/default/files/Sierra%20Leone%20-%20FINAL.pdf

Friederike Mieth.  2013.  “The Impact of the Special Court for Sierra Leone.”  International Journal of Conflict and Violence 7, no. 1 (January 2013): 10-22.

International Monitory Fund.  2012.  Staff Report for the 2012 Article IV Consultation—Debt Sustainability Analysis on Cambodia.  November 16, 2012.  Accessed December 15, 2013.  http://www.imf.org/external/pubs/ft/dsa/pdf/2013/dsacr1302.pdf

International Monitory Fund and International Development Association.  2012.   Joint IMF/World Bank Debt Sustainability Analysis on Sierra Leone.  Accessed on December 15, 2013.  http://www.imf.org/external/pubs/ft/dsa/pdf/2012/dsacr12285.pdf

Leo Zulu and SigismondWilson.  2012.  “Whose Minerals, Whose Development? Rhetoric and Reality in Post-Conflict Sierra Leone.”  Development and Change 43, no. 5 (September 2012): 1103-1131.

Sok Heng Lay, Makoto Kakinaka and Koji Kotani.  2012.  “Exchange Rate Movements in a Dollarized Economy: The Case of Cambodia” ASEAN Economic Bulletin 29, No. 1 (April 2012): 65-78.

Tarawallie, Ibrahim.  2013.  Sierra Leone: 2013 Corruption Perception Index - S/Leone Ranks 119.  All Africa, December 6, 2013.  Accessed December 15, 2013.  http://allafrica.com/stories/201312061597.html

Understanding Children’s Work (International Labour Organisation (ILO), UNICEF and the World Bank).  2006.  “Children’s Work in Cambodia: A Challenge for Growth and Poverty Reduction”, December 2006.  Accessed on December 15, 2013.  http://www.unicef.org/eapro/Children_work_in_Cambodia.pdf

United Nations Development Programme.  2013.  Human Development Report 2013: Sierra Leone.  Accessed on December 15, 2013.  http://hdrstats.undp.org/images/explanations/SLE.pdf

United Nations Security Council.  2012.  Statement by the President of the Security Council dtd November 30, 2012.  Accessed December 15, 2013.  http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_prst_2012_25.pdf

United States Department of Labor.  2008.  “Findings on the Worst Forms of Child Labor - Sierra Leone.” September 10, 2009.  Accessed on December 15, 2013.  http://www.refworld.org/docid/4aba3ec23c.html

 

The German State and Economic Bailouts

Germany does not hold a responsibility to assist weaker European economies through economic bail outs.  The dilemma for Germany is that to bail out European states with weak economies “might encourage more spending and would enrage German voters. Yet to let them go bankrupt might threaten the Euro, the European currency that benefits Germany” (Kesselman, Krieger, & Joseph, 2013, 142).  This dilemma can been seen after the 2008 financial crisis as “one bailout cost German taxpayers about $140 billion” (Kesselman, Krieger, & Joseph, 2013, 157) and a “2009 Constitutional Court decision sent shockwaves through the EU because it limited any deeper German integration with the EU and restricted German money for bailouts for other European countries” (Kesselman, Krieger, & Joseph, 2013, 160).  At the same time, couldn’t it be argued from the opposite position that Germany benefits the Euro?  The German economy was strong coming out of the scramble for Africa and leading into World War I, and was stronger than expected leading into World War II, and is now a leading European economy under globalization.  While “Germany’s economic fortunes are tied to globalization” (Kesselman, Krieger, & Joseph, 2013, 161), European states such as Greece, Ireland, Portugal, Spain, and Italy are submerged in debt.  The problem with Germany’s positive position in globalization, compared to German growth prior to World War I and II, is that the majority of exports are privatized and do not strengthen the state because bail outs force “indebted countries such as Ireland to pay above market interest rates for bailouts that go primarily to repay foreign banks, many of them, you guessed it, German” (Kesselman, Krieger, & Joseph, 2013, 182) and privatized.  It is detrimental to the domestic political stability of Germany, who would be a strong exporting state even without the European Union collective, to place the interests of other European states before, or on an equal level, as German state interests when “German voters have felt enraged enough for mass demonstrations” (Kesselman, Krieger, & Joseph, 2013, 179) on issues such as bailouts for foreign states.  Many German voters, acknowledging German “flat wages and some painful cuts in social programs” (Kesselman, Krieger, & Joseph, 2013, 183), already feel that the German state has “sacrificed while other countries borrowed their way into trouble” (Kesselman, Krieger, & Joseph, 2013, 183) leaving the average working German holding “little sympathy for the Greeks and the Portuguese” (183), and other European states with extreme debt levels and faulty economies.

The article link below is a New York Times article dealing with a recent IMF proposal for dealing with possible future bailout defaults by extending some of the fiscal responsibility on private sector bondholders instead of solely on state tax payers.  The article, from November 2013, provides a pretty solid picture of debt in the Eurozone and shows the fierce opposition from the United States, Germany, and the international banking lobby toward the IMF proposal.

http://www.nytimes.com/2013/11/27/business/international/imf-plan-for-next-crisis-would-split-the-bill.html

Resources:
Mark Kesselman, Joel Krieger, and William Joseph. 2013. Introduction to Comparative Politics, 6th edition. Boston, MA: Wadsworth

NAFTA, Trade Blocs, and Consumer States

The North American Free Trade Agreement (NAFTA) was implemented on the first day of 1994 and included the major North American states of the United States, Canada, and Mexico and has created the globe’s largest area of free trade. The main premise of NAFTA was the agreement that “each Party shall progressively eliminate its customs duties on originating goods” (NAFTA, 1994) and that “each Party shall accord most-favored-nation duty-free treatment to any local area network apparatus imported into its territory” (NAFTA, 1994). The first impacting consideration pertaining to the elimination of tariffs in the name of so-called free trade is the ability of private sector corporations to manufacture products in developing post-colonial states, such as Mexico, where wages are much lower than in the U.S., which is the consumer of the majority of manufactured products. The elimination of tariffs allows for the movement of goods and capital across state borders with no tariffs being charged to state or private sector.

One of the largest areas of the agreement is in the field of agriculture. According to the United States Department of Agriculture, “From 1992-2007, the value of U.S. agricultural exports worldwide climbed 65 percent. Over that same period, U.S. farm and food exports to our two NAFTA partners grew by 156 percent.” (USDA, 2008). During the same time period, “Canada had been a steadily growing market for U.S. agriculture under the U.S.-Canada Free Trade Agreement (CFTA), with U.S. farm and food exports reaching a record $11.9 billion in 2006, up from $4.2 billion in 1990” (USDA, 2008). While tariff elimination between the United States and Canada were completed under the CFTA, the complete elimination of agricultural tariffs between U.S. exports and Mexico were not completely established until January of 2008 (USDA, 2008).

The amount of exporting and importing involved in the private manufacturing sector is also a very important aspect of this so-called trading bloc.  In order to attempt to view the NAFTA bloc for what it is, it is important to focus on the privaye sector, excluding military sales, defense, and government sales, spending which is predominately from private sectors manufacturing in foreign states, the following statistics should be considered:

U.S. outgoing so-called investment capital:

U.S. foreign direct investment (FDI) in NAFTA Countries (stock) was $357.7 billion in 2009 (latest data available), up 8.8% from 2008 (Office of the U.S. Trade Representative, 2013).

U.S. direct investment in NAFTA Countries is in nonbank holding companies, and in the manufacturing, finance/insurance, and mining sectors (Office of the U.S. Trade Representative, 2013).

Incoming so-called investment into U.S.:

NAFTA Countries FDI in the United States (stock) was $237.2 billion in 2009 (latest data available), up 16.5% from 2008 (Office of the U.S. Trade Representative, 2013).

NAFTA countries direct investment in the U.S. is in the manufacturing, finance/insurance, and banking sectors (Office of the U.S. Trade Representative, 2013).

These statistics are based on private sector corporations that import materials into Mexico for low wage manufacturing to create products that are imported into the United States for consumption at maximum profit. The question is…how do the exemption of tariffs and the promotion of so-called free trade blocs build revenues for the state? The creation of more jobs in the service industry for developed consumer states and more low wage manufacturing jobs for so-called developmental states? Collection of sales tax on individual consumers of consumer states instead of the state accumulation of tariffs on the private sector? What happens to a state when its population ceases to be a consumer state?

North American Free Trade Agreement. January 1, 1994. Accessed on December 17, 2013. http://www.worldtradelaw.net/CBBD1ABA-923D-466C-A327-3DA533B6CA2C/FinalDownload/DownloadId-5BE31FBEADDCF208D18A5FDD0720CD7A/CBBD1ABA-923D-466C-A327-3DA533B6CA2C/fta/agreements/nafta.pdf

Office of the United States Trade Representative. 2013. North American Free Trade Agreement (NAFTA). Accessed December 17, 2013. http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta

United States Department of Agriculture. 2008. Fact Sheet: North American Free Trade Agreement (NAFTA). Accessed on December 17, 2013. http://www.fas.usda.gov/info/factsheets/NAFTA.asp

Oil Dependency - Mexico and Nigeria

Although both states have a supporting cast of additional problems from corruption to centralized government ownership of large portions of the oil industry and the ever present foreign exploitation of globalization, the oil-rich states of Mexico and Nigeria have made the mistake over the past five decades of falling into excessive dependency on oil.

Mexico is “rich in oil, silver, and other natural resources” (Kesselman, Krieger, and Joseph, 436) and like any state that is rich or deficient with natural resources, management or a lack of management, corruption and foreign investment/exploitation are usually closely related to the directions of the state. The Mexican state is categorized by the “World Bank as an upper-middle-income developing country” (Kesselman, Krieger, and Joseph, 445) and its “industrial and petroleum-based economy gives it a per capita income ($13,200) comparable to that of countries such as Brazil, Russia, and South Africa, and higher than those of most other developing nations” (Kesselman, Krieger, and Joseph, 445). In the oil rich state of Mexico “the government-owned petroleum industry is a ready source of revenue and foreign exchange, but this commodity also makes the economy extremely vulnerable to changes in international oil prices” (Kesselman, Krieger, and Joseph, 446). A prime example of how oil dependent states are dictated by the ebb and flow of international oil prices was when the Mexican “state-owned petroleum company, PEMEX, grew to enormous proportions in the 1970s and 1980s under the impact of the oil boom” (Kesselman, Krieger, and Joseph, 457) and later when “international petroleum prices plunged in the early 1980s, and Mexico plunged into a deep economic crisis” (Kesselman, Krieger, and Joseph, 442). The correlation between dependence on natural resources and migration becomes evident in the case of Mexico because “the inability of the Mexican economy to create enough jobs pushes additional Mexicans to seek work in the United States, and the cash remittances that migrants abroad send home to their families and communities are now almost as important a source of income for Mexico as PEMEX’s oil sales” (Kesselman, Krieger, and Joseph, 474).

Oil dependency has also had serious consequences on Nigeria as “authoritarian rule has given way to competitive oligarchy, in which an increasingly greedy, oil-rich political elite fight to expand their power, while more than 90 percent of Nigerians struggle to survive on less than two U.S. dollars per day” (Kesselman, Krieger, and Joseph, 525). The Nigerian economy has also been “subject to the fluctuations of the international oil market” (Kesselman, Krieger, and Joseph, 536) as the government has enjoyed “high oil prices and increasing U.S. consumption of Nigerian oil and gas” (Kesselman, Krieger, and Joseph, 536) over the past decades while today “suffering the consequences of not addressing its oil dependence, as its projected oil revenues have dropped more than half as oil prices fell in late 2008 under global recession pressures” (Kesselman, Krieger, and Joseph, 536). Similar to Mexico during the oil boom of the 1970s, “Nigeria greatly increased its expenditures on education, defense, and infrastructure” (Kesselman, Krieger, and Joseph, 538) which spurred “increasing corruption, as some officials set up joint ventures with foreign oil companies and others stole public funds” (Kesselman, Krieger, and Joseph, 538). The largest error Nigeria made was abandoning the Agricultural sector in the face of the booming “petroleum industry” (Kesselman, Krieger, and Joseph, 538) instead of attempting to reinvest into both sectors and expanding exportation. Instead, “Agricultural export production plummeted from 80 percent of exports in 1960 to just 2 percent by 1980” (Kesselman, Krieger, and Joseph, 538). Nigeria’s oil dependency since the 1970s has “relied on oil for more than 90 percent of its export earnings and about three-quarters of government revenues” (Kesselman, Krieger, and Joseph, 539). In the area of migration, interesting enough, Nigeria experienced an inward flow of immigration as “at the height of the 1970s oil boom, many West African laborers, most of them Ghanaians, migrated to Nigeria in search of employment” (Kesselman, Krieger, and Joseph, 546), but today “many Nigerians now flock to the hot Ghanaian economy for work and to countries across the continent, including far-off South Africa” (Kesselman, Krieger, and Joseph, 546).

The following news report link from May 2013 reports a warning from the Organisation for Economic Co-Operation and Development to Mexico on its oil dependency. The reports points out that Mexican president Enrique Pena Nieto’s dedication for overhauling the nation’s energy sector and the opening of the Gulf of Mexico for private sector oil exploration:

http://www.upi.com/Business_News/Energy-Resources/2013/05/17/OECD-warns-Mexico-on-oil-dependence/UPI-49691368786702/

The following news report link from January 2013 on Nigeria’s oil dependency, the exploitation of shale gas in Nigeria and the emergence of fracking in Nigeria:

http://www.businessdayonline.com/NG/index.php/analysis/editorial/50699-fracking-and-future-of-nigerias-oil-dependency

Resources:

Kesselman, Krieger, and Joseph. 2013. Introduction to Comparative Politics, 6th edition. Boston, MA: Wadsworth

Commodification, Finance Capital, and Consumerism

Considering that globalization is basically the expansion of capitalism from a state constrained capital accumulation process to an intricate global network of consolidating international capitalist accumulation and consolidation, globalization does not impact capital trade, commodification, and consumerism.  It is the expansion of capitalism that creates and expands commodification, including the commodification of technologies accredited to globalization, and the expansion of capital trade made fluent by IMF international currency exchange rates that actually define the character of globalization.  Therefore, globalization does not have implications on trade, because it is capitalist trade that has implications on globalization as the most basic pillar of the international system of globalization.

Capitalism is not a new system of accumulation and has been evolved multiple times throughout history due to the development and commodification of technological advancements and trade.  Capital generation once was mainly acquired “through trade in agricultural and mining output as well as in certain luxury goods like furs and spices” (Scholte, 112) during the early era of colonial imperialism and evolved after the Industrial Revolution as “commodities expanded to include manufactures from large-scale factory production” (Scholte, 113) and tactics of enhanced labor division in mass manufacturing.  The system of Capitalism continued to expand with each technological wave, not only in scope of supraterritoriality….but in methods of capital accumulation as “from the late nineteenth century onwards, commercial and industrial capital were supplemented with finance capital” (Scholte, 113).  Finance capital is especially noteworthy of attention because of the commodification of capital itself, as “global banking, global securities and global derivatives business have hugely increased both the volume and the variety of financial instruments that serve not so much as facilitators of other kinds of production, but as channels of accumulation in their own right” (Scholte, 113).  When capital becomes a commodity, it is “not only to further capitalist production in other sectors (agriculture, manufacture, etc.), but also as a means of accumulation in their own right (Scholte, 116).

While there is no question that capitalism, especially in its current international format and the various history affiliated with the accumulation and consolidation of capital still in existence, is exploitive in nature, the trend of consumerism and the mass produced promotion to glamorize such a culture of consumerism by capitalists utilizing technological commodities such as television, satellite, internet, and smart phones, technically falls on the shoulders of the people in consumer states.  Advertising is a major component in the development of a consumer state, such as the U.S., as “advertising has over the past century, and especially during recent decades, become a crucial adjunct to much capitalist enterprise” (Scholte, 114). An example of the recent advertising increase can be seen in the following statement: “World expenditure on product promotion burgeoned from $7.4 billion in 1950 to $312.3 billion in 1993” (Scholte, 114).  Consumerism is an unhealthy state trend “where people frenetically acquire (and usually fairly quickly discard) a variety of goods that provide the user with some kind of instant but ephemeral gratification” (Scholte, 113) and “transient desires, especially cravings for novelty, entertainment, fantasy, fashion and pleasure” (Scholte, 113).

Everything that capitalism touches becomes commoditized, and yet private sector capital actors still strive to extend maximized capital profiting by manufacturing in so-called lesser developed countries in order to avoid tariffs or taxation (depending on different variables such as regional trade agreements, etc.) in selling to the citizens of consumer states, like the United States.  Two areas of note, if not concern, are off shore manufacturing zones for private sector corporations and private sector multi-national corporations.  These off shore “sites also entice capital with low costs, limited regulation, and statutory guarantees of confidentiality” that “provide `tax efficiency' and `discretion'” (Sholte, 124).  Multi-Nationals Corporations (MNCs) also maximize profits to consumer states by “establishing affiliates in two or more countries or by forging strategic alliances with enterprises based in other countries” (Scholte, 125).  In the case of the most economically heavy private sector conglomerate entities, international manufacturing is spread throughout many various states depending on wage requirements, taxation, and tariffs.  The example provided in the Scholte text is: “as of the mid-1990s the Unilever corporation encompassed more than 500 subsidiaries in over 90 countries, and the mass media conglomerate Bertelsmann covered more than 600 affiliates in 53 countries. In the realm of strategic alliances, the WorldPartners Association, formed in 1993, has linked 19 telecommunications carriers in operations across over 35 countries. The advertising firms FCB and Publicis have since 1988 developed collaboration between their several hundred offices in over 70 countries” Scholte, 125).  Many MNCs within globalization are products of “mergers and acquisitions” caused by the capital consolidation process…..the recirculating capital still wet with blood from the transatlantic slave trade and colonialism.

Generating capital from the trade of commodities is the basis of capitalism, and capitalism is an expanding and consolidating organism that “has brought substantially increased concentration to many areas of production” (Scholte, 129) and trade.

Scholte, Jan. 2000. Globalization: a Critical Introduction. London, England: MacMillan.

 

 

Globalization and Identity Theft Democracy

It is not viable to argue that capitalist globalization is an anti-democratic force because true democracy, “understood to prevail when the members of a polity determine collectively, equally and without arbitrarily imposed constraints”, is a rare element around the globe, while what is portrayed and accepted as democracy is actually parliamentary, or representative, democracy and is a mechanical component of capitalism because it is the most easily manipulated form of government in existence (Scholte, 262).  While true democracy is “participatory, consultative, transparent and publicly accountable”, representative democracy is a form of governance in which capital influence places voting representatives and influences policy votes (Scholte. 262).  Since the most industrialized, capital heavy states are not true democracies, the international organizations which weave the structure of capitalist globalization in “agencies such as the EU, MERCOSUR, the IMF and the UN” are equivalently open to the manipulation of capital and political influence and bribery.  No other so-called democratic international organization is more notable for this type of elitist democracy than the United Nations, which allows the permanent members of the Security Council to cast vetoes above all other members.  How many times has the U.S. cast their veto to defend human rights violations committed by Israel against the Palestinians?  There is certainly little democracy in the capital-heavy “Bretton Woods institutions” where “quota-based weightings have given one quarter of the member-states control of three-quarters of the votes” (Scholte, 269).  The World Bank issues so-called developing states ‘conditional loans’ to encourage foreign private sector exploitation of natural resources while the “IMF has developed considerable links with business groups” (Scholte, 270).

As true democracy would be detrimental to internal state capitalism and the representative democracy steered by capital, “a future electronic democracy” where each citizen has a vote on legislation and policy within the most politically powerful states will never be voluntarily implemented unless the methods of that democracy are “in private hands and highly concentrated ownership” (Scholte, 276).  As true democracy has never existed within the most powerful of capitalist states, and these states hold the greatest economic, technological and military power within the international organizations that solidify globalization and embrace international representative democracy, the result will continue to be international inequality guised as smiley-faced democracy.

Scholte, Jan. 2000. Globalization: a Critical Introduction. London, England: MacMillan.

 

 

Democracy and Islam: Can it Co-Exist? The Islamic Republic of Iran.

Iran has been an “Islamic Republic since the 1979 Islamic Revolution” and is a “mixture of theocracy and democracy” with political system emphasis based on “clerical authority and popular sovereignty, on the divine right of the clergy and the rights of the people, on concepts derived from early Islam and from modern democratic principles (Kesselman, Krieger, and Joseph, 579-580).  Before looking at the Iranian political structure and attempting to identify which portions are democratic and which are not, two points must be considered:

1.  The Iranian population consists of 89% Shia Muslims, 9% Sunni Muslim, with Christian, Jews and others comprising the remaining 2% (CIA, 2013).  These demographics actually support the argument that theocracy and democracy function together in the case of Iran’s constitution which “affirms faith in God, Divine Justice, the Qur’an, the Day of Judgment, the Prophet Muhammad, the Twelve Imams, the eventual return of the Hidden Imam (the Mahdi)” (Kesselman, Krieger, and Joseph, 599).  While the U.S. Supreme Court reviews legislation based on the U.S. Constitution, the Iranian constitution is aimed toward Islam and the teaching of the Quran.  It is irresponsible for a person from the West to criticize the political structure of Iran, especially those who have not studied Islam in order to understand Islam, by denouncing Iran’s political structure as undemocratic.  With 98% of the Iranian population being Muslim, theocracy and democracy co-exist and function as a system equivalent to any political system in the west.

2.  While most developing states are post-colonial possessions that inherited European style government structures after colonial withdrawal and so-called state independence in the first decades of capitalist globalization, “Iran was never formally colonized by the European imperial powers and has always been independent” (Kesselman, Krieger, and Joseph, 617).

So how democratic is the Islamic Republic?

The Iranian presidency, limited to two four year terms, is elected by the “general public” and “all citizens, both male and female, over the age of eighteen have the right to vote (Kesselman, Krieger, and Joseph, 599).  If a “candidate does not win a majority of the vote in the first round of the election, a run-off chooses between the two top vote getters” (Kesselman, Krieger, and Joseph, 601).  The “executive power for the president” is defined in the “constitution of the Islamic Republic” and once elected the Iranian president has the responsibilities to “conduct the country’s internal and external policies, including signing all international treaties, laws, and agreements; chair the National Security Council, which is responsible for defense matters; draw up the annual budget, supervise economic matters, and chair the state planning and budget organization”, as well as the responsibility to propose legislation to the Majles (Kesselman, Krieger, and Joseph, 601).

The legislative branch of Iran consists of a unicameral body, the Majles, that consists of 290 seats and is elected by direct national elections “every four years” (Kesselman, Krieger, and Joseph, 580).  The Majles “can remove cabinet members—with the exception of the president—through a parliamentary vote of no confidence” and “can withhold approval for government budgets, foreign loans, international treaties, and cabinet appointments” (Kesselman, Krieger, and Joseph, 609).

In addition to a president and a legislative body being elected by popular vote, the “Assembly of Experts is elected every eight years by the general public” (Kesselman, Krieger, and Joseph,601).  It is this eighty-six member Assembly of Experts that “appoints the Supreme Leader”, that is placed to “supervise the supreme leader’s capabilities to determine whether he is able to perform his duties”, and to “dismiss him if he is unable to perform his constitutional duties or it becomes known that he did not possess some of the initial qualifications such as “social and political wisdom, prudence, courage, administrative facilities and adequate capability for leadership” (Farhi).

Overall, the structure of the Iranian political system appears highly democratic and quite different from how it is usually portrayed on Fox News.

The Supreme Leader, appointed by the democratically elected eighty-six member Assembly of Experts, is often the center of democratic criticism from the capitalist western states, especially the United States.  The state constitution “gives wide-ranging powers to the Leader” which allows the elimination of “presidential candidates”, and “as commander-in-chief, he can mobilize the armed forces, declare war and peace, and convene the Supreme Military Council. He can appoint and dismiss the commanders of Revolutionary Guards as well as those of the regular army, navy, and air force. (Kesselman, Krieger, and Joseph,600).  One of the most interesting nongovernment posts held by the spiritual leader is “director of the national radio-television network”.  Again, the Supreme Leader is not some unchecked power and is held to his constitutional duties, a constitution which is aimed toward Islam, by the Assembly of Experts (Farhi).

The Guardian Council is the “most influential body in the Iranian system and is comprised of “six theologians appointed by the Supreme Leader and six jurists nominated by the judiciary and approved by parliament” (BBC).  While the Majles is the main legislative branch, “bills do not become law unless the Guardian Council deems them compatible with Islam and the Islamic constitution.” (Kesselman, Krieger, and Joseph, 580).  The review process ensures that passed bills “conform to the shari’a” (Kesselman, Krieger, and Joseph, 603).  The Guardian Council is also the body that approves election candidates based on compatibility to the Islamic Republic and Islam.

 

The following news report link from WMTV in Madison, Wisconsin is a democratic example of elections in Iran and is entitled “Iran Citizens vote for president at Wisconsin Hotel”.

http://www.nbc15.com/home/headlines/Iran-citizens-vote-for-president-at-Wis-hotel-211571441.html

RESOURCES:

BBC News.  2013.  Iran: Who Holds the Power?  Accessed on December 4, 2013.  http://news.bbc.co.uk/2/shared/spl/hi/middle_east/03/iran_power/html/guardian_council.stm

CIA.  2013.  CIA World Factbook.  Accessed on December 4, 2013.  https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html

Farideh Farhi.  2013.  The Assembly of Experts.  United States Institute of Peace.  Accessed on December 4, 2013.  http://iranprimer.usip.org/resource/assembly-experts

Mark Kesselman, Joel Krieger, and William Joseph. 2013. Introduction to Comparative Politics, 6th edition. Boston, MA: Wadsworth