Saturday, March 19, 2005

It's always nice to have a traveling secretary

As I've said before, Colin Powell's biggest failing as Secretary of State was that he didn't leave Washington, DC all that much. Which is kind of important for America's chief diplomat.

In Time, Elaine Shannon reports that Condi Rice seems to have grasped the importance of getting outside the Beltway:

According to a source in the State Department, Jim Wilkinson, a senior adviser to Condoleezza Rice, recently asked the department's historian for a list of countries that have never been visited by a U.S. Secretary of State. An unlikely Trivial Pursuit question, his inquiry signals that Rice's travels, which have already taken her to 11 countries in her first six weeks on the job, will be more extensive than most of her predecessors'. "The Secretary will travel when there's serious diplomatic work to be done," says Wilkinson. "There's no better diplomacy than personal contact."

After three trips to Europe and visits to Jerusalem, Ramallah and Mexico City, Rice is taking her frequent-flyer diplomacy on a six-nation mission to Asia this week. Even skeptics who wrote off her early forays as standard grip-and-grin fare are beginning to pay attention....

Rice's travel routine is grueling. Her 15-hour days typically start at 5 a.m., when she hits the elliptical machine in her hotel's fitness center. After her Asian tour (which will take her to Afghanistan, India, Pakistan, Japan, China and South Korea), she will attend a meeting next month in Santiago, Chile, on emerging democracies. Rice has visited eight NATO nations, and by summer, she or her deputy, Robert Zoellick, plan to travel to the remaining 17. By then, she may be ready to tackle Wilkinson's list.

UPDATE: Time has a follow-up story in this week's issue that offers the contrast between Rice and Powell:

Sometimes the hardest thing about being Secretary of State is managing relations with 191 other countries across the globe. And sometimes it's just making nice with three or four of your colleagues in the Cabinet. Colin Powell once told his British counterpart, Jack Straw, that intramural squabbling in Washington kept him from traveling. Every time he stepped onto an airplane to fly overseas, Powell said, someone in Washington stuck a knife in his back.

A shiv in the ribs is one worry Condoleezza Rice doesn't have. As she flew across Asia last week in her latest overseas trip, holding private meetings with leaders of six nations and appearing almost everywhere on TV, it was clear that in two months in office, Rice has consolidated her power as the chief exponent of the Administration's foreign policy, a perch bolstered by her exceptionally tight relationship with George W. Bush....

For someone who, as National Security Adviser during Bush's first term, often seemed overwhelmed by rivals in the war Cabinet, Rice has displayed striking confidence in her early forays as a diplomat. Foreign officials note that she likes to play solo, holding meetings without a phalanx of regional experts. Others report that she is unexpectedly generous with her time, even to countries that have been sharply critical of the U.S. At the Sharm el-Sheikh summit in February between Arab and Israeli leaders, Rice met with all the participants individually but steered clear of the summit to avoid the appearance of U.S. overreach. And an Israeli official notes that in private negotiating sessions, Rice has a clever way of pushing hard on an issue, even if only to elicit a vague agreement. But then she immediately doubles down. "She'll restate it in a firmer way," says this official, "and then pocket it as a commitment." Says an Arab diplomat: "This one is nimble, very nimble."

But Rice's best asset is her direct line to the Oval Office. "You get the feeling as you speak to her and listen to her," said an official who met with her in Europe last month, "that you are actually listening to the President's voice. You don't have to make a calculation about whether this is the view of all the government in Washington--or just part of it."

posted by Dan at 12:00 AM | Comments (8) | Trackbacks (2)

Friday, March 18, 2005

George Kennan, R.I.P. (1904-2005)

George Kennan, the first director of policy planning for the State Department, is dead at the age of 101. The New York Times obit by Tim Weiner and Barbara Crossette has more detail and background, but the Washington Post obit by J.Y. Smith has a paragraph that best captures Kennan's love-hate relationship with the U.S. foreign policy establishment:

Despite his influence, Mr. Kennan was never really comfortable in government or with the give-and-take process by which policy is made. He always regarded himself as an outsider. It grated on him when his advice was not heeded, more so because it often turned out that he had been more right than wrong. He had little patience with critics.

Kennan will forever be known as the author of the Long Telegram in 1946, the most famous State Department cable in history. Kennan later converted the telegram into a 1947 Foreign Affairs essay entitled, "The Sources of Soviet Conduct," which brought forth the doctrine of containment.

It is a grand irony of international relations theory that although the realist theory of international relations seemed to predict a strategy of containment, Kennan derived this doctrine from a domestic level analysis of the Soviet Union. Realism as it is currently understood derives most of it's causal power from the systemic level -- i.e., the world is anarchic and the distribuion of power among states powerfully affects the behavior of individual governments. However, Kennan argued that to understand Soviet behavior, one hand to understand the ever-present domestic legitimacy crisis of the Soviet government:

The circumstances of the immediate post-revolution period -- the existence in Russia of civil war and foreign intervention, together with the obvious fact that the Communists represented only a tiny minority of the Russian people -- made the establishment of dictatorial power a necessity. The experiment with war Communism" and the abrupt attempt to eliminate private production and trade had unfortunate economic consequences and caused further bitterness against the new revolutionary regime. While the temporary relaxation of the effort to communize Russia, represented by the New Economic Policy, alleviated some of this economic distress and thereby served its purpose, it also made it evident that the "capitalistic sector of society" was still prepared to profit at once from any relaxation of governmental pressure, and would, if permitted to continue to exist, always constitute a powerful opposing element to the Soviet regime and a serious rival for influence in the country....

Now the outstanding circumstance concerning the Soviet regime is that down to the present day this process of political consolidation has never been completed and the men in the Kremlin have continued to be predominantly absorbed with the struggle to secure and make absolute the power which they seized in November 1917. They have endeavored to secure it primarily against forces at home, within Soviet society itself. But they have also endeavored to secure it against the outside world. For ideology, as we have seen, taught them that the outside world was hostile and that it was their duty eventually to overthrow the political forces beyond their borders. Then powerful hands of Russian history and tradition reached up to sustain them in this feeling. Finally, their own aggressive intransigence with respect to the outside world began to find its own reaction; and they were soon forced, to use another Gibbonesque phrase, "to chastise the contumacy" which they themselves had provoked. It is an undeniable privilege of every man to prove himself right in the thesis that the world is his enemy; for if he reiterates it frequently enough and makes it the background of his conduct he is bound eventually to be right.

Now it lies in the nature of the mental world of the Soviet leaders, as well as in the character of their ideology, that no opposition to them can be officially recognized as having any merit or justification whatsoever. Such opposition can flow, in theory, only from the hostile and incorrigible forces of dying capitalism. As long as remnants of capitalism were officially recognized as existing in Russia, it was possible to place on them, as an internal element, part of the blame for the maintenance of a dictatorial form of society. But as these remnants were liquidated, little by little, this justification fell away, and when it was indicated officially that they had been finally destroyed, it disappeared altogether. And this fact created one of the most basic of the compulsions which came to act upon the Soviet regime: since capitalism no longer existed in Russia and since it could not be admitted that there could be serious or widespread opposition to the Kremlin springing spontaneously from the liberated masses under its authority, it became necessary to justify the retention of the dictatorship by stressing the menace of capitalism abroad.

The initial domestic insecurity of the Soviet elite made them see external societies that thrived on alternative sets of political, economic, and social principles as an existential threat -- a fact that's worth remembering when contemplating what radical Islamsts want.

In terms of U.S. foreign policy, however, the most cited paragraphs in "The Sources of Soviet Conduct" are these:

It is clear that the United States cannot expect in the foreseeable future to enjoy political intimacy with the Soviet regime. It must continue to regard the Soviet Union as a rival, not a partner, in the political arena. It must continue to expect that Soviet policies will reflect no abstract love of peace and stability, no real faith in the possibility of a permanent happy coexistence of the Socialist and capitalist worlds, but rather a cautious, persistent pressure toward the disruption and, weakening of all rival influence and rival power.

Balanced against this are the facts that Russia, as opposed to the western world in general, is still by far the weaker party, that Soviet policy is highly flexible, and that Soviet society may well contain deficiencies which will eventually weaken its own total potential. This would of itself warrant the United States entering with reasonable confidence upon a policy of firm containment, designed to confront the Russians with unalterable counter-force at every point where they show signs of encroaching upon the interests of a peaceful and stable world.

Kennan is proof that the author often loses control of his words the moment they are printed. The Times obit quotes Kennan in his memoirs as saying that the language on containment, "was at best ambiguous and lent itself to misinterpretation." Indeed, the most fully developed articulation of the containment doctrine, Paul Nitze's NSC-68, differed in significant ways from Kennan's own views. Kennan barely supported the Korean War and opposed the Vietnam War.

Even when his writing was clear, Kennan's foreign policy vision was not always 20/20. He opposed NATO expansion in the nineties, convinced it would have disastrous consequences. When he was in power, he bitterly railed against congressional influence over foreign affairs, and then changed his tune later in life. Kennan never gave a flying fig about the developing world, believing that it never would develop. Kennan's narrow world vision consisted only of the five centers of industrial activity -- the US, USSR, Germany, Great Britain, and Japan. By the early nineties, when he wrote Around the Cragged Hill, he clearly believed the U.S. to be doomed to decline and devoid of "intelligent and discriminating administration." And the less said about Kennan's view of non-WASPs, the better.

Nevertheless, Kennan achieved something all too rare in the world of ideas -- he came up with a very big idea at a crucial moment in history that was simultaneously influential and correct. His doctrine of containment proved to be a useful and ultimately successful framework to guide U.S. foreign policy during the bipolar era. Varioius administrations committed various blunders in the name of containment, but a lot more good than harm was done to honor Kennan's idea. Fifteen years after the Cold War ended, we are still searching for the big idea to replace Kennan.

In honor of Kennan, his alma mater started up The Princeton Project on National Security -- "a nonpartisan effort to strengthen and update the intellectual underpinnings of U.S. national security strategy." Seven working groups have been formed to advance the project (I'm on one of them) -- probably close to a hundred top-flight thinkers.

Combined, if we're very, very, very lucky, we might come up with something half as smart as Kennan.

UPDATE: David Adesnik has a long post on Kennan's aversion to democracy promotion. However, with all due respect, I disagree with Adesnik's characterization of Kennan as a realist. Realists simply do not care about the regime type of any country. Kennan was worse than that -- his antipathy to democracy was pretty much universal. He deplored its effects on U.S. foreign policy, and as Adesnik points out he believed that most countries of the world "weren't ready for democracy." More so than the realists, Kennan thought that domestic politics mattered -- but his natural conservatism led him to dismiss the notion that regime transitions were either possible or desirable in the developing world.

ANOTHER UPDATE: Be sure to check out this special Foreign Affairs web page devoted to Kennan -- by my count, he wrote more than fifteen essays for that journal.

posted by Dan at 12:56 AM | Comments (14) | Trackbacks (13)

Thursday, March 17, 2005

Uh.... I was talking about trade, right?

While trade is the subject of the day, it's worth pointing out that Tim Wu has a provocative story in Slate on an intriguing mechanism through which the United States could be forced to legalize marijuana: the World Trade Organization:

[T]he strange status of marijuana may also bring down the scrutiny of a different entity altogether: the World Trade Organization and its powerful condemnation of inconsistent national laws. The American ban on marijuana is what the WTO calls "a barrier to trade," raising the question: Can U.S. marijuana policy survive the tough scrutiny of world trade law?

WTO scrutiny of American drug laws may sound far-fetched, but then until recently so did WTO scrutiny of U.S. gambling or tax laws. U.S. gambling laws, like drug laws, are erratic: Online casinos are strictly prosecuted, but state lotteries and Las Vegas are tolerated. Citing such inconsistency, last November the WTO declared American gambling enforcement an "illegal barrier to trade in services." The fate of these gambling laws may be a guide to the future of American marijuana laws.

Read the whole thing -- the analysis is not completely far-fetched. Wu's biggest reach is his claim that "it may just be a matter of time" before another country will request a WTO panel. Yes, some countries have legalized marijuana, but I find it hard to conceive of a country pushing for the ability to export any narcotic that retains a moral stigma across the globe. A lot more countries would need to legalize Mr. Jay before this happens.

UPDATE: Jacob Levy emerges from seclusion to point out a more serious flaw in Wu's reasoning.

posted by Dan at 03:24 PM | Comments (6) | Trackbacks (0)

Rob Portman has his work cut out for him

The Bush appointments just keep on coming. Reuters reports that Bush has picked his next U.S. Trade Representative:

U.S. President George W. Bush said Thursday he has selected Rep. Rob Portman, a seven-term Republican congressman from Ohio, to be next U.S. trade representative.

"As a member of the House (of Representatives) leadership, Rob has shown he can bring together people of differing views to get things done," Bush said at a White House event to announce Portman's nomination.

The surprise choice, which must be confirmed by the Senate, comes as the White House faces strong opposition in Congress to one of its key trade initiatives, a new free trade pact with five Central American countries and the Dominican Republic.

Here's the complete text of Bush's announcement. Both the President and Rep. Portman made nice sounds on trade expansion:

BUSH: When he is confirmed by the Senate, Rob Portman will build on Ambassador Zoellick's achievements. I've asked him to take on a bold agenda. We need to continue to open markets abroad by pursuing bilateral free trade agreements with partners around the world. We need to finish our work to establish a free trade area of the Americas, which will become the largest free trade zone in the world. We need to complete the Doha round negotiations within the World Trade Organization to reduce global barriers to trade. We must continue to vigorously enforce the trade laws on the books so that American businesses and workers are competing on a level playing field....

PORTMAN: As you and I have discussed, open markets and better trade relations are key components to a more peaceful, a more stable and a more prosperous world. Through expanded trade, the roots of democracy and freedom are deepened. And here at home, trade policy opens markets to create jobs, a higher standard of living and greater economic growth.

[So does this mean you remain hopeful that trade will be freer?--ed. Well, I see this appointment as a good news-bad news kind of situation. The good news is that Portman is a legitimate free trader. Daniel Griswold at the Cato Institute's Center for Trade Policy Studies just published a briefing paper looking at Congressional attitudes towards trade, and Portman is categorized as a consistent free trader (his one major lapse was support for the steel tariffs).

The bad news is that, while I don't know the extent of the personal relationship between Portman and Bush, I have to guess that it's not terribly close (see update below). Which makes me wonder just how much politcal capital Bush is willing to spend on trade expansion. Bob Zoellick, when faced with a similar situation, did the best he could with a weak hand. But as any poker player knows, without the cards there's only so much you can do. Plus, as that Cato study suggests, Portman is going to have an uphill fight getting his congressional colleagues to sign on to the Bush trade agenda.]


UPDATE: Thanks to D.J. for this Capitol Hill Blue link from mid-2004 which suggests that Portman and Bush are actually pretty tight: "Among other members of Bush's brain trust are Vice President Dick Cheney; a brother, Florida Gov. Jeb Bush; longtime adviser Karen Hughes; and Ohio Rep. Rob Portman, a longtime Bush family friend.... Portman, the only alumnus of the first Bush administration serving in Congress, is actively involved in Bush's strategy in industrial battleground states like his own." So maybe my "bad news" concerns are misplaced.

posted by Dan at 11:59 AM | Comments (4) | Trackbacks (1)

I will not surrender to the dark side, I will not surrender to the dark side...

Via Ross Douthat, I see the latest trailer for Star Wars III, Revenge of the Sith is out. Last fall, I confess I found the teaser trailer to be very seductive, so I was worried about my reaction to this one.

And I'm happy to report that I mildly disagree with both Douthat and Matthew Yglesias; the trailer is OK, but the dark side has not turned me yet. There are other popcorn movie trailers out there -- like Sin City, Mr. and Mrs. Smith, or Fantastic Four -- that have grabbed more of my attention.

Take that, Emperor Lucas!!

posted by Dan at 11:44 AM | Comments (5) | Trackbacks (0)

State vs. Defense II

The president announced his nomination of Paul Wolfowitz to be the next World Bank president. Apparently the Europeans are not happy, according to the Washington Post's Keith B. Richburg and Glenn Frankel:

President Bush's nomination of Deputy Defense Secretary Paul D. Wolfowitz as the next president of the World Bank was met with much surprise, little enthusiasm and some outright opposition in Europe, where he is best known as a leading architect of a conflict deeply unpopular here, the Iraq war.

"We were led to believe that the neo-conservatives were losing ground," said Michael Cox, a professor of international relations at the London School of Economics. "But clearly the revolution is alive and well." He added that despite recent efforts from Washington to mend relations, "Europeans are still inclined deep down to suspect the worst, and this appointment won't go down too well."

European countries control about 30 percent of votes on the bank's board; opponents would be able to fight the nomination if they chose to do so. By tradition, the United States, the bank's largest shareholder, selects the president, while Europeans pick the head of its sister institution, the International Monetary Fund.

Some Europeans who closely follow U.S. politics said the Wolfowitz choice, coming the week after Bush selected outspoken diplomat John Bolton as his United Nations ambassador, could be a sign that the president is moving to placate his more conservative supporters.

Some expressed concern that such appointments could undermine trans-Atlantic goodwill that developed in recent weeks through visits by Bush and Secretary of State Condoleezza Rice.

"There are two interpretations" of the selection of Wolfowitz, said Guillaume Parmentier, who heads the French Center on the United States, a think tank in Paris. "One is the optimistic one -- that this is going to take him away from U.S. policy. . . . The pessimistic interpretation is that this administration has to give sop to the far right. There was Bolton and now Wolfowitz -- where does it stop?"

For more international reaction, see this blog devoted to the topic.

My thoughts, in no particular order:

1) While I'm sure that Europe is less than thrilled, the Post story automatically gets devalued from the fact that the first quote comes from Mick Cox. Cox is a very bright international relations theorist. He's also a classic Marxist, however, so I'm pretty sure he'd have been unenthused by any Bush selection.

2) Matthew Yglesias is correct to point out that Wolfowitz's performance as Deputy SecDef isn't necessarily correlated with how he'd do at the Bank, since, "preventative wars are not, I take it, something the Bank head is able to launch."

3) I have to disagree with Kevin Drum's assessment of Bush's recent moves:

On a PR level, though, the message Bush is sending is plain. A number of pundits inexplicably thought that Bush might settle down in his second term and try to run a more conciliatory, less strident administration, and it's pretty obvious that he's trying to make it crystal clear that he has no intention of doing this. Second term Bush will be no different from first term Bush, and don't you forget it.

I see things very differently. Consider the personnel shuffles that have taken place at both State and Defense.

At State, Condi Rice is now the secretary; She cajoled Bob Zoellick to leave a cabinet-level position at USTR to be her deputy, rejecting John Bolton in the process; highly regarded NATO ambassador Nick Burns will be the number three person as Under Secretary of State for Political Affairs; and Bush consigliere Karen Hughes just agreed to come back as Under Secretary of State for Public Diplomacy. There's no comparison between this crew and the old Powell/Armitage team. The old group had gravitas and little else. This group has gravitas, bueaucratic infighting skills, and several people personally close to the President.

Meanwhile, at DoD, Douglas Feith has announced plans to leave this summer, Wolfowitz has now departed, and Richard Myers term as JCS chief will expire in December. In other words, Rumsfeld is still around but his cronies are gone. As Greg Djerejian points out, "it's starting to feel like the defenestration of Prague!"

Fred Kaplan notices this trend at Slate:

A few months ago, Doug Feith announced that he would be leaving his job this summer, for personal reasons. Now Wolfowitz heads toward the door. Will the neocon triumvirate's third peg, Stephen Cambone, the undersecretary for intelligence, be the next to fall? And what of Rumsfeld himself? The face-saving has been accomplished. His archrival, Colin Powell, was booted while he stayed on in triumph. He escaped official blame for Abu Ghraib. Having thus emerged from the firestorms unscathed, he too may be working up an appetite to spend more time with his family.

Rumsfeld's fingerprints, which were smeared all over Bush's first-term foreign policy, have thus far left no marks in the second term. There are three possible explanations: Rumsfeld is insinuating himself more subtly than before; Condoleezza Rice shares his views, so he doesn't need to raise a fuss; or, just maybe, the winds are shifting over the Potomac.

I vote for no. 3. No neocon worth their salt would want Bolton at the UN of Wolfowitz at the Bank -- because neocons don't believe these institutions are particularly relevant. What matters is who is ruling the roost inside the beltway. And in DC, the balance of power has shifted to State -- and the people that are there have signaled a willingness to listen to the Europeans. Compared to what they faced during the Powell/Rumsfeld wars, this is a much more hospitable environment for European diplomats.

UPDATE: The Financial Times reports that European countries probably will not form a united front to oppose Wolfowitz.

posted by Dan at 12:18 AM | Comments (27) | Trackbacks (10)

Wednesday, March 16, 2005

Well this is nice

Barbara Slavin reports in USA Today that Iraqis are feeling better about Iraq:

More Iraqis believe their country is headed in the right direction and fewer think it's going wrong than at any time since the U.S. invasion two years ago, according to a new poll.
The poll, by the International Republican Institute (IRI), due to be made public Wednesday, also found that nearly half of Iraqis believe that religion has a special role to play in government.

The survey of 1,967 Iraqis was conducted Feb. 27-March 5, after Iraq held its first free elections in half a century in January. According to the poll, 62% say the country is headed in the right direction and 23% say it is headed in the wrong direction. That is the widest spread recorded in seven polls by the group, says Stuart Krusell, IRI director of operations for Iraq. In September, 45% of Iraqis thought the country was headed in the wrong direction and 42% thought it was headed in the right direction. The IRI is a non-partisan, U.S. taxpayer-funded group that promotes democracy abroad.

Pollsters did not survey three of Iraq's 18 provinces because of security and logistical concerns. Two of those omitted, Anbar and Ninevah, are predominantly Sunni Muslim. A third, Dahuk, is mostly Kurdish. Krusell said that even if those areas had been included and 100% had expressed negative views, the poll would still have shown that most Iraqis believe that the situation in their country is improving.

Here's a link to the IRI press release of the poll.

Assume for the moment a best-case scenaio in which the insurgency starts to die down. Given that the National Assembly has just started to meet, don't be surprised if that satisfaction figure were to go down. This is the funny thing about democracy -- one people get it, their dissatisfaction from seeing the process up close seems to increase.

Eventually, most people adopt the Churchillian posture: democracy is the worst form of government except for all those others that have been tried.

posted by Dan at 11:43 PM | Comments (3) | Trackbacks (2)

Outsourcing as an economic experiment

One of my favorite economics articles of all time is by Nathan Rosenberg, "Economic Experiments." Industrial and Corporate Change , volume 1 (1992). In that essay, Rosenberg pointed out that any dynamic economy had to let firms engage in experimentation to find out new ways to innovate and generate profits. Many of these experiments would fail, of course, but the successes would lead to massive economic gains. It was crucial that these experiments be permitted to fail, otherwise no useful information could be gleaned.

I bring this up because looking at economic enterprises as a rolling series of experiments is a great analytical lens to think about offshore outsourcing. Specifically, a lot of firms outsourced offshore as an experiment to boost profits. And, not surprisingly, a lot of experiments fail: Gartner recently predicted that 80% of customer service outsourcing projects aimed to cut costs will fail. That cannot and should not stop other firms from trying -- like MacDonald's outsourcing its drive-thru windows to remote call centers (if you click on the story, note that they're thinking of outsourcing to Norh Dakota and not Bangalore).

The great thing about experimentation is that the people conducting the experiments learn more from failure as success. As firms gain more experience from offshoring, they are starting to recalibrate what is outsourced and what is kept in-house. Kelly Shermach makes this point in CRM Buyer:

By farming out only bits of business, U.S. organizations can more easily grasp the risks they take as well as the efficiencies they gain. "It's easier to see you're getting a better price, easier to get a benchmark when you're selective for better process manageability," said Robert McNeill of Forrester Research.

Even when companies outsource some functions, they often keep control over far more than their core competencies. Unless outsourcing will deliver a cost savings with equal or better service quality, they keep it in-house....

And by farming out only bits of business , U.S. organizations can more easily grasp the risks they take as well as the efficiencies they gain. "It's easier to see you're getting a better price, easier to get a benchmark when you're selective for better process manageability," McNeill said.

U.S. firms are also starting shifting the location of offshoring activities. Some firms are relocating their offshoring activities to the Philippines because of increasing costs of Indian offshoring. Cultural familiarity is also causing firms to switch some of their activities to nearshoring -- i.e., farming out operations to Canada (or, for western European firms, to eastern Europe).

These trends worry some Indian analysts. Sonia Chopra frets in India Daily:

In recent days the escalating cost of employment in India, lack of qualified work force and deflation service prices have made outsourcing a tough business. The Western companies in India are running around to save even one cent. The escalating cost of living and shortage of qualified workforce is putting a solid pressure on wage increase. On top of that the companies have to keep 20% excess work force to accommodate turn over and other issues. The clients in the West are always threatening to stop business, not pay etc. based on quality and delivery of services on schedule. All these have made outsourcing a painful business. On top of those countries like Poland, Philippines, South Africa and so on are competing heavily lowering the prices and providing additional incentive to the clients....

Some Indian companies have tried to branch out into premium pricing environments – the vertical markets in IT. That is where India is failing. It was a easy honey moon for Indian companies to offer cheap services with less than par alary in the country and Indian rupees trading at a lower value than then the fair market values. But when these factors are taken out, Indian companies find they are nowhere.

It's with this kind of experimetation in mind that one should read Pete Engardio and Bruce Einhorn's excellent article in Business Week about the offshore outsourcing of R&D activities. The outsourcing of R&D is often considered the "line of death" for economic analysts. If that happens, the thinking goes, so does American technological leadership. Parts of the article sound ominous:

When Western corporations began selling their factories and farming out manufacturing in the '80s and '90s to boost efficiency and focus their energies, most insisted all the important research and development would remain in-house.

But that pledge is now passé. Today, the likes of Dell, Motorola, and Philips are buying complete designs of some digital devices from Asian developers, tweaking them to their own specifications, and slapping on their own brand names. It's not just cell phones. Asian contract manufacturers and independent design houses have become forces in nearly every tech device, from laptops and high-definition TVs to MP3 music players and digital cameras. "Customers used to participate in design two or three years back," says Jack Hsieh, vice-president for finance at Taiwan's Premier Imaging Technology Corp., a major supplier of digital cameras to leading U.S. and Japanese brands. "But starting last year, many just take our product. Because of price competition, they have to."

While the electronics sector is furthest down this road, the search for offshore help with innovation is spreading to nearly every corner of the economy....

However, a closer read reveals that what's going on is experimentation:

[There is] a rethinking of the structure of the modern corporation. What, specifically, has to be done in-house anymore? At a minimum, most leading Western companies are turning toward a new model of innovation, one that employs global networks of partners. These can include U.S. chipmakers, Taiwanese engineers, Indian software developers, and Chinese factories. IBM is even offering the smarts of its famed research labs and a new global team of 1,200 engineers to help customers develop future products using next-generation technologies. When the whole chain works in sync, there can be a dramatic leap in the speed and efficiency of product development....

[D]ifferent companies are adopting widely varying approaches to this new paradigm. Dell, for example, does little of its own design for notebook PCs, digital TVs, or other products. Hewlett-Packard Co. says it contributes key technology and at least some design input to all its products but relies on outside partners to co-develop everything from servers to printers. Motorola buys complete designs for its cheapest phones but controls all of the development of high-end handsets like its hot-selling Razr. The key, execs say, is to guard some sustainable competitive advantage, whether it's control over the latest technologies, the look and feel of new products, or the customer relationship. "You have to draw a line," says Motorola CEO Edward J. Zander. At Motorola, "core intellectual property is above it, and commodity technology is below."

Wherever companies draw the line, there's no question that the demarcation between mission-critical R&D and commodity work is sliding year by year. The implications for the global economy are immense. Countries such as India and China, where wages remain low and new engineering graduates are abundant, likely will continue to be the biggest gainers in tech employment and become increasingly important suppliers of intellectual property. Some analysts even see a new global division of labor emerging: The rich West will focus on the highest levels of product creation, and all the jobs of turning concepts into actual products or services can be shipped out. Consultant Daniel H. Pink, author of the new book A Whole New Mind, argues that the "left brain" intellectual tasks that "are routine, computer-like, and can be boiled down to a spec sheet are migrating to where it is cheaper, thanks to Asia's rising economies and the miracle of cyberspace." The U.S. will remain strong in "right brain" work that entails "artistry, creativity, and empathy with the customer that requires being physically close to the market."

....Still, most companies insist they will continue to do most of the critical design work -- and have no plans to take a meat ax to R&D. A Motorola spokesman says it plans to keep R&D spending at around 10% for the long term. Lucent says its R&D staff should remain at about 9,000, after several years of deep cuts. And while many Western companies are downsizing at home, they are boosting hiring at their own labs in India, China, and Eastern Europe. "Companies realize if they want a sustainable competitive advantage, they will not get it from outsourcing," says President Frank M. Armbrecht of the Industrial Research Institute, which tracks corporate R&D spending.

Companies also worry about the message they send investors. Outsourcing manufacturing, tech support, and back-office work makes clear financial sense. But ownership of design strikes close to the heart of a corporation's intrinsic value. If a company depends on outsiders for design, investors might ask, how much intellectual property does it really own, and how much of the profit from a hit product flows back into its own coffers, rather than being paid out in licensing fees? That's one reason Apple Computer lets the world know it develops its hit products in-house, to the point of etching "Designed by Apple in California" on the back of each iPod....

Companies are still figuring out exactly what to outsource.

Let the experimentation continue....

UPDATE: The EU, on the other hand, seems to disapprove of both outsourcing as experimentation and any report that signals that these experiments can be successful:

Outsourcing isn't as bad for European jobs as some have feared, says an unpublished European Union study. On the contrary, the study suggests it can help create high-skilled jobs and boost Europe's flagging economy.

But the study was pulled from the agenda of European finance ministers meeting here yesterday to be rewritten, EU diplomats said. It was too inflammatory for countries such as Germany and France, which fear deindustrialization and falling investment from companies exporting jobs to lower-cost countries, they said. "The report says there's nothing wrong with outsourcing, and that's absolutely not politically sensitive," an EU diplomat said. "That's why it could not be discussed."

The 16-page report, commissioned by the EU's economic affairs department and reviewed by Dow Jones Newswires, said "there is no evidence that a deindustrialization process is underway." Developed economies consistently see increases in manufacturing output, the report found. Though some manufacturing jobs are lost, "One should not lose sight of the overall positive developments of net job creation throughout the EU," the report concluded, "especially for the high skilled."

posted by Dan at 07:52 AM | Comments (16) | Trackbacks (1)

Tuesday, March 15, 2005

Return to sender

Ian Urbina has a fun story in today's New York Times on the small rebellions individuals engage in every day to protest life's petty annoyances. Here's an excerpt:

Life can involve big hardships, like being fired or smashing up your car. There is only so much you can do about them. But far more prevalent - and perhaps in the long run just as insidious - are life's many little annoyances.

These, you can do something about.

To examine the little weapons people use for everyday survival is to be given a free guidebook on getting by, created by the millions who feel that they must. It is a case study in human inventiveness, with occasional juvenile and petty passages, and the originators of these tips are happy to share them.

"They're an integral part of how people cope," said Prof. James C. Scott, who teaches anthropology and political science at Yale University, and the author of "Weapons of the Weak," about the feigned ignorance, foot-dragging and other techniques Malaysian peasants used to avoid cooperating with the arrival of new technology in the 1970's. "All societies have them, but they're successful only to the extent that they avoid open confrontation."

The slow driver in fast traffic, the shopper with 50 coupons at the front of the checkout line and the telemarketer calling at dinner all inflict life's thousand little lashes. But some see these infractions as precious opportunities, rare chances for retribution in the face of forces beyond our control.

Wesley A. Williams spent more than a year exacting his revenge against junk mailers. When signing up for a no-junk-mail list failed to stem the flow, he resorted to writing at the top of each unwanted item: "Not at this address. Return to sender." But the mail kept coming because the envelopes had "or current resident" on them, obligating mail carriers to deliver it, he said.

Next, he began stuffing the mail back into the "business reply" envelope and sending it back so that the mailer would have to pay the postage. "That wasn't exacting a heavy enough cost from them for bothering me," said Mr. Williams, 35, a middle school science teacher who lives in Melrose, N.Y., near Albany.

After checking with a postal clerk about the legality of stepping up his efforts, he began cutting up magazines, heavy bond paper, and small strips of sheet metal and stuffing them into the business reply envelopes that came with the junk packages.

"You wouldn't believe how heavy I got some of these envelopes to weigh," said Mr. Williams, who added that he saw an immediate drop in the amount of arriving junk mail. A spokesman for the United States Postal Service, Gerald McKiernan, said that Mr. Williams's actions sounded legal, as long as the envelope was properly sealed.

posted by Dan at 08:55 AM | Comments (7) | Trackbacks (1)

Can 200,000 Chinese ex-communists be wrong?

This is one of those blog posts where I have to say up front that I don't know enough to gauge the significance of the event I'm posting about. That said, the information is interesting enough to link and mention.

Apparently the Chinese Communist Party has been suffering from a rash of resignations as of late -- approximately 200,000 in four months. At The Epoch Times, Stephen Gregory reports on what's going on:

On November 19, 2004 The Epoch Times published in Chinese the first of “The Nine Commentaries on the Communist Party”. The Chinese Communist Party (CCP) has been scrambling ever since to find a way to respond.

The “Nine Commentaries” are a book-length set of nine editorials that tell the true history of the CCP. Written under the auspices of The Epoch Times editorial board, the authorship is anonymous.

The “Nine Commentaries” lay out the Party’s crimes: its campaigns of mass murder, brainwashing and terror; the 80 million plus unnatural deaths; the avoidable famines; the degradation of the environment; the corruption that goes from top to bottom, and much more....

On December 3, 2004 The Epoch Times established the Tuidang (“withdraw from the Party”) website in order to give the people of China the opportunity to renounce their membership in the CCP and its related organizations, such as the Communist Youth League (CYL).

On December 4, the website received its first solemn declarations by Party members who wished to renounce all ties with the CCP. In December the rate of such statements was a few hundred a day. But the rate has increased exponentially. On March 7, the Tuidang website recorded over 22,000 renunciations. The website has been limited in the number it can post by its ability physically to keep up with the huge volume of statements....

The CCP and its state-controlled media have not publicly responded to the “Nine Commentaries”. This is not surprising. If the CCP were to issue a statement condemning the “Nine Commentaries,” then everyone in China would want to know more about them.

Now, the thing is, the CCP isn't the only institution that hasn't responded to these resignations -- I can't find a non-Epoch Times report on this. On the other hand, they've been all over the story. What's going on?

Gregory is candid in an e-mail he sent to me:

To avoid the suspicion I am attempting to hype a story, I should point out a few things about these resignations. First, the resignations or withdrawals are from the CCP and its affiliated organizations, such as the Communist Youth League (CYL), which almost all Chinese are required to join. Second, the resignations, or perhaps more accurately, renunciations, are from any association with the Party, even if that association is many years in the past. Thus, former members of the CCP and former members of the CYL are posting their withdrawals to organizations of which technically they are no longer members. Third, in order to protect those who are withdrawing from harm, the website accepts resignations made under assumed names. Fourth, the relatives of deceased family members are allowed to post withdrawals on behalf of their now dead relatives. Finally, while the pace of resignations has increased rapidly all along, it really shot up after the founder of Falun Gong, Li Hongzhi, published his own withdrawal from the CYL on the Epoch Times.

Having said all of that, the resignations are real, and they represent a real and dramatic challenge to the rule of the CCP. And, given the amount of detail included in the resignation statements, they often are done at great risk, even if they are done under an alias. These resignations are the most important story in China today, and no one outside the Epoch Times is covering them.

So there it is. I'll leave it to my readers to decide how much weight to put on this. I would also love to see the mainstream media do some digging on this story.

posted by Dan at 12:19 AM | Comments (12) | Trackbacks (5)

Monday, March 14, 2005

Calling and raising Hezbollah

Last week I said that the re-appointment of Lebanese PM Omar Karami would trigger more protests. It turns out that was a mild understatement. The Associated Press reports that the anti-Syrian proestors in Lebanon have responded to the reappointment -- and Hezbollah's pro-Syrian rally from last week, which was undoubtedly a factor in Lebanese President Emile Lahoud's decision to reappoint Karami -- with the largest demonstration of people power yet:

Hundreds of thousands of opposition demonstrators chanted “Freedom, sovereignty, independence” and unfurled a huge Lebanese flag in Beirut on Monday, the biggest protest yet in the opposition’s duel of street rallies with supporters of the Damascus-backed government.

Crowds of men, women and children flooded Martyrs Square, spilling over into nearby streets, while more from across the country packed the roads into Beirut — responding to an opposition call to demonstrate for the removal of Syrian troops from Lebanon.

“We are coming to liberate our country. We are coming to demand the truth,” said Fatma Trad, a veiled Sunni Muslim woman who traveled from the remote region of Dinniyeh in northern Lebanon to take part....

Monday’s protest easily topped a pro-government rally of hundreds of thousands of people last week by the Shiite Muslim militant group Hezbollah. That show of strength forced the opposition to try to regain its momentum.

Publius Pundit has much, much more on this.

UPDATE: Neil MacFarquar reports on the protest for the New York Times. The telling section:

The most notable element in the rally was that it did represent a broad cross section of Lebanese from all around the country.

"They can say that they represent a wide spectrum of Lebanese factions, including some Shiites, and they have been able to bring the Sunnis into the streets, which is not easy," said Ghassan Salame, a former minister of culture and political science professor, speaking by telephone from Paris. "They have an upward momentum now after a week that was full of uncertainty." ....

"This will counterbalance last Tuesday, and now we can sit and talk," said Mazen al-Zain, a 30-year-old financial analyst, noting that he himself was a member of an illustrious Shiite clan from southern Lebanon. "What is really important after today's gathering is that we all sit down at the same table."

posted by Dan at 11:40 AM | Comments (22) | Trackbacks (0)

Blogging as public diplomacy?

Hampton Stephens has a fascinating op-ed in today's Boston Globe about using blogs as a low-cost, high-yield way of enhancing U.S. public diplomacy. The highlights:

as the bureaucracy belatedly gears up to spread the message of liberty as an alternative to extremism and tyranny, there is evidence to suggest that independent, grassroots efforts to nurture democratic ideas in some of the world's most repressed societies are gaining momentum and could make old-style public diplomacy irrelevant. While the latest US-sponsored public diplomacy efforts, such as the new Arabic television station Alhurra, rely on decidedly old-media formats, the Internet appears to be the medium through which future international political opinion will be influenced most significantly.

In most foreign countries, traditional media like Al Jazeera -- against which Alhurra, established in February 2004, is designed to compete -- is the place most citizens get their political information. However, the particular characteristics of the Internet and Web logs make them fertile ground for alternative political cultures to take root, especially in countries where the state attempts to control access to information. With their use of the Internet for organization and for communicating their ideology to new believers, terrorist groups like Al Qaeda have already demonstrated the power of networks to spread political movements. Less publicized so far is the growing use of the Internet by democrats to foster liberal culture in repressive countries....

Although the international blogging phenomenon is in its infancy, Internet trends spread fast, so US foreign policy makers would do well to take notice soon. A chief aim of public diplomacy has always been to foster liberal political culture where authoritarian states are attempting to snuff it out. President Bush clearly believes America's interests are served by the spread of freedom and democracy. To that end, US policy makers should recognize blogging as a perfect tool to promote the proliferation of independent democratic voices.

Read the whole thing to see more specific policy proposals -- Sprit of America is prominently mentioned.

The one nagging question I have is what happens when a blogger puts their foot in their mouth (as often happens) through a U.S. government-sponsored channel? I suspect this kind of downside can be managed, but I'm not completely certain.

Paging Karen Hughes......

posted by Dan at 11:06 AM | Comments (4) | Trackbacks (2)

Sunday, March 13, 2005

Can academics be bloggers?

A truncated version of what I said at the Public Choice roundtable with Michael Munger and Chris Lawrence on the question of "Can Academics Be Bloggers?":

1) Of course academics can be bloggers. The more interesting questions are:

a) Can academics be good bloggers?

b) Should academics be bloggers?

My answer both of these questions is "yes, with significant caveats."


The answer should be yes:

1) 40% of TTLB's Higher Beings have Ph.D.s, so clearly it's possible.

2) Academics possess skills that are useful for blogging -- expertise, writing experience, analytical and critical thinking skills, etc.

That said, the answer for many academics is no:

1) To put it gently, some top-notch academics have not completely mastered the art of the blog. In all likelihood this will change, but it points to a barrier to entry for good scholars; unlike lower-level primates like myself, high-profile academics will often attract attention the moment they start blogging, stripping them of the opportunity to stumble out of the gates and move down the learning curve under the radar.

2) Furthermore, tenured academics have to adjust to a new and strange power structure if they start blogging. Suddenly they're in a world where mere graduate students, or worse yet, people possessing only a B.A., wield more power and influence than them. I mean, it's been three months and Munger is still in a fetal position from being exposed to my "mighty" hit count. And that's just between a full professor and an assistant professor!

3) Richard Posner's theory of public intellectuals suggests that as academics stray from their area of expertise, their signal to noise ratio of the information they generate drops. Some academic bloggers strongly confirm this hypothesis.

4) Yes, academics have writing experience, but they've been trained within an inch of their lives to eschew clear prose for jargon-laden discourse. There are sound and unsound reasons for this within the academy, but for blogging to the general public it's disastrous.

5) It should be stressed that these hindrances are not permanent, but they do constitute a barrier to entry.


*By academics, I mean untenured ones, because if you have tenure, f$#% it.

**By blogging, I mean political blogging rather than blogging only about one's research, which is an unalloyed good.


1) Blogging can be thought of as part of service. It's a low-cost way of reaching beyond the ivory tower. It's also acting like a quasi-referee of public intellectual output.

2) As blogging has become more respectable, the stigma associated with the activity has faded away.


1) It can be addictive.

2) If the blog is successful, it will breed resentment from colleagues, because it creates an alternative path to acclaim where tenured faculty do not function as gatekeepers.

3) Colleagues who do not write for a wide audience will overestimate the amount of time you devote to blogging, because they assume a one-to-one correspondence between public articles and scholarly articles (the actual ratio is more like 1:3). They will also underestimate the possibility that blogging is a complement rather than a substitute to traditional scholarship.

4) Scholars who out themselves as not part of the mainstream political persuasion of academics will have some uncomfortable hallway moments -- though this cost is often overestimated.

5) More serious are the academic political minefields that blogging can trigger -- you know, thin-skinned senior academics who are perfectly willing to carry a blog grudge into the academic realm.

Thanks to Michael, Chris, and the lovely Leslie Johns for making my 20 hours in New Orleans so enjoyable.

UPDATE: Munger posts his round-up as well. His most telling point:

I still think there is a legit question about whether a junior person can blog, or if a senior person can blog, and ever get a first/another academic job. Same as with a supreme court justice nominee: too much paper trail, and people who oppose you can find stuff to use against you. I am clearly going to die at Duke, so it is easy for me to act all tough, but I think this is a real concern. I have colleagues who have tenure, and say they would like to blog, but that the stuff would be used against them in their Senate confirmation hearings if they ever get a top appointment in a regulatory agency. They are completely right, of course.

I'll be up for tenure next year, so -- lucky me -- I get to be the first test of Munger's first thesis -- and I hope he's wrong. However, he's dead right about a blog potentially sabotaging a confirmation hearing -- which is why I pretty much threw any dreams of those positions out the window once I started the blog.

Mike also came up with the best turn of phrase for describing the tenure process -- "the star chamber."

posted by Dan at 05:00 PM | Comments (11) | Trackbacks (4)

I'm not a pure libertarian

Unlike Michael Munger, I'm not terribly bothered by my score of 58 out of a possible 160 points on this Libertarian Purity test. First, that score characterizes me as "a medium-core libertarian," which is pretty much accurate. Second, I'm perfectly comfortable saying no to questions like

  • Should the law itself be privatized?

  • Should the state be disarmed and its military disbanded?

  • Is it morally permissible to exercise "vigilante justice," even against government leaders?

  • Should the state be abolished?

  • Would you call yourself an "anarcho-capitalist?"
  • As I've said before, "I’m frequently conflicted between my laissez-faire instincts and my clear-eyed recognition that there is no substitute for nation-states in world politics." Libertarian theories of international relations have never been able to cope with this fact.

    posted by Dan at 01:11 PM | Comments (12) | Trackbacks (5)