I think Steve is identifying a critical tipping point for Kurdistan. Leapfrogging the bazaari mentality to create a financial structure that inspires enough confidence to attract and sustain legitimate foreign investment and diversify Kurdish reliance on Turkish capital and American aid would be a milestone. This probably would not mean ” best practices” in the sense of Chase Manhattan so much as ” best enough practices” relative to the region. ” Good enough” is what gets a healthy level of local economic growth going. ” Best” can wait for the day the Republic of Kurdistan applies for admission to the WTO and the EU.
Today, Kurdistan is a nation with a virtual state shepherding its interests. More than Hezbollah in Southern Lebanon, the regional government in Kurdistan is less than Taiwan. But like Taipei, the Barzani-Talabani regional government seeks to negotiate or leverage de jure status and the full sovereignty of statehood over the virulent objections of a powerful neighbor and a nervous American patron. Economic development and integration with other global power centers ( EU, China, India, Japan, Russia) will be the key for the Kurds to create a scenario where Ankara can swallow – however bitterly, even with with ironclad security guarantees – Kurdish independence, because it will be in Turkey’s economic best interests to do so.
LINKS:
“Kurdistan Rebalancing the Middle-East” and “Iraq Travel Guide” by Chirol
“The Kurdistan Problem: Part I “, “The Kurdistan Problem: Part II“, “The Kurdistan Problem: Part III“ by midtowing at ProgressiveHistorians
“Response to Virtual Nations Will Shape World Order or Disorder“ by Adrienne Redd
“The Rise of the Virtual StateWealth and Power in the Coming Century” by Richard Rosecrance
“Market-state vs. Virtual State” by John Robb
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A.E.:
May 21st, 2007 at 7:27 pm
I’ve read Baer’s account of Northern Iraq. Very interesting, but depressing at the same time.
Dan tdaxp:
May 23rd, 2007 at 6:56 am
A very good post by you, and a very good series by Steve.
Craig Hubley:
May 23rd, 2007 at 8:00 pm
I’m going to subtly agree and unsubtly disagree with one point.
“This probably would not mean ” best practices” in the sense of Chase Manhattan so much as ” best enough practices” relative to the region. ” Good enough” is what gets a healthy level of local economic growth going.” Sadly not all local economic growth actually leads to health.
“” Best” can wait for the day the Republic of Kurdistan applies for admission to the WTO and the EU.”
This seems to assume that the WTO and EU practices would be appropriate to a region ridden with conflict and ethnic tensions and now primarily depending on a black economy built wholly on clan or interpersonal trust. Let’s not pretend that the choice is between an abstract rules-based regime such as the WTO or EU apply, and a black market economy in which personality and clan relations define all contracts and dispute resolution. An arbitrary path from one to the other could well run into the same problems as the US banking system which has kept its opaque cliques, overly empowered its fulltime managers, and firewalled itself completely from the values of stakeholders.
Given the need to curtail certain types of socially destructive trade (such as weapons or drugs) and the long history of ethical micro-venture capital in Muslim countries (its traditional banking system), it may make more sense to give them EXACTLY what they want:
“This group craved exposure to current international banking best practices, core banking information technology and know-how that would allow them to connect to the global banking industry as well as the training and education that would allow staff members to raise themselves up to a minimal level of maturity so they can foster commerce in their region.” This is EXACTLY what they need: “current international banking best practices” in the form of scenario discipline, risk-as-regret measurement and representative effective boards, and “core banking information technology” that calculates expected value based on explicit formulae reconciling many scenarios, including those that violate popular opinion. Read Ron Dembo on this, and read the Basel II Accords. Modern best practices are easily understood and applied by diligent educated people, and a high school education is sufficient to learn to apply these techniques. It is not suitable to write the software, but that can be bought.
Where I subtly agree is in “leapfrogging the bazaari mentality to create a financial structure”. However the goal is not to inspire mere “confidence” but actual local resilience. The “legitimate foreign investment” is most likely to flood in from other Muslim countries, and these are most likely to recognize the value of a system that reconciles the old practices of investment based on explicit shared values without debt interest assurances, and the new practices of explicit scenario weighting and regret measurement. In other words, modern banking best practices resemble traditional Islamic economics more than they resemble Chase Manhattan.
Given that profitable but chaos-making influences like arms deals and transport-centric industries unconcerned with what or who they move around would be subject to two extra layers of scrutiny (the investors’ values, the scenarios by which investors could lose) in a modern robust banking practices regime, it seems unwise to try to emulate the pre-scenario-analysis pre-ethical-screen practices of the WTO, IMF and most US banks. A volatile region requires more care and thought put into each investment, though it requires it quickly (thus the software assist).
In this case, the Kurds know best, and should get the training and tools to implement a modern risk management regime, which would be effective at reducing not just the risks to direct foreign investors but to everyone in that region and the larger world affeced by it. To foster this general longer-term rational risk-management thinking and reconcile it with traditional thinking about Islamic economics has profound peacemaking potential.
Not least in countries where civil society is stunted and would see a way to influence major decisions by means other than suicide bombs. If you can sit on bank boards, input scenario analysis and vote on values that determine investment strategy, why would you engage in violent insurgencies? If Muhammad would approve of the banking system, why not invest as opposed to insurge? If nothing else this would end the debate about overt Western influence
if both The Economist and the Qu’ran agreed that the banking system did not encourage vices.