At the end of last year I offered ten foreign policy predictions for 2009.  The first prediction was about Mexico:

The world’s leading narco state will, unnoticed, dissolve into total chaos destabilising the surrounding region.

In a early January 2009 John Robb suggested that Mexico would be an essential security threat to the United States:

The narco-insurgency in the northern provinces morphs into a national open source insurgency with thousands of small groups all willing to fight/corrupt/intimidate the government. Many, if not most, of these groups will be able to power themselves forward financially due to massive flows of money from black globalization. The result will be a diaspora north to the US to avoid the violence.

Since the beginning of 2009 more than 1,000 people have been killed in drug violence. In 2008 6,290 people were killed, double the 2007 death toll.

Since 1993 the City has been known for the violent deaths of hundreds of women – ‘las muertas de Juárez’ (The dead women of Juárez). According to Amnesty International , since February 2005 more than 370 bodies have been found, and over 400 women were still missing. Most of the cases remain unsolved.

In the next three weeks the Mexican Government is sending up to 5,000 new troops and federal police to the country’s most violent city, Ciudad Juárez , where law and order is on the brink of collapse.

I’ve been in Japan today, speaking at ‘Reforming International Institutions – Meeting the Challenges of the 21st Century’,  a seminar organized by the United Nations University and the British Embassy in Japan.

You can download my talk here (with pictures, references etc) – or the text only is available below the jump. There’s a webcast too.

Headlines:

• It’s going to be a tough year. The financial meltdown has a long way to go, and the downturn is risking turning into a global depression.
• Trade is a bell wether. Protectionist pressures are already on the rise. If they gain traction, take that as a warning of a wider loss of confidence in global institutions.
• The unravelling of global economic imbalances could prove corrosive to the international order. If countries start to devalue to protect exports, expect a tit-for-tat dynamic to kick in.
• Scarcity issues (energy, water, land, food, atmospheric space for emissions) remain the key medium term driver of global change. Commodity prices will spike again as soon as there’s recovery.
• The downturn has stemmed the uncontrolled growth of emissions, but also lessened the chance of a robust global deal on climate.
• Economic bad times could well drive increased conflict. A major new security threat might be the fabled black swan – hitting just when the global immune system is already overloaded.
• If we experience a long crisis (or a chain of interlinked crises), we are likely to see either a significant loss of trust in the system (globalization retreats), or a significant increase in trust (interdependence increases). 
• You need to stretch time horizons to get the latter – shared awareness (joint analysis of risks and challenges), as a basis for shared platforms (loose coalitions of leaders), which can lobby for a shared operating system (a new international institutional architecture).
• 2009 sets a challenging agenda for the G20 (financial reform and economic recovery – but framed by a broader vision on climate, resources, security etc.)…
• …the G8 (caucus of rich countries able to tee up Copenhagen and kick start development assistance if developing countries begin to teeter)…
• …the UN (especially Ban Ki-Moon’s proposed high level ‘friend’s group’ on climate, but also as a fora for getting to grips with scarcity issues)…
• and the Bretton Woods institutions and the WTO (first of all ensuring they keep their heads above water, then looking to ’save globalization from itself’).
• Oh and be ready for the backlash – people are angry and rightfully so, but that may well lead us down some populist blind alleys.

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Last May I wrote about a World Bank scheme to pay Tanzanians to test negative for sexually transmitted infections (a proxy for HIV/AIDS), and about the positive effects on health of Mexico’s Oportunidades conditional cash transfer programme (South Africa’s pension scheme has also had beneficial health impacts, as have programmes to pay US drug users not to inject).

A new study by Rebecca Thornton lends further support to the idea that financial incentives should play a part in HIV prevention. In a randomised trial of over 2,000 Malawians, she gave some participants money in return for testing for HIV and finding out their results. Those receiving the cash were on average twice as likely to turn up to be tested as those left empty-handed. Even pretty small sums, amounting to a tenth of a day’s wage, had a significant effect on the likelihood of getting tested.

Unfortunately, Ms Thornton also found that being tested didn’t have much impact on sexual behaviour (though several other studies have found that knowing you’re HIV-positive makes you less likely to indulge in unsafe sex). Still, cash incentives could be used to persuade the reluctant to adopt other preventative measures, like male circumcision, condom use or, as the World Bank hopes, to find their own ways of staying negative.

H/T Chris Blattman.

Charlie has got some debate going with his ten predictions for 2009, and I’m not going to try to rival it.  But after a year of following food prices unusually closely, I’ve decided to go where even Alex Evans has not gone before in an effort to tell the future: the official US Poultry Outlook Report – December 2008.  And no, this isn’t about avian flu.  It’s about how the global downturn is going to create a rift between increasingly internationalist turkey farmers and isolationist, America-first chicken and egg producers.  Feathers will fly!

Let’s start with chickens (to the initiated, “broilers”).  For the first nine months of last year, production was growing strongly.  But as food prices slumped over the last few months, so did the number of “chick placements” – which I assume is code for “fattening the little critters up in a big shed until they can’t walk”:

Over the last 5 weeks (8 November to 6 December, 2008), the number of chicks placed for growout averaged 7.4 per cent lower than for the same period in 2007. With uncertainties about the domestic and world economies, the trend of year-over-year declines in chick placement is expected to continue well into 2009. With smaller chick placements forecast, the estimates of broiler meat production have been adjusted downward in fourth-quarter 2008 and in the first three quarters of 2009.

Who are we going to blame for this? Foreigners. Unless they like brown meat:

All the uncertainties in the global economy have combined to sharply reduce the demand for broiler exports . . . but declining exports may be slightly mitigated by lower prices for leg quarters, the primary export.

So expect the chicken farming lobby to turn inwards. Their disinterest in foreign affairs will only be compounded by increasing imbalances in the egg market:

Shipments of all shell eggs and egg products in October totaled 17.9 million dozen, down 13 per cent from the previous year. Much of the decline is due to lower shipments to Mexico and Hong Kong.

But it’s all very different on the turkey front. There’s a glut of the damn things – more and more are being put into cold storage – and production is expected to slow  as a result. With supply higher than demand, the U.S. needs to offload large quantities of its national bird. Fortunately, there are proven markets available:

Turkey exports remained very strong in October, totaling 71.8 million pounds, up 36 per cent from the previous year. Much of the increase in October’s turkey exports was due to higher shipments to the largest markets — exports to Mexico, Canada, and the combined China/Hong Kong markets were all up considerably from the previous year.

So that’s good news… but wait a minute! Not only is China propping up the U.S. economy by buying vast quantities of American bonds, but now we discover that it will start underwriting the turkey industry? What if Beijing stopped buying? Even Mexico slapped a temporary ban on birds from some U.S. plants just before Christmas on health grounds.  And last Tuesday Russia demonstrated its resurgent nationalism by slashing its total poultry import quota from the U.S. by 1.25 million metric tons to 952,000 metric tons.  So here’s my first big question for 2009: can the U.S. poultry industry adapt to a multi-polar world?

Next week: a post in which I explain the new world order by tracking trends in the price of tea-leaves.

1. Mexico: The world’s leading narco state will, unnoticed, dissolve into total chaos destabilising the surrounding region.
2. Middle East: February elections in Israel will see Binyamin Netanyahu being voted in while President Mahmoud Ahmadinejad will be voted out in Iranian elections in June.
3. Asia: H5N1 will return with a vengeance.
4. Bosnia: A growing culture clash between conservative Islam and the country’s avowed secularism will result in an increase in violence in the country.
5. Africa: Robert Mugabe will be assassinated.
6. UK: There will be no election in 2009.
7. Turkey: Prime Minister Recep Tayyip Erdogan will abandon further attempts to join the European Union and instead turn East and focus on regional diplomacy.
8. Iraq: Elections will be relatively peaceful in much of the country.
9. Somalia: The US or France will be drawn into a short, intense ground war in the South West of the country.
10. Afghanistan: In May Britain will increase the number of troops in the country. In October a European deal with the Obama administration will see France, Germany and Italy do the same.

* I will happily blog when these predictions are proven wrong.

Ahead of this weekend’s G20 summit, David and I have published a short paper entitled A Bretton Woods II worthy of the name.  Key points:

- The summit is unlikely to be able to live up to its billing.  Leaders do not yet understand the nature of the problem well enough to be able to implement viable solutions.  However, the problem is more fundamental than a simple lack of shared awareness. 

 - History suggests that leaders will only think the unthinkable on institutional reform once the challenge they face has really hit rock bottom. But history also suggests that we are wrong to think that the worst of the crisis is now past, given that many past banking crises have taken five years or more to unravel.

 - Bretton Woods 1 looked across the whole international economic waterfront in 1944, while this weekend’s summit will be much more narrowly focused.  Leaders will make a big mistake if they try and tackle finance in isolation, given the growing impact of resource scarcity, and that 2009 is supposed to see another ambitious global deal – on climate.

 - We need to recalibrate what we expect from globalization through a serious debate about subsidiarity. Where has globalization gone too far, too fast? Where do we need more integration at a global level? These were exactly the questions that preoccupied Keynes in 1933, when he weighed the relative benefits of global versus local across a range of variables.  We need a similar debate today as a precursor to serious international economic reform.

 - Leaders need to extend their horizons in (at least) five directions: onto longer time scales; beyond financial regulation into wider resource scarcity challenges; into other international processes, especially climate; towards grand bargains with emerging powers; and beyond government, to non-governmental networks.

Full version after the jump, or better yet here’s the pdf.

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We are now officially beginning some sort of post-credit crunch global governance feeding frenzy.  We now have the following to look forward to:

- The report of a new High Level Commission on modernisation of the World Bank, chaired by former President of Mexico Ernesto Zedillo;

- A UN General Assembly task force on the global financial system, chaired by Joseph Stiglitz (composition and terms of reference to be announced on 30 October);

- An EU summit on the financial crisis and reform of global financial institutions on 7 November, to prepare for…

- A G20 summit on international financial institution reform in Washington DC on 15 November (though no-one seems to have told the G20 secretariat);

- A UN Financing for Development summit from 29 November to 2 December – it’s been in preparation since last year, but Ban Ki-moon has now suggested turning it into a UN summit on the financial crisis, in NYC rather than Doha as planned (Ban says:

“I strongly believe that holding the summit at the United Nations, the symbol of multilateralism, will lend universal legitimacy to this endeavour and demonstrate a collective will to face this serious global challenge…”)

I make no claim to this being a comprehensive list (and will add to it as I find more baubles to hang on the tree).  But it all invites the question: how much is really going to be achieved through all this pannelling and summitry?  As Eurodad, the civil society network on debt relief, notes on its website:

Too right.  Over the summer, there were no fewer than three summits (FAO; G8: WTO) that claimed in advance that they were riding to the rescue on food prices, and which then failed to deliver anything interesting.  Now it looks like we’re about to do the same on the credit crunch…

Update: Eurodad have produced a helpful FAQ on the ‘Bretton Woods II’ summit – download it here. Thanks to Alex Wilks.

Update 2: David and I have published a briefing paper on the Summit.

If you haven’t read it already, World Bank President Bob Zoellick’s speech on multilateral reform earlier this month is definitely worth a read.  One of best nuggets in it is his call for “a Facebook for multilateral economic diplomacy” – the rationale for which goes like this:

The G-7 is not working.  We need a better group for a different time. The G-20, though valuable, is too unwieldy in moving from discussion to action. We need a core group of Finance Ministers who will assume responsibility for anticipating issues, sharing information and insights, exploring mutual interests, mobilizing efforts to solve problems, and at least managing differences.

For financial and economic cooperation, we should consider a new Steering Group including Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa, and the current G-7. Such a Steering Group would bring together over 70 percent of the world’s GDP, 56 percent of world population, 62 percent of its energy production, the major carbon emitters, the principal development donors, large regional actors, and the primary players in global capital, commodity, and exchange rate markets. 

But this Steering Group would not be a G-14.  We will not create a new world simply by remaking the old.  It should be numberless, flexible, and over time, it could evolve.   Others may be added, especially if their rising influence is matched by a willingness to help shoulder responsibilities.

This new Steering Group should meet and videoconference regularly to foster group responsibility.  The Deputies should have frequent and informal discussions.  An active network of bilateral consultations within and beyond the group will support it.  We need a Facebook for multilateral economic diplomacy.

It’s a timely reminder that there’s no hard and fast rule to say that multilateral cooperation has to revolve around formal multilateral organisations - and especially refreshing to hear this coming from the head of the World Bank.  (And yes, he does have a Facebook page, since you wonder.)

Responses to the financial crisis over the last few weeks seem to bear out Zoellick’s point.  Although multilateral cooperation has been central, multilateral organisations haven’t been: the IMF, for example, has been largely absent from the main action, and while the EU managed in the end to be at the forefront of marshalling a collective response, it was the Council of Ministers – not the Commission – that pulled it all together.

In this light, it’s perhaps ironic that while Gordon Brown has come to be seen as one of the main organisers of this non-organisationally-based but nevertheless fundamentally multilateral crisis response, his stated vision for multilateral reform is very organisationally focussed, what with emphasis on a new Bretton Woods, an enhanced early warning role for the IMF and so on.

Comparisons below:
1. Guangdong (113 million) Germany plus Uganda (3)
2. Henan (99 million) Mexico
3. Shandong (92 million) Philippines
4. Sichuan (87 million) Vietnam
5. Jiangsu (75 million) Egypt
6. Hebei (68 million) Iran
7. Hunan (67 million) France
8. Anhui (65 million) Thailand
9. Hubei (60 million) U.K.
10. Guangxi (49 million) Burma/Myanmar

Brought to you courtesy of the ever excellent Strange Maps

So far, many observers and experts point out, developing countries seem to be holding out quite well amidst the global financial turmoil. In reality the current global financial crisis poses multiple and profound risks to development, which I will briefly outline.

Finance ministers from 24 developing countries (the Group of 24, or ‘G-24’) meeting last Friday at the IMF, noted that:

“many emerging markets and developing economies are not immune to the spillovers of the ongoing global financial crisis”

and that:

“preventing macroeconomic volatility from financial spillovers and sustaining continuous growth were key priorities for developing countries”

See the G-24 public communiqué here.

There are several ways in which the global financial crisis can impact on development. Impacts will be highly country-specific. Key factors include:

1. Cuts in international development aid – Jakaya Kikwete, President of Tanzania and Chairman of the African Union, expressed his ‘deep concern’ about the financial crisis dampening rich countries’ commitment to development aid (see news report here). And for good reason: development aid tends to be strongly pro-cyclical, in other words a nation’s generosity to other nations tends to be proportional to its own good fortunes.
2. Reduced access to international financial capital markets – The impact will likely be bigger for middle-income countries and some emerging markets (excluding China, given it is a super high saver). Much of sub-Saharan Africa had limited access to international private capital to start with, and will therefore not be strongly affected by this.
3. Possible reversals in capital inflows to developing countries – due to the global credit crunch and as investors’ appetite for risk abates.
4. The spread of stock market turbulence to emerging markets – in one day last week, markets in Brazil, Mexico, South Africa and Turkey plunged 10%.
5. Downturn in global demand for developing country exports.
6. Postponement of large investment projects. There is emerging evidence that large investment plans (e.g. in India’s power sector) are being delayed or cancelled as turbulence in capital markets undermine prospects for raising funds.
7. Remittances will be impacted by the economic downturn, as well as inflation and a weak dollar. See a recent news report on how remittances to the Caribbean are being hit.

It is of course unrealistic to expect that developing countries can be wholly insulated from the global financial crisis. However, the one very powerful instrument that rich countries do have at their disposal to help keep development on track is aid. A cutback in aid at this point can have severe impacts, as high food and oil prices justify increases in aid. Aid will be needed for countries with reduced sources of revenue and finance, as social expenditures are typically the first to get cut when fiscal resources tighten. Emergency support should be targeted to countries that are fiscally highly vulnerable (the IMF has identified 22 such countries).

According to the Onion:

ORLANDO, FL—Republican vice presidential nominee Sarah Palin sought to silence those who have criticized her lack of foreign affairs experience Tuesday by announcing plans for a weeklong, 10-nation tour of Walt Disney World’s Epcot.

According to Palin, the trip—her first past Frontierland—will include speaking engagements at Norway’s famous Viking ride, sausages at Germany’s Kaufhaus, and, time permitting, a fact-finding mission to Future World.

“This ambitious trip should finally demonstrate that I am ready to assume the vice presidency, whether by standing in long lines at Morocco’s Tangierine Café or by sitting down face-to-face with Mexico’s Three Caballeros,” Palin announced during a campaign stop outside a Chinese restaurant in Tulsa, OK.

“All of our neighbors deserve good diplomacy, from the Universe of Energy down to the French pavilion.” Palin also promised a visit to the American Adventure exhibit before returning home, adding that she hoped to learn more about her own nation and the diverse peoples within.

Over at the UN in New York, where it’s the annual jamboree that is the General Assembly, Nicolas Sarkozy has been calling on world leaders to hold a summit later this year on building a “regulated capitalism”.  Four thoughts:

1) if this summit were to go ahead, it would mark the continuation of a trend towards head of state / government level summits on specific issues (as opposed to gatherings that cover a whole range of foreign policy issues, like the G8 or the Security Council). Earlier this year heads of government turned out in force for the FAO food summit; last year, Ban Ki-moon got a good turn out for his high level event on climate change at the UN.

But there’s only value in getting heads engaged if a) their involvement is needed in order to join up the dots between different areas of ministerial or department responsibility within their goverments (e.g. cross-sectoral bargaining that involves energy, climate and trade all at once), or b) their political clout is needed to forge a deal.  I’m not sure that either of those conditions applies here – in which case, wouldn’t it make more sense to leave such a summit to finance ministers?

2) Sarkozy also said at a press conference yesterday that “we cannot wait any longer to turn the G8 into the G13 or G14, and to bring in China, India, South Africa, Mexico and Brazil”.  Interesting to see this idea reviving; the scale of the current crisis (‘perfect storm’ etc.) might appear to militate in favour.  But as ever, the big questions are less over who would be around the table and more about what it would do, how it would work and – above all – whether it would be any more effective than the G8 (which hasn’t achieved very much lately).  More on this in a paper I wrote on new global leaders’ forums a while back.

3) While Sarkozy knows he wants a summit, it’s also clear that – so far – he doesn’t have any specific proposals for multilateral action.  You can bet this will cause a frisson or two at Number 10, given that Gordon Brown does have a set of proposals for international financial reform, but so far lacks a coalition to push them.  There might be potential for France and the UK to team up quite effectively here, not least given that Sarkozy will have recognised that without at least one major financial centre involved front and centre, his idea’s dead in the water (n.b in that regard that Sarkozy mooted London as a possible venue for the summit, along with NYC, Paris and Brussels).

4) Whether Brown’s proposals are the right ones to deal with the current crisis is, of course, a separate question.  Looking at them again, the main impression is of the lack of specificity: calling for a “common approach to handling major global market disruptions”, a “clearer, more authoritative watchdog” or “common principles, shared analyses and information and collaborative management of crises” is all very well, but if there was ever a case of the devil being in the detail, this is it.  (As for his calls for a global early warning system for financial crisis – by all means, but is now really the time to be thinking about that?)

It’s good to see that someone’s asking the big questions about long term prevention and looking to facilitate a serious high level conversation about where we go from here, and the UK should certainly get involved and think seriously about offering to host.  But it’s way too soon to be thinking about shared operating systems or even shared platforms at this point: the key tasks now are a) to put out the immediate fire and then b) to build up shared awareness of what’s happened, why, and what we want to achieve as we consider a new financial architecture.

(For explanation of shared operating systems, platforms and awareness, see here.)

Hurricane Gustav has already swept through Haiti, the Dominican Republic and Jamaica. After Cuba, its projected path will take it over the Gulf of Mexico, before arriving on US shores. New Orleans has already begun a mandatory evacuation for coastal districts and parishes.

You can follow preparations for Gustav on the the Red Cross’ Twitter feed.

A wikipedia page for Gustav (2008) was created today and is being regularly updated.

The Eye on the storm blog is also offering a running commentay.

Update 1: The Gustav Information Center has been created for coordinating volunteer knowledge-sharing related to Hurricane Gustav.

Update 2: Predicted route of Gustav has been updated.

Update 3: New predicted route.

Full marks to WWF for their report on virtual water use today, which finds that when imports of virtual water – the water used to grow or manufacture goods that are then imported into the UK, sometimes from severely water-stressed countries – each Briton uses some 4,645 litres, making the UK the sixth largest net importer of water in the world.  Only 38% of the UK’s net water use actually comes from Britain’s own resources, the report adds.  (Press release; report.)

Virtual water’s a handy concept, not least in that it shows up where consumers’ real water impact takes place.  Turning off the tap while brushing one’s teeth is all very well, but if you really want to have an impact, go vegetarian: here’s the amount of water it takes to produce selected foods:

1 kg of potatoes – 500 litres

1 kg of wheat – 900 litres

1 kg of rice – 1,900 litres

1 kg of poultry – 3,500 litres

1 kg of beef – 15,000 litres

(Source: the excellent Atlas of Water. Buy one today.) Agriculture’s easily the world’s largest consumer of water, too: it accounts for 70% of global water use, compared to 20% for industry and 10% for the domestic sector.

In case you wondering, WWF says the top 5 net importers of virtual water are Brazil, Mexico, Japan, China and Italy.  And the top 5 exporters? The USA, Australia, Argentina, Canada and Thailand.  (Sixth is India, where water tables are plummeting.)

Daniel’s a hundred per cent right to call for an end to some of the more stupid measures taken in Afghanistan in the name of counter-narcotics work.  Take aerial spraying off the table? Absolutely. Avoid alienating farmers in order to avoid swelling the insurgents’ ranks?  Sign me up.

But I think we need to go much further than this.  Daniel argues that coalition forces in Afghanistan should focus on:

…arrests and the prosecution of drug lords and their backers in government. Unless these “narcotics entrepreneurs” are targeted, arrested and prosecuted, little will change. 

As he noted yesterday, the FT’s recent leader on this subject agrees with him, arguing that:

…while crop eradication and locking up bad guys may be an important part of addressing the crisis, they are not by themselves a solution. That can only come over years of a sustained and consistent strategy to develop a real market economy which would provide a better livelihood for farmers than the dangerous and volatile drugs business.

That will, it is true, require security and a role for the military. It will mean targeting the middlemen, smugglers and, yes, chemists who operate the infrastructure of the drugs business, hitting their finances and improving co-operation with Afghanistan’s neighbours.

Above all, it will mean that while the small poppy farmer escapes the attentions of the authorities, the big drug barons do not. That demands ending the de facto impunity enjoyed by some Afghans, a move that can be sanctioned by only the president.

I hate to be a sceptic, but, well, I’m a sceptic.  Targeting the big drug lords, the middlemen and smugglers is certainly preferable to targeting small farmers from a development point of view. But it’s still pretty pointless.  Just look at Colombia, where massive resources to the war on drugs have made negligible impact. True, interdiction efforts can influence the street price a bit – maybe even quite significantly, as in the aftermath of the destruction of the Medellin Cartel in 1989 – but the effects never seem to last much beyond a year.  For all the hullabaloo about the war on drugs,  the long term price trend for most illegal narcotics has been downwards. 

What’s more, we all know that this emperor has no clothes.  When I worked in the government, I used to ask the Afghanistan experts I came across what assessment had been made of what effect even a best case scenario on counter-narcotics in Afghanistan would have on the street price of heroin in the UK, or how we could be sure that production wouldn’t just be displaced to Turkmenistan instead.  The answers I got back were never very encouraging.

None of this, of course, is to dispute the underlying point about just how corrosive organised crime is to the legitimacy and effectiveness of states (c.f. Mark’s recent post on Guinea-Bissau, or mine on Italy and Mexico).  But the point is that if we want to halt that process of corrosion, the it’s not Helmand, or even Kabul, that’s the front line.  The real front line is with our policy of Prohibition, and the fantastically profitable economic opportunities that it introduces.

The war on drugs will never, ever be won on the supply side.  And until we figure that out and internalise it in our policies, the margins on illegal drugs will remain astronomical, the incentives for organised crime and insurgent movements will stay irresistible, and states will keep failing. After all, we can all see that Prohibiton in America created and sustained Al Capone.  So which bit about sustaining his inheritors at the global level is it that we don’t get?