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misreportedandmisremembered

Bringing context and perspective to the chaos

Roses and Concrete

England in the 18th and 19th century was a beating heart of activity, much of it illicit, some transformative. The launch of the Industrial Revolution was sparked by these and other factors, but a key theme evident throughout it’s history is the redistribution and reallocation of power in ever fewer hands for the sake of increasing efficiency. With that process came a few firm societal divisions: one could work in cities or the country side, each with their associated costs and perils. To work the land required capital for farming and the enclosure of land, offering both a financial and literal barrier to entry that drove many to factory work. The perils of the worker are well-noted, with the depressing reality noted with the Marxist theory defined during the mid-19th century generating enormous support in Sinclair’s turn of the century novel about factory workers in Chicago, The Jungle. But less conceptually prevalent in the mainstream is the acknowledgement of that divide, one that we must choose to cultivate in the countryside or create in the capitals. It prompts one to ask: why not both?

Humans need food, and humans are now urban dwellers, with an estimated 66% of the population forecasted to be living in urban areas by 2050. Urban agriculture, defined as the growth, processing and distribution of food in and around cities to feed local populations, has been touted as the future of agriculture by community planners and skyscraper architects for years. The evidence is all around – community gardens and even growing vegetables in one’s backyard are common practices, some artisanal and others for reasons more fundamental to the food security of a region. But as we look to meet the Sustainable Development Goals laid out at the turn of the century, what sort of role does urban agriculture play in addressing the common problems we face as a species moving into tomorrow?

The short answer is that it’s role is already being played; more than 800M people the world over practice urban agriculture (UA), with a statistically notable percentage of practitioners operating in the developing world. Current UA practices include working on vacant lots, community gardens, balconies, greenhouses and indoor farms, which fit into the categories of controlled environment agriculture (where environmental conditions are controlled; greenhouses and vertical farming are examples) and uncontrolled urban agriculture (where environmental factors are not controlled, as is the case in community gardens and rooftops farms). UA has been identified as a potential solution to address four different sustainable development goals (ending poverty, ending hunger, ensuring sustainable consumption patterns and sustainable resource management), and currently uncontrolled urban agricultural systems are far more prevalent than controlled for predictable reasons of cost and infrastructure limitations.

A 2015 UN Brief outlined that UA would require roughly 1/3 of total urban area to meet the global vegetable consumption of the current urban population. That is substantial – opponents of UA also state that each comes with risks. Uncontrolled environment agriculture can lead to excess nitrogen leaching into water systems or the spread of botanical disease. Controlled environmental agriculture, while less resource intensive than any other form of agriculture, is often simply too cost-intensive to be taken seriously. Building a $248M skyscraper and attempting to generate profits through the sales of cash crops is an idea that would give any accountant a measure of pause.

Policy-types can argue that regular farming also heavily subsidized, and the societal benefits of agriculture can provide non-monetary benefits that governments should support. But the true impediment to it’s growth may be the question of increasing efficiency at a quick enough pace to lower costs. Questions of land rights also emerge: is it efficient for a planner to allocate the finite resource of urban land towards farming, or increasing housing to keep costs lower for a growing population? Any individualized cost-benefit analysis will need to factor in the unknown variables of a changing climate and water stresses as well to understand what the explicit and implicit costs of investing in UA may have.

The Industrial Revolution reshaped the globe when power became concentrated and efficiency paramount. We sit now on the edge of the precipice dug by our predecessors working towards these very objectives. Perhaps letting a little more natural back into our cities would be a step towards reclaiming that old mindset – or perhaps it’s precisely that thinking that got us there in the first place. Either way, only one thing is clear – No rose comes without thorns, whether they grow from windswept fields or concrete jungles.

 

 

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The Importance of Photos of Cats

Every generation has their myths – men and women (mostly men) who have exploited new technologies to create opportunities and processes that change the very nature of society. Henry Ford’s car went beyond reshaping personal transportation, serving to sculpt a landscape with asphalt roads and mass production we now understand to be the norm. Early tech giants, Steve Jobs and Bill Gates, typified the mass consumption of technology through positioning it as a tool for the individual instead of a robotic overlord in waiting. And today’s giants, Mark Zuckerberg and Larry Page, have focused on the value of the internet in building a network, in connecting the world and becoming the “third space” outside of work and home we so need when defining our own identity. With each, access to information and our contacts sits at our fingertips at any connection point. It’s impossible to now imagine a world without connection and networks to the degree we have now.

The first step in the spread of technology to the consumptive mainstream was reducing it’s inherent sci-fi fear factor. The second was making it cool. The third was making it intrinsic in our daily lives. So what comes next? Marketing campaigns batter consumers each day about the value of the next technology, but some focus is also given to the existing problems faced in our new accessible era. Monetization for content developers is still minuscule and targeted advertising has resulted in the ideological silo-ing of consumer bases. Technology in networks has, at times, resulted in the best of humanity being exponentially spread through our family and friends. But such stories are shared with same vigor as memes about cats and sports teams. Technology has not provided a panacea to replace the compassion and trust we must place in each other, nor has increased connection seen this process become an ingrained norm. But is it reasonable to expect that we can simply innovate our way towards a more utopian humanity?

Some believe so – Blockchain, an encrypted ledger recording transactions currently underpinning Bitcoin and one of the top buzzwords of the last 36 months, has been touted as a solution to “automate trust”. A bold claim – the theory goes that the ledger technology will shift networks towards a more decentralized model that tracks content posted and uses an open-data model out of the control of any single party. Users can add new “transactions” to the ledger but it’s history, once entered, cannot be changed, making the entire ledger (record of transactions) public, readable and traceable back to the source. If someone shares dubious content on a network, it can be traced back to the source account. If someone is curious about the source of an advertisement, it can be traced back. In theory, we can all access all information to hold all people accountable all the time.

A privacy argument is often made here – it lacks the context that users who sign up for Facebook agree to terms and conditions stating Facebook owns any content posted and sells it onwards to advertisers. Information revealed will simply be publicly available as opposed to available only to Facebook, who can choose to sell it to anyone they please (hence the targeted advertising seen on networks). Facebook faces a trust deficit unlike that seen since the launch of the network in 2005. A lack of transparency into the giant’s internal operations for decision-making and ad-reviewing, as well as a too-late push away from the stance that Facebook faces no responsibility for the content shared on it’s site, have positioned it as a dubious operator in the eyes of public institutions and public opinion. The question of which fickle party can inflict greater damage remains to be seen.

Different pundits advocate for the use of Blockchain in different ways – some call for an inter-company ledger for user data that can be sold to advertisers, thereby placing an objective value on consumer data currently disproportionately valued by firms and consumers, some call for the creation of an ad-tech protocol using the ledger that is managed by independent actors so consumers can see exactly where content comes from, and others call for a complete re-invention of social networks towards a decentralized model to remove biased actors and ensure data is owned by those who create it.

Within this, a risk emerges – every technology positioned as capable of solving the world’s problems has solved some and created others. The attractiveness of Blockchain stems from the increased transparency embedded, which does have applicability outside of tracking transactions – it’s use as a tool in development to overcome the fallibility of humanity is well-noted. But building a decentralized social network would serve only to remove the current intermediaries, giving more power to content creators. There is no guarantee that power would be used more responsibly, or that decentralization will result in a better-off society. Anarchistic and network theory are abound with examples of self-organization collapsing without a common set of rules of engagement.

But more distinctly, a moral question emerges: has innovating our way past our humanity ever actually worked? Choosing to address the deficits in networks by installing technologies that bypass these flaws and automate our processes seems an expensive alternative that may not solve our actual problem. Social networks were supposed to democratize information, not result in further ideological splitting. Access to information was supposed to make everyone better informed, not differently informed. Ford and Jobs wanted to change the world to suit their visions, and their mythos has shaped the way we view our world. A shame they didn’t seek instead to focus on how pushing their world towards a technological utopia in ours could serve to bring the rest of us with it as well.

Crime and Punishment

War isn’t what it once was. The age of bloody conquests is still upon us, but new instruments of destruction are readily deployed the world over to win territory and inflict losses. Some, like UAVs armed with RPG rounds scouting the deserts of the globe, are focused upon gaining a direct tactical advantage – facilitating the execution of existing strategy. Other tools, more strategic in focus, take a holistic view of conflict as both a militaristic and political exercise wherein groups struggle for power or control. This strategic view can often take a less tangible approach. People don’t need to be killed directly if support for their cause can be eroded, or their cause itself loses it’s sheen. Wars are easier won and less often fought when those who fight lose the hope for a better day.

One such way of accomplishing their means is through the imposition of economic weaponry – tools used to limit a regimes access to global markets to reduce economic access and potentially deter impending risks. One such form is economic sanctions, often deployed against illiberal regimes to force cooperation with international law, contain a threat to peace or condemn actions deemed not in keeping with the values of the world order. But just as a drone is designed to kill with maximum efficiency and minimal external casualties, a sanction must be designed to impede the dangerous actions of a government as effectively as possible without placing an undue burden or strain upon the populace. In other words, a targeted sanction should impede inappropriate actions with maximum efficiency and inflict minimal damages on surrounding humanitarian causes.

Sanctions come in different forms – the two standard designs are comprehensive and targeted. Comprehensive sanctions, or trade embargoes, focus on an entire economy, and create sweeping bans on trade, diplomatic relations and financial activities. Targeted sanctions impose embargoes on specific items or restrictions on peoples or groups, and are more strategic in their design. While each has it’s place, full-scale embargoes are often more effective in toppling regimes or containing military targets. However, they are less readily used given that a full embargo upon an entire national economy requires coordination, and traditional thought dictates that the relative effectiveness of comprehensive sanctions has been eroded by globalization and a world of interconnection. While this is not completely true, such interdependence has made it easier for states to evade sanctions by working under the table with others. Therefore, the trend in recent years has been towards “smart sanctions”, or more targeted approaches to handicapping an opponent.

A 2012 study from the Graduate Institute in Geneva found that only 31% of UN targeted sanctions are deemed “effective” in meeting their objectives, with the deployment of sanctions being more effective in signalling or constraining a set target than actually fueling behavioral change. In fact, sanctions focused on coercement were only shown to be effective 13% of the time, with sanctions focused on targeting key sectors to slow industrial development achieving a 43% success rate. Additionally, secondary sanctions, which focus on the actions of non-native citizens interacting outside of national jurisdiction, have also been shown to be highly effective, but require greater governmental cooperation, as a Chinese citizen doing business with North Korea’s energy sector must now have their whereabouts tracked by American intelligence operatives, requiring the barrier of coordination between Beijing and Washington.

Despite the differentiation of types, the desired impacts of a sanction remain the same: inflict maximum pain with minimal casualties. But as seen above, the impact of just sanctions is limited. Often, pairing embargoes with positive inducements (trade deals or financial support) has a higher success rate, notably in the area of nuclear weapons proliferation and most publicized within the Iran Nuclear deal framework. The removal of sanctions, despite it’s political unpopularity, assured a higher chance of compliance between Iran and the UN Security Council members, a trade-off deemed necessary to achieve the ultimate objective of slowing nuclear proliferation in the Middle East.

This means a great deal of thought must go into the design of sanctions themselves – What constitutes compliance? What is the current baseline of conditions, and what are the desired changes made explicit to all parties? What will the humanitarian impacts and functional consequences of the embargoes be? In this, multiple UN assessment tools exist to determine the exact impacts of any given sanction, and numerous methodologies speak to how they should be derived. But no tool offers the answers the question of just how much damage is acceptable to inflict upon a population if it increases the likelihood of success or topples an enemy regime.

If sanctions are viewed as a tool in arsenal of militaristic or economic weaponry, this answer will drastically differ from one where sanctions are viewed as a pre-combat mechanism to reduce geopolitical tension. But the categorization of the sanction does not change the fact that sanctions themselves are designed using the same methodology drones are. And the mindset of the designer, regardless of the nobility of their intention, is reflected in the strategic approach taken to the new-era of combat. It just so happens our battlefields have shifted to now include boardrooms as well as bombs.

 

A Patchwork Planet

An effective writer understands the need to create empathy between the reader and the story. One must be able to feel themselves in the shoes of another to truly be drawn into the world and the realities outlined therein. And one of the most effective tools a journalist uses to order to foster that empathy is to paint an image of tragedy, or success, or accomplishment, and then explain in greater context why the reader should care. If it’s an issue of corruption in local politics, this tether is easy to hook. But engaging middle-aged Caucasian white collar workers in the depths of tragedy of the current Kenyan and Ethiopian famines is one that requires greater leadership on the part of the writer – one where a reader must be ushered, potentially unsuspectingly, from A (apathetic) to E (engaged).

A common tool is to proclaim that whatever is being discussed is not a local problem, it is a global one – that the issue of the day is one that affects us all. But a single person cannot conceptualize the scope of their small-scale actions having a global compounding impact. Most people feign interest at the concept of compounding interest, therefore it’s not hard to understand why a single grocery trip seems inconsequential in the scheme of things. But groceries, like anything, are an investment with a dollar towards the causes we care about. We make decisions as single-actors every single day about what we like and dislike, and those are reflected in the world. Writers know this – and in order to convince you that what they have to say is worth the limited time and attention we have to care about such things, they have be bundled in a way that makes you care and potentially convinces you of the value of change.

This week, the International Finance Corporation, an investment group within the World Bank that provides capital and financial products to support burgeoning private sectors in the developing world, released a report entitled Climate Investment Opportunities in Emerging Markets. The report, like every other report published by international institutions tasked with promoting international development, takes a favorable view on “climate-smart investments” in developing nations, gauging the investment potential of regions based on abundance of natural resources (ie. how much solar potential does one region have vs. another) and local physical and political infrastructure levels (ie. what are the opportunities that lie in developing the electricity grid? What potential exists for local groups to champion industrial energy efficiency?).

The report goes region by region, framing the opportunities that may fuel growth and greater emergence in the coming years. Here are a few highlights:

  • Sustainable transportation solutions make up almost 60% of green investment potential in Latin America, valued at $1.56T USD in investment opportunities;
  • Infrastructure solutions, whether investment into refurbishments and efficiency upgrades or a focus on building railways and ports, have a concentrated investment potential in Southeast and South Asia, with the region stretching from Bangladesh to the Philippines seeing the majority of it’s $18.2T USD investment potential concentrated in these areas;
  • The greatest opportunity for on-grid and off-grid clean energy growth lies in the African continent, with over $200B in investment potential across sub-Saharan and North Africa;
  • Eastern Europe has over half of their $665B USD investment potential concentrated in new green building development and efficiency upgrades.

Investment potential by region

Figure 1: Investment potential by region and technology/sector (IFC, 2017)

Key themes can be seen therein: the greatest investment potential lies in regions with high levels of industrial activity, developed nations can see the greatest returns from efficiency and infrastructure upgrades, and the majority of the global south would see drastic increases in QOL from greater access to basic resources. The report claims that greater push for climate-smart investments has come following the emissions reduction commitments states made within the Paris Agreement. None of this is groundbreaking or revelatory.

But the IFC’s mandate of private-sector development offers a perspective that shines a light on those who create changes at these levels through a look at where the report’s data was taken: from people and firms. The first step in defining what the investment potential of sustainable infrastructure is in sub-Saharan Africa could be involved drawing a scope – too often, data didn’t exist for the capital cost of investments to be projected at a macro-level. Therefore individual pilot projects or emerging technologies were used to project future impacts. These projects, especially in the case of Sub-Saharan Africa, were developed by entrepreneurs and visionaries striving to create change at a local level. They sought not to save the world, only to make life easier for a few people. And from that investment, those impacted by this change were able to realize their own potential, thus spawning a ripple effect throughout a community.

It is in communities that change occurs. Groups of dedicated individuals, firms who care about their employees, others who see chronic problems and wish to remove the barriers to progress that hold back them or their neighbours. The IFC report outlines the large-scale investment potential for the region, and speaks of a need to unify public and private sector efforts to catalyze change and seize opportunities – but those macro figures refer to changes that will be implemented one at a time, with each action contributing towards a target and progressing towards a milestone we have all collectively agreed is in our best interests. We act together not because we must, but because we can – such is the nature of empathy when we feel we are in a position to make better the lives of those we love.

If each person was entirely rational, no writer would ever need to convince us to care. But the work of Keynes and Laffer does not inspire the same emotion as that of Fitzgerald, the same pull as that of Hemingway, the same spiral into imaginative fantasy as that of Tolkien. We are emotional, subjective and often irrational – and therefore have a capacity in us to adapt, to create and to drive change for the good of others that is not always apparent in forecasted trends and modelling. We vote with our wallets, but we engage with our humanity. And even when discussing the investment potential of solar energy in the sprawl surrounding Kampala, a seemingly global problem with impacts with cannot conceptualize, when we can see the faces of the children reading their schoolbooks at night time, it feels an awful lot less like sacrifice and more like we are driving forward the stories of change in a community we care about. And any community, global or local, that you care to participate in is one where you can affect change. And if that’s not engaging, well – I’m not sure what is.

Read the report here: http://www.ifc.org/wps/wcm/connect/51183b2d-c82e-443e-bb9b-68d9572dd48d/3503-IFC-Climate_Investment_Opportunity-Report-Dec-FINAL.pdf?MOD=AJPERES

Funding the Revolution

Everything is relative. In the realm of financial matters, this extends to poverty – for some, poverty is equated to starvation. For others, it constitutes an inability to live a certain lifestyle. But poverty can exist beyond the simple realm of people and money, extending to corporations and finite resources. And within the cleantech industry, increasing the access to capital of one is associated with reducing energy poverty within another.

Access to funding for clean technology firms, in this case focusing on clean energy technology developers and providers, has gone through peaks and valleys in the 21st century. A venture-capital darling as recently as 2006, clean energy attracted $1.75B USD in the first year of it’s gold rush, fueled by rising fossil fuel prices and increased awareness of environmental concerns. But within five years, investment into clean energy had taken a steep nosedive, with over half of the $25B USD in investment accrued in investment having been lost. As with any investment darling, clean energy fell victim of a shifting climate where, amongst other factors, natural gas prices plunged and the cheap credit available before the 2008 crash dried up.

But an argument can be made that clean energy was never an appropriate investment vehicle for venture capital in the first place. Venture capital firms do not specialize in technologies with high capital requirements, long lead times for development and that are generally non-competitive in large-scale commodity markets when deployed at current scale – all of which readily describe firms within clean energy technology sector. VC should instead focus on investment into other cleantech avenues, such as software solutions or medical innovations.

So what does this mean for investment into clean energy? Surely the entire industry charged with saving the world from the smog of a fossil fuel future cannot be written off as a low-grade investment. The reality is that alternative funding models do exist; public sector capital does not possess the time or capital constraints imposed upon VCs, and may be better suited for patience as development occurs.

Venture capital firms may also fail to provide the additional supports required by any start-up; building capacity and providing access to resources is just as crucial to effective commercialization and scaling as access to cheap capital, and corporations who purchase individual firms and their proprietary technologies can provide both access to capital and capacity-development services. Outright acquisition does undermine the notion of the start-up, though not of developing the clean energy technology sector as a whole; a trade-off that may be acceptable for some.

A final model is for governments to collaboratively partner with private-sector firms, or provide supporting services that create more attractive investment vehicles for VCs. Lead time for technology development can be shrunk through capacity-building and investment directed into research, much the same as high-capital requirements can be leveraged into development projects that increase valuations and draw additional attention from investors.

Much like the energy system itself, any solution developed will require a mix of partners to supply capital and push to generate the sought-after demand. Otherwise, if relegated to the governance of the market, the clean energy sector may find itself in the same trap as it is attempting to solve: one where poverty is exacerbated by poor policy management. And it is unlikely that the degree to which that poverty is relative will matter to those involved.

Reference: Gaddy, Sivaram & O’Sullivan, 2016. Venture Capital and Cleantech: The Wrong Model for Clean Energy Innovation. MIT Energy Initiative. Cambridge, MA. Massachusetts Institute of Technology. 

Going with the flow

Few things are as pervasive in modern business than the spread of pesky buzzwords. Shifting paradigms and incorporating synergy have transcended the boardroom to the bar-room in cartoons, eliciting snorts of derision from those wearing loosened ties. Today’s financial industry has a similar buzzword, save it brings forth dread behind the smirks of derision: unbundling, referring to the individualization of banking services within the sector by multiple firms that is chipping away at the bank’s ancient monopoly on all money matters.

Two trends are serving to disrupt major banks in modern markets: financial technology start-ups (fintech firms), and increased levels of regulation since the Great Recession. Specialist fintech startups have branched out since their inception, and now offer competitive and convenient money transfer services, personal loans, investment options and financial advice, leaving the banks with exclusive market share on only lower-margin services. Increased regulatory burdens, including Dodd-Frank and Basel III, have placed requirements that banks carry greater capital reserves to reduce their risk of solvency, thereby again limiting profitability through a restriction on access to liquid investment capital.

Banks are split on how to view fintech firms: some see them as a disruptive force capable of eradicating banking as an industry, and others view them as a temporary blip that still require bank accounts to be effective, thereby making the great ones potential partners and the pesky ones in need of greater alignment. But the reality remains that fintech firms have had unprecedented success, and regulatory burdens will not fade fast. So the role of a bank must either evolve, or pray that the optimist at Goldman Sachs is somehow the only sane one in the room. Evolution seems more likely.

One idea that has been floated is regulating banks as utilities – a fear that banks would once again fail and monetary stimulus had gone too far in the Great Recession saw the re-emergence of the theory that tougher regulations limiting profitability would increase the total utility of banks to the public. The argument emerges that banks are too integral to daily life to exist without and, much like energy or water, must therein be prevented from failing through regulatory means. In theory, regulations that impose capital controls could be tightened to create an industry that maintained financial infrastructure non-profitably, meaning it would be as a public service. Typically utilities are government-owned or heavily subsidized due to carrying high-debt loads. Some may argue that another bailout like that of 2008 would actually technically fill that definition. This is wrong – receiving bailouts does not make one a utility. But systemically receiving them whenever they are needed and being prevented from failure, that just might.

The direct impact of this would be reducing banks to the role of financial intermediation (converting assets to liabilities and vice versa) and little else. As this is a core function, it should be heavily regulated. And it is. In fact, intermediation is the very basis of modern banking, and is subject to all regulations therein. But the concept of limiting banks to this core role, and mandating a fortification of their balance sheets with substantial surpluses of cash, is the basis of the utility conversation, one which provokes several eyebrow-raising questions.

Utilities often function as natural monopolies in a set region, given their need to develop infrastructure within a defined territory. Would banks be subject to territorial borders or set offerings of specific financial products? Would they be offered territorial protection from competitors? Requiring banks to hold massive capital amounts is only just if competitiveness within their region is guaranteed, lest individual firms be unable to spend the revenue they accrue. Additionally, forcing banks to sell a set product mix would limit their future financial competitiveness and make them less responsive to innovations, thereby reducing their desirability to clients. This will also hurt the competitiveness of firms.

None of this, of course, includes the vast political fallout such an designation would yield, ranging from the need to abandon free market principles to the forcible drawing of boundaries for one industry within the United States. Such a move has no precedent, and likely never will. But a move towards the median may be in play – existing regulations have imposed stricter capital requirements and developed flusher balance sheets, and that may limit growth moving forward. And a designation as a public utility could have positive impacts for the valuation of smaller banks, given the perception of greater consistency and stability as an investment vehicle a utility would have over a small regional financial institution.

The concept of regulating banks like utilities will likely stick around the fringes of mainstream debate until one of two scenarios occurs: either banks survive another Recession without being bailed out (current interest rates make that questionable), or fintech start-ups devour enough market share that it happens accidentally. If the latter ends up the case, it may be the banks who beg for a buzzwordy-spin on designation as opposed to the other way around.

 

Square Peg, Round Hole

Any good puzzle is built upon the notion that the correct construction and alignment of key components will result in a whole, either static or dynamic, that can perform a function the individual pieces could not. For some, it is the creation of an image. For others, it is the assembly of an engine capable of generating power. Importantly, one can have all the individual pieces to a puzzle and attempt to assemble it in other ways – puzzle pieces can be forced together to attach in ways other than what they were originally designed for. But in a dynamic instead of a static system, for example an engine designed to operate at full capacity without an ability to cool itself, a dynamic puzzle mis-assembled can have disastrous consequences. The intentions with which it was constructed, and the initial theories about its capacity to run itself cease to be important when the engine begins overheating and exploding, causing real damage to real people.

Churchill’s claim of democracy being the worst form of government (save for the others that have been tried) is well-publicized. Less known is that he prefaced this statement, made to the House of Commons in 1947, with “No one pretends that democracy is perfect or all-wise”. Democratic systems rely upon being governed by the will and choices of those elected to represent the people, but in the reality we exist in, it is not all the people who wish for the same outcomes. And the notion of liberal democracy is equally context-dependent – if the people do not wish to have a society built upon liberal values, choosing instead secularity or familial ties, then by it’s very definition liberal democracy is not what will be chosen.

Cut to the Arab World. A previous post has documented the notion of Islamic Exceptionalism, built upon the idea that Islam is different. With political parties and public opinion often leaning towards the implementation of Sharia Law as the law of the land and a view that the laws of the Koran are constitutional in nature, it is undeniable that the laws of Islamic faith are often intertwined with those of the state. Parties in current democracies, including the Muslim Brotherhood, are defined as Islamist, wherein a platform is built upon the idea of forming an Islamic state and being policed by Islamist militia groups. This post is not claim that democracy in the Islamic world is impossible, nor to claim that Islamic parties are incapable of being effective at holding elected office (see Tunisia and Morocco). But it does ask a question: if the majority of situations in which a system is implemented result in a greater than normal failure rates (or at least a longer, less-clear road to success), what is an alternative that could feasibly function more effectively in this context?

The first step to understanding what system would work is to better understand the context in which our solution will be implemented – what do the people living in Islamic nations hold as values? For this, we can look to two structures: Maslow’s Hierarchy of Needs and the World Values Index, which is categorized along the same structures as the former. The strongest instances of survival values (emphasis on physical and economic security, paired with low levels of trust) are found in Islamic states. The structure of the World Values Index Questionnaires is such that respondent data is placed upon a spectrum wherein survival values are at the opposite end from self-expression values. But this does not mean they are opposites – only that an individual concerned with the physical safety of their children and their families is perhaps otherwise preoccupied to be dealing with concerns around gender roles in society. Islamic nations also scored highly on holding traditional values (prioritizing family units and traditionalism, again indicators of low trust levels) over more liberal ideologies. The intertwining of Islam holds an influence here: institutional faith that may be lacking in the government or judiciary might otherwise be placed in religious institutions, given that at least one can be certain every adherent happens to be reading the same text.

Now if those are the values held by the people, what are the examples of effective governance that have both improved their livelihoods and held true to those beliefs? A few exist in unlikely places – Afghanistan, Somalia and Iraq. The Balkh province of Afghanistan, Iraqi Kurdistan and Somalia’s region of Somaliland are each examples of regions with higher than average levels of security, public infrastructure and even examples of democracy. Each region holds lower than average statistics for child mortality, school enrollment and access to clean drinking water. It is tempting to place these regions in a different standard due to geographical factors, but these regions all hold other similarities as well: Leaders have risen from within their communities, meaning they are trusted. Because of their local ties (often ethnic or familial), they lack federal ambitions, ensuring they plan for their communities for the long-term as they intend to remain there. This results in a preference for institutions, such as formal taxation, over looting and bribery. Another key success factor is how these governments make decisions – often informally, through collaboration and discussion within their communities. Coercion and co-optation are commonplace, but free press and political opposition are typically tolerated.

Contrast this with an American attempt to install a system in 2010 after evicting the Taliban from the Afghani province of Helmland. Upon the Americans selecting a new district governor and funding local services, the system still failed, primarily due to incompetence by bureaucratic officials. But another key indicator emerges: a lack of trust amongst the populace. Had the governor been one of the people, he may have been given time to fail and learn from his mistakes. Instead, because of mistrust upon entering office, he lacked public support for his initiatives and was forced to turn to more traditional tactics to push forward his agenda. Contrast it again with a more eyebrow-raising example: regions taken by the Taliban have reported of communities being governed rather than ruled over. In return for occupation and adhernence to Islamist principles, the militia provides access to clean drinking water, an education system and protection from other local militias. An anarchic system ruled over by local warlords? Without a doubt. But in a region where survival is not guaranteed and mistrust is more rampant than anywhere else in the world, one cannot afford to be picky about who is protecting your family if the cost can be bore.

Addressing these issues is no small task. Local or regional leaders are not a panacea – in fact they often present their own risks – but people living under anarchy are safer if living under a stationary rather than a roving ruler. To begin addressing the systemic issues that exist within the Islamic world, one must first acknowledge the context: democracy only functions if the people share the values of their leaders and trust them. Supplanting liberal democracy a-la-carte fails on both counts. A more effective approach could be the promotion of decentralization and regional leadership. The lines drawn on the map of the Middle East by the Sykes-Picot treaty have only exacerbated existing issues, and dealing directly with regional actors has proven to be a more effective solution in the past – rebel groups are often recruited by Western armies to fight alongside them against a shared enemy. Kurdistan, the Balkh and Somaliland have proven invaluable to fighting ISIS, the Taliban and Al Shabab. Pulling away foreign aid, or redirecting it for greater efficiency, may also prove wise – governments supported by foreign aid consistently rank as less trusted amongst their citizens given that power structures are then typically centralized within national-level governments instead of trickling down. But a dynamic system, with this many moving parts, will require a defter hand than a few simple fixes. But the way the pieces have been assembled thus far has cost lives – it’s time to start thinking less about what it looks like and more about how it will actually work.

Make Taxes Sexy Again

Only two things in life are constant: death and taxes. And while the concept of death and mortality has made many an author and poet a rich man (speaking relative to the average poet of course), very rarely are great works composed about the intrigue and humanity of the modern tax system. Even when the two are combined, never has a prose been eloquently penned regarding the injustice of the Estate tax imposed upon the transfer of property rights whenever a land holder so thoughtlessly expires.

Some may ascribe the lack of interest in standardized methods of taxation as evidence that they are inherently boring systems – not so. The very creation of a tax itself, in which a charge is imposed upon a consumer to acquire a capital pool used to fund other projects, is a fascinating concept: What should be taxed? How high should any given tax be? What should the money, once acquired, be used for? How can this system, seemingly designed to be corrupted, circumvent the inevitable issue of sticky-fingered bureaucratic interests? The answer is, as with all things, both enormously subjective and fiendishly complicated.

The basics: A tax is a levy imposed to gather money to fund public expenditures, and often defined by the fact that not paying this charge is punishable by law. Taxes are often issued by a governing body, typically though not always a legitimate government. Taxes can be either direct (sent directly to a governing body) or indirect (gathered through an intermediary, like paying a 15% levy on groceries purchased at the shops). Taxes can be charged as a flat percentage of the cost of goods purchased, or can vary based upon income levels. Because the money gathered in taxation is typically used to fund projects that contribute value to the community as a whole (maintaining sewage infrastructure, building new roads, building power lines, etc.), almost every governing body imposes taxes of one form or another on a segment of their population.

Taxation gets more complicated with scale: with multiple layers of government each setting their own priorities, explicit systems of taxation are needed to ensure each level of government is able to fund their efforts without too forcefully pillaging the earnings of good folk and giving everyone a headache. Even just focusing on the taxation of goods and services (ignoring property, income and payroll taxes, as well as tariffs), complexity is abound; Value Added Taxes (VAT) creates a system that applies the value of a sales tax (a set rate of X%) to all activities that create value. An example is if a baker imports fruit, bakes it into a pie and resells those pies, the VAT they will need to pay will be everything they have earned in the charging of X% (output tax) minus everything they have already paid (input tax), since the rate of X% was imposed in every step of the process from import tariffs to the purchase of other ingredients to the sale of the pie itself.

Nuances exist: some may prefer a sales tax, which simply imposes a tax on the final sale of retail goods, often excluding core essentials such as food and energy. A sales tax is often divined hand-in-hand with an income tax system, as it can be used to piece together government revenues and provide tax breaks where they may otherwise be required. Taxes for importing goods also vary, as they may consist of excises (an indirect tax directly tied to value, often of luxury items) or tariffs (a simple charge for the movement of goods through a political border).

While these differences may seem trivial, it is in these shades and margins of perpetual grey that economies live and die. Free trade zones are created to circumvent the need for tariffs, while customs unions simply seek to impose the same tariffs and quotas on all the members of cet union. For an image of sheer complexity, look to India, which ranked 157th on the global ease of doing business scale as recently as last year. Central, state and municipal governments not only imposed their own dizzying arrays of charges, but also imposed tariffs to cross state lines that led to production hold-ups that would have sent Taiichi Ohno crawling home on his knees in tears. Until, that is, the Modi administration successfully passed a reform for one simple standardized GST (a form of VAT) that was simpler and taxed firms only on the value directly added to a product as opposed to the entire value of the good. The simple act of simplifying the tax code is estimated to boost national growth by 1-2%, and will serve to centralize fiscal policy within India, no small feat when looking to the land of bold colours and bolder castes.

So while there are few odes towards the beauty and bounty of the modern tax system, fret not: it is not the fault of taxes that we all must pay them anymore than it is the fault of death that we must die. Instead, aim to gaze in awe and wonderment at the complexity of modern tax systems and their capacity to fuel or hinder economic growth. And if you focus just hard enough, you may even forget that the interest they ask for has little to anything to do with whether or not the topic interests you at all.

Sophie’s Choice

War illuminates the best and worst of humanity. But even in the most difficult of times, our natural desire for structure and a rules-based order is evident. The Geneva Conventions define the rules of the battlefield, with the final treaty negotiated in 1949, and outlines the basic rights of prisoners, establishes protections for the wounded and sick, and for civilians trapped within a war-zone. A testament to the universality of humanity is that these treaties have been ratified, either fully or conditionally, in 196 countries. Yet these norms are only effective if enforced. And rarely are the norms of warfare enforced when battles see the guerilla tactic of child recruitment as a viable option for victory.

Despite the recruitment of children under 15 being prohibited under both the Geneva Convention and the UN Convention on the Rights of the Child, as well as protections being offered in a myriad of legal and international resolutions, there are at least 250,000 child soldiers currently engaged in conflicts across almost 20 different nations. Because children are vulnerable to intimidation, violence and psychological manipulation, their training undergone consists of physical violence and ideological indoctrination. Infractions are punished and youth are forcibly desensitized to violence. There are countless horror stories of children as young as eight or nine being forced to commit atrocities through fear of death or beatings by commandants, who are themselves often child soldiers whose brutality has seen them rise through the ranks of their militias.

Most international law treats children in war-zones as innocent civilians, with the understanding that children have no place on the front lines of a battlefield. Soldiers who encounter and face child soldiers are given guidelines as to how they should be interrogated, demobilized and helped in any way possible. But this ignores the deeply disturbing possibility that a solider or peacekeeper may be faced with the horrifying decision wherein, faced by a child holding an assault rifle to his chest, he must choose to kill or be killed. In 2000, a group of peacekeepers were taken hostage in Angola by a group of child militants, with one peacekeeper killed and eleven others injured in a rescue attempt. Soldiers who are forced to act often suffer crippling psychological wounds and many have committed suicide rather than continue to be tortured by the moral implications of murdering a brainwashed child. Earlier this year, Canada became the first nation to explicitly outline a protocol for encountering an active militant under the age of fifteen on the battlefield.

In this, Canada is to be lauded for doing what is right – soldiers in combat face impossible decisions and, without rules or orders to fall back on, must act within their own instincts for self-preservation lest they themselves never come home. Creating a guideline ensures that a soldier who must act can hopefully maintain a sense of their own humanity in the face of trauma. The doctrine also goes beyond the point of confrontation, offering a holistic approach to combating child soldiers, and was written in partnership with the Child Soldiers Initiative, an institute founded by former UN peacekeeper and Canadian Senator Gen. Romeo Dallaire. The doctrine states that military intelligence should map out the presence and patterns of child soldiers in the area to avoid conflict whenever possible, and that soldiers entering these war zones should be trained to prepare them for such encounters and psychologically assessed upon their return.

Human rights groups are aware of the sensitivity of this topic and have, for the most part, shown understanding. They view the doctrine as attempting to strike a balance between treating children as innocents, as outlined in international agreements, and recognizing the realities of combat. After all, it is not the fault of the soldier that the rifle aimed at him is being steadied by the hand of a ten year old versus a twenty five year old. By recognizing that the reality of warfare often sees internationally recognized norms thrown out the window in favor of whatever competitive advantage can be sought, governments can go a long way towards creating rules that maintain the humanity of a soldier when every rule and structure fails to prepare them for the horrors of war.

 

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