Everyone is reeling as a result of the current economic meltdown. The credit crunch has restricted available funds to investors and consumers, which has caused a leftward shift in aggregate demand. This has had a multiplier effect on the financial sector, whose actors are now more reluctant to make direly needed credit available. People cried foul when the TARP was drawn up to “bail out” Wall Street. And then came the cries of victimization from those who had been against it: the auto industry, followed by retailers, and everyone else who could fit on the bandwagon. Only just now are people beginning to recognize the interdependence of the the auto industry, retailers, print media, and the woes on Wall Street. No matter how many fat investment banker fish some of us may like to fry, what sinks Wall Street will sink us all. And as easy as it is to sit back and watch greedy investors reap what they have sown, we would be naive to think that their disintegration won’t affect us as consumers and workers. This stark reality reared its nasty visage in November when more than one half a million Americans lost their jobs. Unemployment rates are now higher than they have been in over a quarter of a century. In light of all this, shrinking growth will continue to worsen before it gets better, as events this week involving the car parts sector and the pharmaceutical sector demonstrate.

As we begin to put these puzzle pieces together, let’s not forget there are people who will feel this shock more profoundly than Wall Street bankers, more profoundly than auto-industry CEOs, more profoundly than the hundreds of thousands of Americans who have lost their jobs in recent months, and even more profoundly than the workers in Chinese factories who will be laid off as Americans curtail purchases of plasma screen TVs: those in the global south. This crisis may have its roots in the sub-prime mortgage fiasco and mortgage-backed securities that led to insolvency in major investment and commercial banking giants like Lehman, Washington Mututal, Wachovia, and Citibank; however, it will have its end with those who struggle to meet their basic needs.

In times of economic insecurity, capital flight hits the developing world first. We’ve already seen this affecting nations like Argentina, who are desperately attempting to make their exports more enticing by reducing export taxes amidst global economic capital flight and falling commodity prices. We are beginning to see even oil-rich countries flounder as energy investments decline.

Facing an even more dire predicament, however,  sub-Saharan Africa nears the most challenging time of year in the fight against hunger. The World Food Programme is estimating some 6.5 million people in southern Africa will go hungry unless the agency can secure desperately needed food staples before April. Zimbabwe is a case in point, with the food shortage exacerbated by a cholera outbreak that has already resulted in the death of more than two thousand.

As we begin to think about the next step in mitigating this crisis, policy should not forget those who will feel the brunt of the crisis in the form of starvation, death by preventable disease, unpotable water, and a rise in grinding poverty. The developing world will not see a return of investors for some time, and relying on the work of NGOs and charitable donations will not be sufficient to prevent a fullscale disaster in Africa and other developing regions in the coming months. A serious commitment is needed to bolster funding and supplies for the WFP and other programs like it until the global economy begins its slow march back to a respectable level of growth, with the understanding that this could be a matter of years.

The crescendo of instability that started in August of this year in the eastern provinces of the Democratic Republic of Congo is alarming. This is the most recent spike of political and social unrest for the DRC in a period of sporadically waxing and waning conflict that commenced in 1996.

The now-deceased dictator Mobutu Sese Seko, who ruled for 32 years, manipulated control of the country’s rich supply of copper and diamonds in a totalitarian regime that fostered widespread violence and social unrest. The excess and corruption of that regime brought the government to its knees, making way for its overthrow in 1997. What ensued was an entanglement of rebel groups backed by neighboring countries’ armed forces struggling for control of the region’s natural resources.

After years of conflict, the country saw democratic elections in 2006. Unfortunately, however, conflict has again peaked, rooted in the struggle for control over natural resources, and compounded by ethnic conflict stemming from neighboring Rwanda’s genocide. All the while, multinational corporations that purchase these resources as part of their raw materials, including copper, gold, diamonds, and coltan, continue to fund the conflict.

Since August, rebel leader Laurent Nkunda has been threatening the rule of President Joseph Kabila. Nkunda has been charged with war crimes and is alleged to be connected with Paul Kagame, president of Rwanda. Eastern Congo is the base for a number of Hutu and Tutsi rebel groups who spilled into the region after the Rwandan genocide, and who have since been vying for control over territory and access to natural resources. Kagame has been accused of supporting Nkunda’s efforts as part of an alliance between the two men that dates back to their collaboration in Rwanda after that country’s genocide in 1994; Kagame denies the accusations. Meanwhile, there have been accusations of the Congolese government supporting Hutu guerrillas, an instigating factor in Nkunda’s activity in the region.

Hundreds of thousands of newly displaced people, in addition to the 850,000 some odd refugees who were previously displaced, are in dire need of food, water, and medical care. Last Monday, the U.N. made its way to the refugee camps around Rutshuru in eastern DRC, only to find them empty. There were reportedly 50,000 displaced individuals living in these camps, which are now completely abandoned. The camps are now believed to have been looted and burned.  The disappearance of these refugees is upsetting, as they are currently cut off from access to critical humanitarian aid.

Nkunda has now agreed to a ceasefire, but his 6,000 troops are otherwise on the brink of taking the capital of North Kivu in that eastern province, as well as the city of Goma. In reaction to the rebel group’s violence, local militias supporting the Congolese government have rallied and attacked Nkunda’s forces in retaliatory efforts. While this fighting is considered minor, it is the beginning of what could be the birth of new violent factions.

Additionally, last week, Congolese government troops are reported to have attacked civilians and raped women in the town of Kiwanja after they moved there in response to an invasion by Nkunda’s rebels. This incident is highly disturbing, indicating war crimes on both sides of the conflict.

UN Peacekeeping forces need to be stepped up if any attempt to curb the violence and displacement of civilians is to be made. The amount of protection the U.N. can provide is naturally limited by the number of forces at its disposal and the resources allocated to addressing this conflict. While U.N. peacekeepers in the DRC currently total close to 17,000, an increase in support in the eastern provinces is critical.

On Friday, representatives of seven African nations met in Nairobi to discuss ways to mitigate further conflict and avoid a repeated instance of violent involvement by factions in neighboring nations. Nkunda was not invited to the conference. His representatives indicated the meeting was inconsequential, and that the only significant meetings would be those that take place between Nkunda himself and the Congolese government. President Kabila maintains that talks with Nkunda would be unconstitutional.

Facts & figures from an afternoon with Pedro Alba, World Bank Director for Argentina, Chile, Paraguay, and Uruguay

I recently attended a talk given by Pedro Alba, WB Director for Argentina and other countries in the Southern Cone. I was pleasantly surprised by Alba’s approach and perspective on economics in the region and the Bank’s more recent development endeavors. It doesn’t hurt that Argentina has, on the whole, been steadily rising out of the smoke from the 2001-2002 economic crisis. Alba’s candor on the Bank’s successes and failures in the region was both enlightening and refreshing.

Since Argentina’s devastating economic collapse in 2001-2002, the country has been on a steady path to economic recovery, averaging between 5-6% growth per year since the crisis. Informal economic activity has declined, whilst job opportunities and investment have increased.

New social programs have been adopted by the Kirchner regime (starting with Néstor and continuing with Cristina). One such example being the Successful Heads of Household (Jefas y Jefes) program, 16% of which is funded by the World Bank. El Plan Nacer, a maternal/infant health care program has been a positive factor in providing needed pre and post-natal services to mothers and infants.

The World Bank has contributed 5.3 billion dollars over the course of 2004 to 2008 via the Country Assisted Strategies (CAS) channel. Along with social programs, funds are directed towards transportation (both national and provincial road and subway projects), water & sanitation projects, agriculture in the non-Pampean regions, alternative energy in rural areas, and education (in the form of lifelong learning initiatives).

One major environmental project in the works is the Maldonado River project, a $127 million flood prevention project aimed at shoring up the river basin near that river and providing flood contingency infrastructure.

The Bank’s projects are notoriously hindered by state bureaucracy in project implementation, with delays of a year or more to break ground on a basic initiative. The Bank approaches projects with the Argentine government via Middle-Income Country (MIC) procedures. One such procedure is the so-called fast disbursing law, which filters funds straight through the Argentine Treasury to reduce red tape and facilitate timely implementation of projects.

The projects are generally repaid on a 15-year repayment plan, with 4% fixed interest rates.

New and emerging risks for projects in Argentina include:

• Questionable interest rates as reported by INDEC (el Instituto Nacional de Estadíticas y Censos), the national census bureau: whilst INDEC reports inflation at a rate of about 8%, the rate is reported by both NGOs and economists at being closer to a startling 25% at this time. Capital flight is actually at the same relative rate at which it rested pre-crisis.
• Market confidence down: seen in both investment and consumer markets.
• Dependence on high commodity prices: Argentina currently enjoys high commodity prices for its exports, particularly in meat and soy products, which grant it a favorable position in that regard; should this trend change, the country could see itself struggling in the way of net trade gains.

From 2009 to 2011, we can expect to see the World Bank approaching the country with the following objectives in mind:

• Targeted investment lending
• Direct support to provinces
• Demand-driven studies and policy notes
• Flexibility in loan design and implementation

Kalma Camp in Sudan is on the brink of more violent activity.

The camp, located in southern Darfur outside the village of Nyala, is the home for some 90,000 internally displaced persons (IDPs). Conflict between IDPs in the camp and the government is longstanding, with one incident culminating in camp residents chasing out government officials after they made an attempted arrest; camp residents subsequently burned down government offices neighboring the camp.

On August 25, 2008, the Sudanese government attacked the camp, resulting in the death of 31 people, 17 of whom were women and children. In retaliation, many of the camp’s residents are organizing themselves in preparation for defensive action in the event that another such occurrence ensues. Though there is no evidence of arms stocking in the camp, residents have voiced they will retaliate violently if the government attacks again.

Kalma is one of few spaces of refuge for those who have fled their villages for mountainous hideaways, later to desert encampments, and finally to refugee camps. If the camps are prone to violence as well, what refuge can these IDPs take?

Refugee camps should be a safe haven for the displaced. They should not be politicized or militarized. The African Union, specifically UNAMID, needs to take steps to preserve the safety of the camps and prevent further government entry and attack on the camps. Furthermore, rationing and food shortages in the camps have led to unrest and will continue to do so if shortages are not addressed. Residents in the camps depend on food from the World Food Programme and have no other means of subsisting. Food scarcity will be a catalyst for militarization in the camps, which can only lead to more suffering for those who have been displaced by the violence in the region.

The Indictment of President Al-Bashir in the International Criminal Court and the International Community’s Responsibility with Regard to Such

On July 14th of this year, the International Criminal Court indicted Sudanese President, Omar Hassan Ahmad al-Bashir for acts of genocide, crimes against humanity, and war crimes in Darfur, Sudan. The targeted ethnic groups include the Fur, Masalit and Zaghawa peoples. More than 5 million Darfuris are displaced by the crisis in the region. A half a million are residing in refugee camps in Chad, and millions more are left in Sudan as internally displaced people (IDPs).

Subsequently, on September 11th of this year, the Sudanese government invoked Article 16 of the Rome Statute establishing the ICC. That article includes a provision that allows the UN Security Council to defer prosecution of an indicted individual for 12 months. This provision is located in Chapter VII of the UN Charter which is of critical importance in holding states accountable for human rights abuses and humanitarian crises such as the events currently unfolding in Darfur. Chapter VII gives the Security Council the power to “maintain or restore international peace and security” if it finds there exists “any threat to the peace, breach of peace or act of aggression.” Although more than 12 UN resolutions have been adopted with respect to Chapter VII of the UN Charter, none have been adequately implemented.

Since invoking this article, Bashir and his government are for the first time showing peaceful initiatives, ostensibly in an effort to convince the ICC to defer judgment for another 12 months. Conveniently, Sudan is scheduled to hold its presidential elections in July 2009, which would allow Bashir enough time to put in a bid for re-election within the 12-month time frame. The UN Security Council has never before invoked this provision, deferring an investigation.

Involved factions

Since 1955, one year before Sudan gained its independence, there has been ongoing conflict between the government of Sudan and the Sudan People’s Liberation Army, a rebel group based in southern Sudan. The conflict itself is multifaceted and is based in varying points of dispute, namely resources, sovereignty, and religion. In 2005, a Comprehensive Peace Agreement was signed between the CPLA and the Sudanese government, the fruit of many laborious years of peace building amongst neighboring nations and the international community.

The SPLA has three options. They can

1. oppose Bashir;
2. oppose the ICC;
3. support Bashir, but take legal steps to challenge the court.

Many people fear that prosecuting Bashir will lead to chaos and further instability.

The government of Sudan is divided into two factions at this time: (1) hardliners who are against Article 16 itself, and who are of the opinion that the indictment is an effort to control Sudan’s internal affairs and that it is a form of neo-colonial interference, and (2) realists who may be inclined to cooperate with the international community.

What are the implications of this invocation of Article 16?

Allowing the deferment of Bashir’s prosecution would send the message to hardliners in the Sudanese government and others who have committed acts of genocide and crimes against humanity that their actions can take place with impunity. If Bashir can get away with genocide, what meaning is left in the saying “never again” which has been circulating in the international community in recent years with respect to the conflict in Darfur? Allowing this deferral will set a dangerous precedent as others who may be indicted will invoke the same provision in an effort to gain impunity.

The ICC has the jurisdiction to hold Bashir accountable for his crimes against humanity and to set an important precedent. Ten to fifteen notorious perpetrators of other such crimes are still enjoying power in the current regime; these people also need to be brought before the court.

A Threat to Peace Building in Darfur?

UNAMID, the United Nations African Union Mission in Darfur, was established in July of 2007 to facilitate peace in Darfur. With approximately $106 million per month in funding and over 20,000 people deployed, it has considerable capacity to influence a mandate of peace in the region. Yet it has failed to make great strides since its inception.

Some have argued that indiciting Bashir would jeopardize peace building efforts in the region; however, since there is no real peace process in place, there is nothing to jeopardize per se. Not indicting Bashir and others in his National Congress Party (NCP) will give them more leverage and would ultimately set the peace process back even further. It is not likely that the Sudanese government will opt for a violent or confrontational response to enforcing this indictment.

Despite this, some counter that granting Bashir limited impunity could be employed as a tactic to achieve peace.

Upcoming Elections and What Comes Next

It will be interesting to witness the outcome of the upcoming elections. There is a possibility that Southern Darfur could move to secede, which may or may not be a potential option for peace in the region.

In any case, justice needs to be depoliticized in the region. An indictment and prosecution of Bashir appears paramount with regard to ICC’s mandate to address crimes against humanity and bring this man to justice.

Thoughts collected from a lecture at the U.N. on the indictment of Bashir, September 18th 2008.

A Lesson in Microcredit

The Working World, a not-for-profit NGO founded by Brendan Martin of New York, is a stunning adventure in microcredit that is simply and successfully revolutionary.

Founded in 2004, the lending enterprise provides small loans to the cooperatively run fábricas tomadas, or recovered factories, in and around Buenos Aires, Argentina.

Coops & Microcredit as Development

Co-ops are a good investment because all the workers have a stake in the loan being successfully repaid and in seeing a positive outcome from the funding. An investment in a workers’ cooperative is a direct investment in human capital. Co-ops themselves spawn new entrepreneurship through trickle-down learning and job skills sharing, even if the co-op itself eventually disappears or goes under. Workers in a co-op directly see the benefits of what they do and have a connection with the administrative and practical decisions made in running their enterprise. And, of course, they have a vested interest in doing a good job and having a successful enterprise.

Microcredit

One of the major challenges of capital formation in co-ops has been getting funds into the co-op; microcredit is a good solution for this as it provides much needed funds to get production up and running with exponential gains on the upshot.

Backdrop to the Fábricas Recuperadas: The Crisis of 2001-2002

Argentina incurred a massive debt under the dictatorial regime of the 1980s, on top of which more debt was compounded in the late 1990s in exchange for implementation of structural adjustment reforms at the hand of the International Monetary Fund. In the late 1990s, under its Convertibility Plan, the Argentine government pegged the peso to the dollar at a rate of one-to-one. This exchange rate was spurious; there were simply not enough dollars to back up the pesos in circulation.

Leading up to the crisis, in the spring of 2001, it became increasingly clear that the government was inching towards default on its debt with the IMF. Subsequently, banks began to see widespread withdrawals of cash from their hands. Market confidence was abysmally low. GDP had dropped by almost 5% in 2001. In September of that year, according to the IMF, the dept-to-GDP ratio rose to 60%. There was a run on the banks in the private sector, with banks seeing US $3.6 billion leave their hands in a mere three days in late November. In kind, the government responded with its corralito, an effective lockdown on withdrawals to a limit of $250 AR pesos/week, hardly enough to keep a middle class family afloat. Restrictions on transfers abroad were implemented to mitigate capital flight. On December 20, 2001, tens of thousands of people took to the streets in protest, vandalizing corporate billboards and building facades, and banging on banks with pots and pans (these actors, many of them homemakers, earned the name cacerolazos for the pots and pans they carried as noisemakers as they marched through the streets). The pinnacle of the protesting took place on December 20 and 21 at the Plaza de Mayo, the plaza in front of the Casa Rosada, the seat of the federal government. President de la Rua was airlifted via helicopter from the Casa Rosada on December 20th, resigning from the presidency. Argentines would see a series of five more presidents over the course of the subsequent few weeks come and go. In January of 2002, the government officially defaulted on its debt and officially ended the Convertibility Plan. Households who weeks prior had life savings at the equivalent of one peso to the dollar saw those savings reduced to a third of their value due to the currency flop and failure. Thousands of middle class workers suddenly found themselves transformed into cartoneros searching for trash on the streets for survival, many of whom continue to do so today. Unemployment hit 25%; by October 2002, close to 58% of the population was below the poverty line.

Tomando las Fábricas

In light of the run on the banks and capital flight as a consequence of businesses taking their money right out of the country, throngs of businesses suddenly shut down, leaving workers with no occupation, no way to produce or provide for their families, pay rent, or feed themselves. Many workers ended up simply sitting at their places of former employment waiting for them to open, or even protecting them from looters and from the business owners themselves coming to sell what they could for capital gain. At a certain point, workers, after various unique and complicated struggles to get utilities turned on and machines up and running, decided to go back to work, with or without the jefes. They began to run things on their own, cooperatively, changing policies, operating democratically–one person/one vote. Many workers went to the government and asked for permission to control the factories, which the government was happy to grant so as to be seen in a favorable light amidst all the chaos. The result was the Law of Expropriation, whereby the government gave control of such factories to the workers for a period of two years. In initial periods, a large portion of the factories’ workforce was actually directed at fixing and maintaining machines that had been looted for their parts or sold by proprietors; many times workers had to take pieces from various machines to make a whole one to get production off the ground.

The Problem of Capital / A Microcredit Solution

Hence the fábricas recuperadas or fábricas tomadas were born. Due to the very nature of their situation, however, the factories were seriously lacking in capital to provide essential raw materials and cover overhead. Workers struggled to scrape together the bare minimum in funds to keep a fraction of machines running and to produce just enough to keep the factory going.

Enter The Working World. By the time TWW came on the scene in 2004, Argentina was already well on the road to recovery, but the worker-run factories were of course still struggling to acquire funding to for raw materials, overhead and startup capital. Since its inception in 2004, TWW has made over 70 loans, starting by granting 10 loans in 2005, 20 in 2006, 40 in 2007, with a goal to grant 80 in 2008. Over 1 million pesos have been loaned to date. The loans are short-term, ranging from six months to a year in length. TWW started on a trial and error basis. They began by making loans for working capital (e.g. for raw materials) as an entry point. They later moved to long-term investment loans (e.g. to fund machinery, new lines of production, infrastructure (utilities), an entirely new factory, etc.)

The Working World’s activities are driven by worker-centered dialogue and planning. The workers are experts in what needs to be done; TWW simply facilitates discussion, probing cooperatives on the whos, whats, whys, hows, and whens of their plans to draw up a schedule and repayment plan that is realistic.

The organization seems to fill a niche in the NGO sector that is actually multiplying productivity and providing capital in a way that is regenerative, fruitful, positive, and with little to no red tape and a small administrative base.

This is truly a lesson in development success.

Thoughts collected from a presentation by TWW’s Brendan Martin hosted by The New School’s Graduate Program in International Affairs.