Annual Christmas Letter

Dear Friends,                                                                                                           December 8, 2010

Seasons Greetings. I hope that it has been a good year for you and those you love. It has been for me, but it remains a troubled time for western economies and for those parts of the world in which we have militarily involved ourselves and in a few in which we haven’t. Here are the highlights of my year. You can read my more extensive comments on my travels, the economy, and other things that have interested me at

My first trip of the year, as usual, was to Grand Cayman Island for the quarterly board meeting of the Cayman Islands Monetary Authority ( My trip there for the May board meeting was my last. Although I was reappointed to the Board for a third, three-year term, I resigned during the summer effective the end of this year. I have good memories and some lasting friends from the experience (Richard Rahn, Tim Ridley, Jane Wareham, and Bill and Patricia Gilmore).

My second trip of the year was to Nairobi, Kenya for the IMF to continue my technical assistance to the Central Bank of Kenya (CBK) on how to improve its formulation and implementation of monetary policy. But this year was very special because I brought my 16-year-old grandson Bryce with me. It was Easter break for him and the CBK was closed from Good Friday through Monday, which gave us a perfect opportunity to drive to the Masia Mara game reserve near the Tanzania boarder for three days and two nights. This added some memorable pictures to my collection, which you can see on my Facebook pages.

The spring also included some fun domestic trips. My long time friend Jim Roumasset and I went to Boston at the end of April for Peter Diamond’s grand retirement party at MIT. Jim and I had had several courses from Diamond at UC Berkeley in the mid 60s. Subsequently Diamond shared this year’s Nobel Prize in Economics. Our Congress is still trying to figure out if he is qualified to be on the Board of Governors of the Federal Reserve. In mid May I flew out to my hometown of Bakersfield for my 50th high school reunion and to celebrate my shared birthday with my dad (what a birthday present he got when I was born).

In July Ito joined me for a trip to Robert Mundell’s annual gathering of economist at his home near Sienna, Italy. We stopped in London to visit Ito’s niece and in Florence to sightsee. We made friends with Bill Middendorf and his daughter Frances, who are both fascinating and enjoyable people.

In early September I was sitting in my gazebo reading about the collapse of Kabulbank, Afghanistan’s largest bank, when the IMF called to ask if I could join the mission leaving that evening for Kabul to help the authorities manage the Kabulbank crisis and to negotiate a new program with the IMF. It was an intense visit with a great IMF team providing little sleep. I traveled from Kabul on to Juba, Southern Sudan (via Dubai and Nairobi), which I did again after returning to Kabul a month later October – November). You can read about Kabulbank in the NYT or Washington Post. I continue to advise the Central Bank of Iraq from afar for the IMF.

I met with Southern Sudanese officials four times this year, once in Nairobi (June) and three times in Juba (July, September and November) after giving up my determination not to go there. As their independence referendum in January gets closer they are paying more and more attention to the issues we (Deloitte/USAID) are advising on (setting up a new post independence central bank and issuing and managing a new currency). On our last visit (November) we were finally meeting with the actual decision makers and we are hoping to convince them to adopt currency board rules for their new currency.

Between my September and November trips to Kabul/Juba, I also managed to attend my nephew Scott Naninga’s wedding in Santa Rosa California, and visit Daylin and Brandon and my grandkids in North Bend, WA and Vancouver, WA while on my way to the Mont Pelerin Society meetings in Sidney, Australia, all in October.

In mid November while I was in Juba my father tripped and fell and sprained his shoulder in Bakersfield and for a few days I feared that I would have to cancel another Thanksgiving dinner, but he is doing fine. My final trip of the year will be to Paris Dec 9-12 for a conference on “The International Monetary System: Old And New Debates,” to discuss the SDR as an international reserve asset.

Ito continues to draw/paint, play the piano and violin, and write while searching for the cure to cancer on the frontiers of molecular biology research at the National Cancer Institute in Fredrick Maryland, thus providing some stability and continuity to the family. So life at home is good when I am there.

Best wishes,


Return to Juba

Greetings from Juba, Southern Sudan

I am back in Juba for the third time since July continuing to discuss with various decision makers monetary policy regime options and negotiating positions with the North for dividing monetary assets and liabilities of the Central Bank of Sudan when the South becomes independent next year, and preparations for establishing a new central bank.

My residence in Afex Camp by the Nile continues to improve and is almost approaching what you could call, African adjusted, nice. The main paths from our bungalows to the open air dinning area by the Nile have been improved with relatively fine gravel, which lets the water drain when it rains and keeps the dust down when it doesn’t. Some quit attractive gardens have been planted on either side of some of these paths. The dinning pavilion, as before, has a high ceiling with ceiling fans that attempt to keep the insect kingdom from invading our food and faces. Its view of the Nile 10 meters away is as lovely as ever.

A unique feature of our dinning area is that everything is covered with saran wrap (plates, glasses, flat ware and of course the food) in order to keep the jungle creatures at bay. It seems to work well and dinners are quite pleasant. Next to our dinning pavilion is an open air (but also covered) bar that would be the envy of any such hang out. I have never had the time to sit there and enjoy it but it is nice to know that it is there.

My two room plus bathroom and toilet room bungalow is in fact quite nice as well, dramatically better, in fact, than my rooms in the IMF guesthouse in Kabul from which I have just come. On this visit I am staying in Zambia 2. On previous visits I stayed in Sudan 1 and Niger 1. My apartment is well air-conditioned and the mosquito net over my bed has no holes. It even has a TV with satellite station access (I am told as I have never tried to turn it on), and Internet access without which I really would feel deprived and isolated.

The evening of my arrival, the Deloitte project manager (my boss) called to say that the North South negotiators had just come to an agreement in Khartoum on the division of the assets and liabilities of the central bank (the currency and the assets that back it) between the North and South in preparations for the South’s independence next year (referendum is January 9 and independence day is scheduled to be July 9th).  This was one of the topics I came to advise on so this was quite a surprise. The project manager was trying to arrange for me to fly up to Khartoum the next day to review what was going on, but had to give up as my Sudanese visa had been stamped in Juba when I arrived and thus would be unacceptable in the North. Not only would they not permit me entry, he learned, but they would not let me return to the South (Juba) either. The next day while waiting for the new agreement to be faxed or emailed to us, we learned that none of it was true—just another one of the rumors that circulated from time to time. This was an adrenaline stimulating start to my visit.

The Great Game: Afghanistan

I returned home from Kabul and Juba last week to three
nights of six one-act plays each evening by twelve playwrights at the
Shakespeare Theater under the title “The Great Game: Afghanistan.” I just can’t
get away from it. I landed at 2:00 Wednesday afternoon and at 7:30 pm the same
day was watching actors play British troops in Afghanistan at the turn of the
century. The second evening of one acts covered to Soviet occupation era and
the final evening the American occupation, which is to say the current era.

“The Great Game,” the plays, isn’t real history. The authors
knew what they wanted to say about “history” from today’s perspective, but it
rings true to me. Basically the large message is that Afghanistan is a complex
place ungovernable by foreigners and no one seems to learn that. The British
ruled it for 90 years then failed, the Soviets for a decade then failed and we
have been at it for almost as long (nine years) and are failing. We did not
really go there in order to rule as did the British or the Russians, but we have
been trying none-the-less to impose our way of doing things, enlightened as
they are, on a reluctant Afghan population. No one seems to have learned the
lessons of their predecessors. The viewing of these plays was very painful at
many levels.

Many of the episodes invite the audience to see Afghanistan’s
many invasions from an Afghan perspective. In the second episode of the first
evening – the British period from 1842-1930—four frightened British Army
buglers looking into the dark for enemies are approached by an Afghan of some
wit. They demand of him “Stop! Who are you? And why are you here?” He stares
intensely back at them and says: “The real question is who are you and why are
you here?”

The opening play of the second evening—the Soviet period
from 1979 – 1989—presents the welcoming speech to his troops by a new Soviet
commander in 1987. He sets out the rather hapless goals for continued Soviet
occupation of Afghanistan that reflect the emptiness and futility of the
undertaking. The next scene is a somewhat more upbeat speech by his Soviet predecessor
as he takes command two years earlier in 1985. This is followed by the opening
addresses of earlier commanders in 1984 and 1982, each more ambitious and
upbeat than the previous (i.e. later) one. The goals of building schools and hospitals
etc., sound remarkably like American goals twenty years later.

The third and final evening—the American period from 2001 –
20??—ended with an American solder watching TV in the middle of the night when
his wife asks him to please come to bed. An intense exchange ensues in which he
speaks of the need to return and protect poor Afghan children from the terrors
of Taliban oppression and his wife speaks of the need for him to look his own
child in the eyes and engage him. This is not just or even one of the many
collateral damages of war politicians too easily and readily forget when
sending our young men to far off wars. This young man suffers deeper problems
having nothing to do with this or any other war. Blaming his dysfunction on the
war is rather like blaming Jimmy McNulty’s neglect of his family to his all
consuming battle against crime on crime in “The Wire.”  There, I found another chance to plug TV’s best series of the last decade.

Comments on Shariah and America

The controversy over building an Islamic cultural center and
mosque several blocks from Ground Zero continues with President Obama joining
in. Michael Gerson explains in today’s Washington
, why it is an American President’s duty to uphold the rights of all
American’s and to defend America’s core values, as President Obama has done in
this instance:

Two of you have sent rather different but interesting
comments on my Daily Caller op-ed on "Shariah and
that I am sharing with you below:


Interesting but I think you are insufficiently critical of
Islam.  The Pope forbid Catholic nuns from opening a center near a concentration
camp site because he understood that it’s existence would be insensitive to
Jews.  The insistence of the Moslems to build near the 911 site shows
massive insensitivity at the least.  It is not just a few Moslem radicals
who commit unspeakable acts but look at all the Moslem countries that deny
fundamental freedoms to women, gays, other religions, journalists, etc, etc, look
at the tens of thousands of Moslems who rioted against the Danish cartoons and
killed people and destroyed millions in property.  Look at all of those
that cheered 911.  When Moslem Americans threatened the producers of
Southpark, the Moslem establishment was largely silent as they have been with
most of the other outrages.  I think that Hirsi Ali is right when she
suggests that we all stand up and say these behaviors do not meet civilized
norms for a religion in the modern world.  We know that many Imams preach
violence and hatred and act as foreign agents.  Every religion has its
assorted violent nut cases, but every major religion other than the Moslems has
acted quickly to condemn and squelch such people.  If they want respect it
is time they started showing respect for others – a good way to start would be
by agreeing not to build at the 911 site as an act of respect to all of those
who died there.


[Richard W. Rahn – former Chief Economist of the U.S.
Chamber of Commerce, author and columnist, former fellow Director of the Cayman
Islands Monetary Authority, and currently a Senior Fellow at the Cato Institute
and Chairman of Institute for Global Economic Growth]



As in the past, when spirit and time combine to permit, I am
commenting on your thoughtful piece on shariah law, mostly to highlight a few
items touched on too passingly:

1. The Cordoba House controversy is almost entirely more a
zoning issue than either a property or religious freedom issue. There are, I’ve
read, more than 100 mosques already in Manhattan. It seems unlikely all but a
very few people in the U.S. either object to these or would object to another
100 being built in New York City, by these individuals or others. If 100
mosques do not evoke controversy and one proposed "cultural center"
does, it almost certainly means it is not the area set-aside for prayer that is
at the heart of the issue.

It is, then, at bottom the location and the publicity
surrounding the intention to build so near the 9/11 site. One may well disagree
with a great many zoning laws and the attitude behind many zoning proposals (as
you and I surely do). One can understand, however, why many might, say, object
to an adult video store being located near an elementary school or a church.
One might even suspect that the intention was provocative more than commercial.
In any case, it is sure to evoke public controversy. A judgment then needs to
be made whether or not the result, including both the building of the center
and the hostile reaction to it, is close enough to the intentions of the

2. Law generally.

The late, great Harvard law scholar Harold Berman wrote
powerfully that only in the late 20th century (and now the early 21st) has the
idea developed that "law" was a single thing, namely positive,
legislated law. When Blackstone wrote his celebrated commentaries, there were
at least over half a dozen "legal systems" operating in England.
Overall, three legal themes were intertwined to form a larger understanding of
law: 1. moral/natural law – meaning the customs, including both simple
practices and those with moral meanings, that were embedded in various
communities. These were not explicit or precise and varied from village to
village in small ways, but were always part of the judgment as to "what
the law is". 2. Judge-made law or the conclusions judges, over long
periods of time, had come to decide in specific cases that were similar to an
issue before them. Call is precedent. 3. Positive law that legislatures enacted.
The notion that "LAW" now means some combination of the positive law
enacted by a legislative body and even a very narrow court decision by judges
is the only "LAW" has warped our understanding.

Thus, your larger understanding of shariah law invokes this
longer tradition of what law is and how it responds to changing times and

3. Shariah Law.

It is tendentious and misleading (or simply ignorant) to
speak of "shariah law" as if it is precise and universal. There is no
single "authoritative shariah law" that many commentators speak of.
Muslim women are instructed to be "modest" in public. Some take this
to mean simply modest dress and appearance. Some wear a scarf to cover their
hair (as St. Paul also argued for women in church; and Mother Teresa always
adhered to in public). Some argue for a burka or complete covering. Which is
"authoritative shariah law"?

As you say, there is a general sense among many Muslims that
"interest" is not allowed (as many Catholics also believed for
centuries). That seems an unfortunate approach in the modern world of finance
(although the excess of the use of credit is also perilous). Refusing to
separate a mortgage payment as part "principle" and part
"interest" seems an easy way around the prohibition and almost a semantic
dodge. Going into a rant against shariah law is similar to condemning
Christians for not wanting to invest in companies the activities of which they

The notion that the spooky because unknown "shariah
law" will be imposed on 330 million Americans is obviously far-fetched.

4. The Unity of Islam

Muslims are proud that there are over a billion Muslims in
the world. Those most eager to incite the West, speak as well in a way to
suggest that this is a unified entity for political or terrorist purposes. In
fact they are deeply fragmented. Even the use of "radical" or
"extremist" covers over that, however broadly or narrowly defined,
these groups are also fragmented.

Even so, "radical" and "extremist" do
not fully describe those Muslims that we should oppose with military force.
They are those Muslims who are quite willing to use violence against Western
people or assets. A civil war among factions, whether religious or not, in
Afghanistan or Iraq, Somalia or the Sudan, should interest us in only a tangential
way. Every terrorist is not a Muslim, although many are. Likewise every Muslim
that uses violence, even the vilest kinds (stoning someone for adultery or
homosexuality or whatever), is not someone the US military should be trying to
kill. For one, it is an impractical goal for a 330 million population who knows
very little about various cultures in Islamic countries. We simply cannot
achieve our goals — any more so than, say, an invasion of China to root out
their system of government.

Secondly, the attempt to root out violence between the various
Muslim communities and within their communities (such as honor killings) will
turn their violence against us.

In short, a longish way of saying that I think I agree with
you — once again.



[Robert A Schadler, Senior Fellow in Public Diplomacy at the
American Foreign Policy Council, Board Member of the Center for the Study of
Islam & Democracy Secretary, former
editor of The Intercollegiate Review,
during the Reagan administration he was
the Director of the Office of
International Visitors and Chief of Staff to the Director of US Information Agency and is a fellow member
of the Philadelphia Society.]


Best wishes,


Shariah and America

Should an Islamic community center and mosque be built a few blocks from the site of the collapsed World Trade Center in New York? The American Center for Law and Justice (ACLJ) doesn’t think so on the grounds, they say in a lawsuit brought against the New York Landmarks Preservation Commission last week, that the Commission did not adhere to proper procedure when it refused to designate the property on which the facility would be built an historic landmark. The basis for requesting historic landmark status was that some of the debris from the World Trade Center fell on it. The Commission’s unanimous ruling preserves the right of the owners of the private property to permit Feisal Abdul Rauf and his wife, Daisy Khan, who Time magazine characterize as “modernists and moderates  who openly condemn the death cult of al-Qaeda and its adherents” to proceed with their intention to build the Cordoba House Islamic Cultural Center there. Score one for private property.

According to Jeffery Goldberg, writing in the Atlantic “Feisal Abdul Rauf, is an enemy of al Qaeda, no less than Rudolph Giuliani and the Anti-Defamation League are enemies of al Qaeda.  Bin Laden would sooner dispatch a truck bomb to destroy the Cordoba Initiative’s proposed community center than he would attack the ADL, for the simple reason that Osama’s most dire enemies are Muslims…. He represents what Bin Laden fears most: a Muslim who believes that it is possible to remain true to the values of Islam and, at the same time, to be a loyal citizen of a Western, non-Muslim country. Bin Laden wants a clash of civilizations; the opponents of the mosque project are giving him what he wants.”[1]

The bigger picture, however, is the serious damage this controversy has done to our struggle to contain al Qaeda and radical Islamists. Our enemies are radical Islamists, not Islam or Muslims. Success depends heavily on our ability to isolate these extremists from the broader Islamic community of which they claim to be a part. The hypocrisy of the ACLJ, which in the past has filed suits “that argue that religious freedom trumps land use laws,”[2] though obvious, is not the issue. The damage comes from the clear message to the world’s 1.5 billion Muslims that many Americans blame all Muslims for the terrorist acts of a handful of political fanatics claiming to act in the name of Islam. ACLJ attorney Brett Joshpe told The Daily Caller: “Would I be personally involved in this matter if this were a church? No. And the reason why is because if it were a church it wouldn’t be offending and hurting the 9/11 victims’ families”[3] Score one for transparency, ugly though it is.

Too many Americans who should know better have taken up an unwarranted and
unhealthy attack on Islam.  Consider the claims of some that shariah law violates American law and
basic American principles. There are several strains to this argument.

One strain is that shariah law is foreign and that it is some how inappropriate to permit or give any scope to foreign laws in America. This misunderstands the nature of common law, which is the continuous discovery of a natural law that reflects people’s expectations of proper behavior between people.  In their compelling book, Money, Markets, & Sovereignty, Steil and Hinds present some of the history of the absorption of foreign law into our domestic laws. “The hugely important Lex
or the international “laws merchant,” which developed privately and spontaneously to govern commercial transactions, dates from the twelfth century, before the consolidation of states….  The Lex Mercatoria was absorbed into English common law in the seventeenth century, where judges, who were paid out of litigation fees, initially treated it with some contempt. Competition from continental civil law countries, however, which frequently proved more accommodative to the Lex Mercatoria, ultimately forced English judges to recognize commercial custom in international trade in order to attract cases. In the United States, widespread early adoption of the practice of commercial arbitration, as well as the history of state jurisdictional
competition, contributed to greater acceptance of the Lex Mercatoria than in England. The U.S. Uniform Commercial Code thus reflects the fact that business practice and custom are the primary source of substantial law.”[4] Score one for common law.

A more serious claim, voiced for example by author and lecturer Nonie Darwish, is that “the goal of radical Islamists is to impose sharia law on the world, ripping Western law and liberty in two.”[5] According to Newt Gingrich: “radical Islamists are actively engaged in a public relations campaign to try and browbeat and guilt Americans (and other Western countries) to accept the imposition of sharia in certain communities, no matter how deeply sharia law is in conflict with the protections afforded by the civil law and the democratic values undergirding our constitutional system.”[6] Gingrich cites a New Jersey state judge ruling in June 2009 that “rejected an allegation that a Muslim man who punished his wife with pain for hours and then raped her repeatedly was guilty of criminal sexual assault, citing his religious beliefs as proof that he did not believe he was acting in a criminal matter.” This behavior obviously violates American law and core values and an
appellate court overturned the judge’s outrageous ruling. But this does not imply that Muslims should not be permitted to observe other (in fact most) provisions of shariah in America if they chose too. It also fails to take account of the fact the shariah law, which largely deals with requirements of personal behavior such as daily prayer (salāh), fasting in Ramadan (sawm), the
pilgrimage to Mecca (haj), charity (zakāt), a tax of 20 percent on untaxed, annual profit (khums), and struggling to please God. (jihād), is subject to interpretation by Muslim scholars. Traditional shariah has five main schools of interpretation.[7] In this respect it is rather like the Christian Bible, which is subject to different interpretations by different Christian scholars and denominations. Similarly some of the more extreme and cruel teachings of the Bible are broadly rejected by Christians (and American law).

Rowan Williams, the Archbishop of Canterbury stated the issue well in a strangely controversial lecture on “Civil and Religious Law in England: a Religious Perspective” delivered at the Royal Courts of Justice February 7, 2008.[8]  In a BBC Radio 4 interview the same day the Archbishop elaborated that: “‘as a matter of fact certain provisions of sharia are already recognised in our society and under our law’. When the question was put to him that: ‘the application of sharia in certain circumstances – if we want to achieve this cohesion and take seriously peoples’
religion – seems unavoidable?’
, he indicated his assent”[9]

“In his lecture, the Archbishop sought carefully to explore the limits of a unitary and secular legal system in the presence of an increasingly plural (including religiously plural) society and to see how such a unitary system might be able to accommodate religious claims. Behind this is the underlying principle that Christians cannot claim exceptions from a secular unitary system on religious grounds (for instance in situations where Christian doctors might not be compelled to perform abortions), if they are not willing to consider how a unitary system can accommodate other religious consciences. In doing so the Archbishop was not suggesting the introduction of parallel legal jurisdictions, but exploring ways in which reasonable accommodation might be made within
existing arrangements for religious conscience.”[10] Score one for common sense.

The level of ignorance or in some cases deliberate misinformation in an effort to tarnish all Muslims as enemies of decent, freedom loving Americans, can be illustrated by attacks on shariah compliant mortgages (or shariah compliant financial instruments more generally).  The Royal Bank of Canada, which offers such products to those who want them, explains the background of their shariah compliant mortgage products as follows: “Shariah law is interpreted on a case-by-case basis by recognized scholars of Islam. It forbids usury, including payment or receipt of interest on monies borrowed or invested. As such, a traditional commercial mortgage would not be a Shariah compliant way to fund a property purchase.”[11] The resulting mortgage contract has followed the guidance of the Shariah Supervisory Board.  Shariah-compliant financial instruments are equity rather than debt, producing, hopefully, profits rather than interest payments. Funds may not knowingly be invested in certain “unethical” activities or products such as gambling, alcohol and the consumption of pork. In this respect this instruments are reminiscent of Green investment funds. You might or might not be interested in such funds, but they hardly represent a threat to the American Way of Life.  Shariah compliant mortgages charge no interest, but establish a rent-to-own agreement that has a very similar end result to a conventional mortgage. If the label “Islamic” or “shariah compliant” where not attached to such mortgages, their critics might embrace them as a neat idea. Score one for sound finance.

Balancing faithfulness to our respective personal religious beliefs and practices with the requirements and laws of commercial, social, and political life can be a challenge, but America does it better than most countries to our great benefit. We have no reason to be at war with Islam. Those who give the impression that we should be are serving Bin Laden’s goals. Those Muslims, or anyone else, who are not willing or able to live in America and practice their religion within
the limitations of our laws and traditions are not welcomed here and should not come. Those who attempt to make Islam and its believers into our enemies are not welcomed either.

[1] Jeffery Goldberg, “If He Could, Bin Laden Would Bomb the Cordoba Initiative”, The Atlantic, August 4, 2010.

[3] Ibid.

[4] Benn Steil and Manuel Hinds, Money, Markets, & Sovereignty, (New Haven and London), Yale University Press, 2009, pages 23 and 25.

[5] Quoted by Gary Lane, “Sharia Law Tearing the West in Two”, February 22, 2009, Creeping Sharia website.

[6] Newt Gingrich, “No Mosque at Ground Zero” Human
, 7/28/2010

[7] Dr Irfan Al-Alawi, Stephen Suleyman Schwartz, Kamal Hasani,  Veli Sirin, Daut
Dauti, Qanta Ahmed, MD, A GUIDE TO SHARIAH LAW and ISLAMIST IDEOLOGY in WESTERN EUROPE 2007-2009, Center for Islamic Pluralism

[9] Quoted fromthe Archbishop’s website:

[10] Ibid.


Juba, Southern Sudan

Sudan’s long history has been closely tied with Egypt’s on its Northern border. The British control of Sudan from 1899 – 1956 was motivated largely by its desire to safeguard its planned irrigation damn at Aswan by controlling the Nile, which flows North through Sudan and Egypt into the Mediterranean. For the Nile, down river is north, the opposite of all the big rivers I have known of.  The British effectively ruled the largely Arabic, Muslim North and the Black African Animist/Christian South separately. When Sudan became independent from Egypt and the UK on January 1, 1956, it was the largest country in Africa geographically but with a modest population of only 42 million.

A civil war between Northern and Southern Sudan broke out the year before independence and lasted for 17 years. The war resulted from Southern concerns over Northern domination and a variety of personal ambitions. Following a ten-year hiatus, war resumed when the North attempted to impose Islamic law on all of Sudan, contrary to the terms of the Addis Ababa Agreement of 1972 than ended the first civil war.  This second civil war raged until a Comprehensive Peace Agreement (CPA) was signed in January 2005. The Sudan People’s Liberation Army (SPLA), which now rules Southern Sudan, was formed at the beginning of this second civil war. Omar al-Bashir of the National Congress Party (NCP) is President of Sudan, ruling from the capital of Khartoum in the North. The International Criminal Court in The Hague indicted al-Bashir for war crimes on March 4, 2009.

The per capita income of Sudan is one of the lowest in the world at $2,380, which includes substantial oil revenue going to the government, and much lower for the South.  A census in 2008 counted 8.3 million people in the South, though some think the actual number is significantly larger. The two civil wars resulted in the deaths of 2.5 million Southern Sudanese, massive destruction, and infrastructure neglect in the South.

The Comprehensive Peace Agreement under which the country is now governed was designed to “Make Unity Work” by granting considerable autonomy to the “Government of Southern Sudan” (GOSS) in Juba, which oversees regional (state) governments and participates in the national government in Khartoum, sharing oil revenue with the South (where most of the oil fields are located), and other sharing arrangements. The CPA also established the Bank of Southern Sudan (BOSS) in Juba as a branch of the Central Bank of Sudan in Khartoum, though it operates somewhat independently. Very importantly the CPA provides for a referendum in the South in January 2011 of whether it wants to
become an independent country. The wide spread view in the South (I am told) is
that the North has not dealt and shared fairly with the South and that it will vote for independence.

I am working there to help the GOSS chose an appropriate monetary regime and to prepare it to issue and manage its own currency, if, as expected, Southern Sudan does become independent next year. In this capacity I am working for Deloitte Consulting under a USAID contract. My first two sets of meetings with the management of BOSS were in Nairobi last month and in 2007. My most recent meetings were in Juba a week and a half ago. While we have advised that the conditions for the successful launch of a new currency would be better after several years of dollarization, the Southern Sudanese want
their own currency as soon as possible. The management of the BOSS with whom I
work has agreed with us that such a currency should be issued under currency board rules (see my book about the currency board I helped establish in Bosnia, “One Currency for Bosnia”). I am now working with my Deloitte colleagues on drafting a new central bank law and an establishment plan for a new central bank, both to be discussed and finalized when I return to Juba in September.

I was not allowed to travel outside of Juba for security reasons. Juba, itself is a garrison city of refuge for hundreds of thousands of Southern Sudanese from years of war. Since the peace agreement in 2005 Juba’s population has exploded from 160,000 to over 1.1 million today. The capital city has few paved roads and I never imagined that the hills and valleys of rutted city roads could be so deep. Malaria is a problem. A scattering of huts surrounds
our relatively lovely camp on the banks of the White Nile. Our driver was proud to live in one such hut, which, he explained, has a real bed (off the ground with a mattress). Apparently that is all that it has. My colleague Adam, who has been in Juba for over a year, described a father and his four little sons who emerge every morning from their hut neatly dressed and with smiles on their faces. Adam asked the father, why they smile so brightly each morning. “Because we know we will have food today,” he replied.

These good and long suffering people deserve better. I don’t really know whether independence or Making Unity Work will be better for them. But I am happy to contribute what I can to at least improving the prospects of their having a stable currency if they issue one.

I am reluctant to photograph people in such poverty, so below you see two of my colleagues breakfasting at our lovely Camp by the White Nile.

A South African Hero

It was interesting being in Kenya this past week while the World Cup football (soccer) matches were being played near-by in South Africa. When Kenyan’s interrupted their viewing of a match to converse with me and learned that I was an American they inevitably wanted to know how I thought President Obama was doing. I hated telling them. The current World Cup in South Africa, however, made viewing Clint Eastwood’s “Invictus” on the plane on the way home even more moving than it would have been anyway. The movie dramatizes South Africa’s first post apartheid President, Nelson Mandela’s, decision to save and embrace South Africa’s national soccer team, “Springboks,” so loved by white South African’s and thus hated by black South Africans, as an element of his program of national reconciliation.The wisdom, courage, and compassion of leaders like Mandela, Gandhi, Martin Luther King overwhelm me. These leaders placed the well being of their people, their countries, and mankind more generally above narrower concerns for justice or revenge. They looked forward not backward. Mandela understood that his fellow black South Africans would have richer more fulfilling lives if they embraced and worked with it’s white citizens rather than simply displacing and replacing them in positions of power. He also knew that that would be a hard sell.

I remember well some worldly wise “friends” telling me in the 1970s that there was no chance in hell that white South Africans would allow blacks to vote and thus turn over the government to blacks. They would fight to the death rather than give in. My “friends” were reflecting not only the view that South Africa’s blacks were incapable of ruling the country
efficiently and justly, but that those in power for all those years would never give it up to anyone. In part my “friends” were ignorant of the actual attitudes of many of South Africa’s whites toward South African blacks. And no one expected a Nelson Mandela to take over the Presidency. It is still too early to know whether post apartheid South Africa will succeed in efficient and just governance, but that it even has a chance is the result of the belief and commitment of Mandela and the last white President F. W. de Klerk and others that the nation must rise above the hatred and score settling for the injustices of decades of the oppression of one people by another if it was to become great (or even survive).

My old “friends” were reflecting an all too human and common attitude of those who have ruled and dominated others for many years. They were reflecting the fear that the “ruling class” might not be able to stay in power on the basis of merit alone and thus needed to become more and more repressive toward the groups that might challenge them. Consider, for example, the outcry of some older American immigrants—we might call them the decedents of Mayflower Christians who came here to find religious freedom and less oppressive government—toward new immigrants, legal as well as illegal. The Mexicans and other Latin’s flooding into the U.S., for example, are not bringing an alien culture with them. They are part of that broader Anglo culture dominated by the Roman Catholic and other Christian Churches and the values they hold. So what is it that our old guard nativists fear? In part, perhaps largely, they fear the loss of their position in society. But why should they fear that in the “land of the free” if they hold their positions by merit? We must be suspicious of the motives of such people.

Before he was President of South Africa, Mandela was in prison for 27 years for opposing the white South African government as a leader of Umkhonto we Sizwe, the armed wing of the African National Congress. He was released February 11, 1990 and led the ANCs participation in the negotiations that resulted in a new constitution opening participation in the government to all South Africans. He was awarded the Nobel Peace Prize with de Klerk in 1994. It was not easy for black South Africans to forgive a lifetime of oppression by whites. But for a man who had spent 27 of the most productive years of his life in prison to not only forgive but to lead his fellow black South Africans to deep and genuine reconciliation with their white oppressors in the interests of all South Africans is extraordinary and the mark of a truly great man.

Great leaders like Mandela, Gandhi, King, and Ronald Reagan, another of my heroes, were optimists who believed that the world could be made a better place for everyone and devoted themselves to that task. Those who out of fear (or plain malice) spread misinformation about others—e.g., Muslims who demonize America and Americans who demonize Islam—can create the very world they fear if we take them seriously. They endanger all of us and potentially make the world a worse place. I stand in awe of the greatness of Nelson Mandela, who could rise so far above his own suffering and the injustices against him to see and promote the higher principles that help make people and
society decent. “Invictus” is a deeply inspiring and moving movie.

Kyrgyzstan in Crisis

My heart goes out to the poor people of Kyrgyzstan. They seem to be sliding into civil war. The current government of this small, poor central Asian country of 5 million people, in power for only two months, seems unable to contain the ethnic violence in the south near the Uzbek boarder and is appealing for outside help. Nestled between Kazakhstan to the north, China and Uzbekistan to the east and west and Tajikistan to the south (and Afghanistan just beyond), Kyrgyzstan provides an example of how it might look easy for the U.S. to help a friend—they have allowed us to set up an airbase there that we use for supplying our troops in Afghanistan to the south. The Kyrgyz Army is weak and its police corrupt. The new government just drove out a corrupt President, Kurmanbek Bakiyev,
who had come to power in March 2005 in the bloodless Tulip Revolution that replaced Askar Akaev, Kyrgyzstan’s first President since its independence from the Soviet Union in August 1991. They need help to survive.

When I first visited this little mountain country in February 1992, I referred to it as the Switzerland of central Asia. Like Switzerland its snow-capped mountains are spectacular and it has few natural resources. I suggested that like Switzerland it could become wealthy with free markets, good policies, and hard work. I lead the International Monetary Fund’s
technical assistance to the National Bank of Kyrgyzstan and helped it replace the Russian ruble with its own currency, the Som, in May 1993. A matched set of that currency with the serial number 000000011, personally signed by the then governor Kemelbek Nanaev, hangs proudly on my office wall. At a celebration of the 5th anniversary of the Som, President Akaev, whose match set of the Som has the serial number 000000001, personally presented me with Kyrgyzstan’s Certificate of Honor for my role in introducing the currency. Some of the most exciting days of my life were in Kyrgyzstan. My strongly felt sympathies are with the new government. Yet it would be a tragic mistake for the United States to become militarily involved in restoring peace there.

Ms. Roza Otunbayeva, the interim leader until elections can be held later this year, has reaffirmed the U.S. lease on Manas Air Base after her deposed predecessor had tried to close it. She seems to be surrounded by pro market, pro freedom reformers. We have every reason to wish her government well. But a U.S. intervention would be taking sides in a potential civil war. Russia has bases in Kyrgyzstan as well and can hardly be indifferent to the fate of its neighbor and former fellow member of the Soviet Union. Russia has, up until now, wisely rejected Ms. Otunbayeva’s call for help and both Russia and the U.S. are exploring the possibility of international (U.N.) assistance. The U.S. Manas Air Base is an important U.S. air link to Afghanistan, but Kyrgyzstan is not critical to U.S. security. In any event, Ms. Otunbayeva asked Russia for help, not the U.S.

Were she to turn to us for help, it might look relatively easy to provide it. We have troops there already. But then for good or ill her problems would become ours and there is no knowing, really, what problems we might be taking on. The Viet Nam, Afghanistan and Iraq wars looked very different when we got into them than they did at the other end of the process (when ever that might be for the later two). We need to try hard to imagine how it might look in a few years looking back. If there is a good case for external help, the U.S. and Russia should be able to make that case to the U.N. If and when the U.N. acts, it will clearly be doing so above and beyond the potentially conflicting national interests of parties to a new Great Game that we and the rest of the world can ill afford.

A Nation of Immigrants

I have had to remind myself of late that there is much to be proud of as an American. And I have not been prouder for a long time than I was last night listening to this year’s recipients of the Merage Foundation for the American Dream’s National Leadership Awards. Paul Merage family’s foundation is dedicated to “Helping Immigrants Join Mainstream America.” Mr. Merage is himself an immigrant from Iran, which he left in 1979 by necessity. But his choice to settle in the United States was his, and the Merage Foundation is one of his ways of expressing thanks for the opportunities that opened up to him here and to give something back to help keep America the dynamic, innovative home to immigrants that has been such an important component of our success as a

America is the wealthiest nation on earth because it is the most productive. Many other countries provide us with first class competition these days. We will retain our markets and our edge only through remaining productive and innovative. We will be the best only as long as our workers and entrepreneurs are the best trained, best equipped, and best incentivized to continually perfect processes and innovate.

America is exceptional among nations in that it is almost totally a nation of immigrants – self selected immigrants who chose to come to our environment in which they were free to work hard and experiment. Mr. Merage noted that immigrants must change to adapt to their new homes and that a culture of change is good for innovation. In our globalized, highly competitive market, innovation is our competitive edge. Mr. Merage stated that those who say that America’s best days are behind her are wrong. They are wrong because of the continual infusion of enthusiasm and innovation from a never-ending
inflow of eager new immigrants.

Mr. Merage also noted that no nation can receive new immigrants without some trepidation and worry about how they will fit in and adapt to its culture and ways. Fear is a powerful emotion. Mr. Merage noted that we can all understand the fears of Arizonans and others over whether our relatively open borders are letting in the wrong people. Fear can cloud good judgment, for example, about who are criminals and where they come from. But America remains the most welcoming of all countries to our great benefit. Its can do spirit and the general decency of its people are magnets for the world’s best and brightest and most hard working. The Merage Foundation is dedicated to
helping them assimilate successfully.

This years winners of the National Leadership Awards where:
Eric Benhamou (Algeria), Chairman and CEO of Benhamou Global Ventures, cofounder
of Bridge Communications, and CEO of 3Com and Palm; Amador S. Bustos (Mexico),
Chairman and CEO of Bustos Media in California; Roger Cohen (England),
Columnist for the New York Times; Gloria Estefan (Cuba), singer, composer and
author; Dikembe Mutombo (Congo), Former NBA star; Arnold Schwarzenegger
(Austria), Governor of California and former Terminator; and Ahmed H. Zewail
(Egypt), Nobel Prize for Chemistry in 1999. The event was cosponsored by the
Woodrow Wilson International Center for Scholars and I am grateful to my friend
Steve Meeter for inviting me.

Each winner addressed us with touching stories of how and why they came to America and how they flourished here financially and spiritually. The Terminator spoke to us by video because of the elections in California that day. Most of them expressed understanding but sadness that fear had pushed Arizona to trample on some cherished American qualities of openness to immigrants. Sorting out a proper balance and policy toward immigration is not and will not be easy but it is a critical, pressing need.

The most dramatic address was by Dr. Halel Esfandiari, Director of the Woodrow Wilson International Center for Scholars Middle East Program. At last years awards dinner, Ms. Esfandiari was in prison in Tehran, where she had been since May 8, 2007. She had returned to her native Iran in December 2006 to visit her 93-year-old mother. The blood curdling story of her arrest and imprisonment can be found on the Woodrow Wilson center website.  She told us that those at last year’s awards dinner had prayed for her release and here she was. Keep those prayers coming, she said, there is so much more to do.

Paul Merage summed up the spirit of the evening by noting that the symbol of America must remain the welcoming Statue of Liberty, not The Wall (pick your favorite).