Louisville/Jefferson County is the principal city of America’s 42nd largest metropolitan area, a 13-county, bi-state region with a 2006 population estimated at 1.2 million. It is the largest city by far in Kentucky, but it is neither Kentucky’s capital nor its center of political power.

The consolidated city, authorized by voter referendum in 2000 and implemented in 2003, is home to 701,500 residents within its 399 square miles, with a population density of 4,124.8 per square mile.² It is either the nation’s 16th or its 26th largest incorporated place, depending on whether the residents of smaller municipalities within its borders, who are eligible to vote in its elections, are counted (as local officials desire and U.S. Census Bureau officials resist). The remainder of the metropolitan statistical area (MSA) population is split between four Indiana counties (241,193) and eight Kentucky counties (279,523). Although several of those counties are growing rapidly, the new Louisville metro area remains the MSA's central hub, with 57 percent of the population and almost 70 percent of the job base.

Centrally located on the southern banks of the Ohio River, amid an agriculturally productive, mineral rich, and energy producing region, Louisville is commonly described as the northernmost city of the American South. Closer to Toronto than to New Orleans, and even slightly closer to Chicago than to Atlanta, it remains within a day’s drive of two-thirds of the American population living east of the Rocky Mountains.

This location has been the dominant influence on Louisville’s history as a regional center of trade, commerce and manufacture. The city, now the all-points international hub of United Parcel Service (UPS), consistently ranks among the nation’s top logistics centers. Its manufacturing sector, though much diminished, still ranks among the strongest in the Southeast. The many cultural assets developed during the city’s reign as a regional economic center rank it highly in various measures of quality of life and “best places.”

Despite these strengths, Louisville’s competitiveness and regional prominence declined during much of the last half of the 20th Century, and precipitously so during the economic upheavals of the 1970s and ‘80s. Not only did it lose tens of thousands of manufacturing jobs and many of its historic businesses to deindustrialization and corporate consolidation, it also confronted significant barriers to entry into the growing knowledge-based economy because of its poorly-educated workforce, lack of R&D capacity, and risk-averse business culture.

In response, Louisville began a turbulent, two-decade process of civic and economic renewal, during which it succeeded both in restoring growth in its traditional areas of strength, most notably from the large impact of the UPS hub, and in laying groundwork for 21st century competitiveness, most notably by substantially ramping up university-based research and entrepreneurship supports. Doing so required it to overhaul nearly every aspect of its outmoded economic development strategies, civic relationships, and habits of mind, creating a new culture of collaboration.

Each of the three major partners in economic development radically transformed themselves and their relationships with one another. The often-paralyzing city-suburban divide of local governance yielded to consolidation. The business community reconstituted itself as a credible champion of broad-based regional progress, and it joined with the public sector to create a new chamber of commerce that is the region’s full-service, public-private economic development agency recognized as among the best in the nation. The Commonwealth of Kentucky embraced sweeping education reforms, including major support for expanded research at the University of Louisville, and a “New Economy” agenda emphasizing the commercialization of research-generated knowledge. Creative public-private partnerships have become the norm, propelling, for instance, the dramatic resurgence of downtown.

The initial successes of all these efforts have been encouraging, but not yet sufficient for the transformation to innovation-based prosperity that is the goal. This report details those successes, and the leadership, partnerships, and strategies that helped create them. It begins by describing Louisville’s history and development and the factors that made its economy grow and thrive. It then explains why the city faltered during the latter part of the 20th century and how it has begun to reverse course. In doing so, the study offers important lessons for other cities that are striving to compete in a very new economic era. 

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Chattanooga a few years ago faced what many smaller cities are struggling with today—a sudden decline after years of prosperity in the "old" economy. This case study offers a roadmap for these cities by chronicling Chattanooga's demise and rebirth.

Chattanooga is located in the southern end of the Tennessee Valley where the Tennessee River cuts through the Smoky Mountains and the Cumberland Plateau. The city’s location, particularly its proximity to the Tennessee River, has been one of its greatest assets. Today, several major interstates (I-24, I-59, and I-75) run through Chattanooga, making it a hub of transportation business. The city borders North Georgia and is less than an hour away from both Alabama and North Carolina. Atlanta, Nashville, and Birmingham are all within two hours travel time by car.

Chattanooga is Tennessee’s fourth largest city, with a population in 2000 of 155,554, and it covers an area of 143.2 square miles. Among the 200 most populous cities in the United States, Chattanooga—with 1,086.5 persons per square mile—ranks 190th in population density.2 It is the most populous of 10 municipalities in Hamilton County, which has a population of 307,896, covers an area of 575.7 square miles, and has a population density of 534.8 persons per square mile.

With its extensive railroads and river access, Chattanooga was at one time the “Dynamo of Dixie”—a bustling, midsized, industrial city in the heart of the South. By 1940, Chattanooga’s population was centered around a vibrant downtown and it was one of the largest cities in the United States. Just 50 years later, however, it was in deep decline. Manufacturing jobs continued to leave. The city’s white population had fled to the suburbs and downtown was a place to be avoided, rather than the economic center of the region. The city lost almost 10 percent of its population during the 1960s, and another 10 percent between 1980 and 1990. It would have lost more residents had it not been for annexation of outlying suburban areas.

The tide began to turn in the 1990s, with strategic investments by developing public-private partnerships—dubbed the “Chattanooga way.” These investments spurred a dramatic turnaround. The city’s population has since stabilized and begun to grow, downtown has been transformed, and it is once again poised to prosper in the new economy as it had in the old.

This report describes how Chattanooga has turned its economy around. It begins with a summary of how the city grew and developed during its first 150 years before describing the factors driving its decline. The report concludes by examining the partnerships and planning that helped spur Chattanooga’s current revitalization and providing valuable lessons to other older industrial cities trying to ignite their own economic recovery. 

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Part of the larger Northeast Ohio regional economy, the Akron metropolitan area is composed of two counties (Summit and Portage) with a population of just over 700,000, and is surrounded by three other metropolitan areas. Akron is located approximately 40 miles south of Cleveland, 50 miles west of Youngstown, and 23 miles north of Canton. The Cleveland metro area is a five-county region with a population of 2.1 million. The Youngstown metro area includes three counties, extending into Pennsylvania, and has a population of 587,000. Canton is part of a two-county metropolitan area with a population of 410,000.

The adjacency of the Akron and Cleveland Metropolitan Statistical Areas (MSAs) is an important factor in the economic performance of the Akron region. The interdependence of economies of the two MSAs is evidenced by the strong economic growth of the northern part of Summit County adjacent to the core county of the Cleveland metropolitan area. This part of Summit County beyond the city of Akron provides available land, access to the labor pools of the two metropolitan areas, and proximity to the region’s extensive transportation network.

Although affected by economic activity in the larger region, the fate and future of Akron and its wider region are not solely determined by events in these adjacent areas. While sharing broad economic trends with its neighbors, the Akron metro area has been impacted by a different set of events and has shown different patterns of growth from other areas in Northeast Ohio.

This study provides an in-depth look at Akron’s economy over the past century. It begins by tracing the industrial history of the Akron region, describing the growth of the rubber industry from the late 1800s through much of following century, to its precipitous decline beginning in the 1970s. It then discusses how the “bottoming out” of this dominant industry gave rise to the industrial restructuring of the area. The paper explores the nature of this restructuring, and the steps and activities the city’s business, civic, and government leaders have undertaken to help spur its recovery and redevelopment. In doing so, it provides a series of lessons to other older industrial regions working to find their own economic niche in a changing global economy. 

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Dear President Obama,

Your decision to give the Arctic National Wildlife Refuge (ANWR) wilderness status and to ban future oil and gas drilling on the Arctic Coastal plain represents the death knell of a coherent national petroleum policy, especially when combined with limitations on new leases in the Beaufort and Chukchi Seas. According to the U.S. Geological Survey, the Arctic Coastal plain alone contains an estimated 10.4 billion barrels of oil. These actions, combined with your hesitation to approve the Keystone XL pipeline (despite five environmental assessments which conclude that the pipeline can be built and operated safely) make your so-called “all of the above energy policy” a mockery of policy incoherence.

The lack of coherent policy and contradiction continues in other areas as well. While your supporters will argue that the simultaneous opening up of areas from the Chesapeake to North Florida and parts of the western Gulf Coast shows that you are willing to allow exploration in areas deemed less environmentally sensitive, one has to query both your seeming lack of concern for East Coast bird and marine sanctuaries, not to mention possible despoliation resulting from the potential for oil spills along the East Coast. Is protection of the endangered loggerhead sea turtle and the ACE Basin along the East Coast really of lesser concern than protection of the walrus and polar bear in the Arctic? Furthermore, nearly one-third of all seafood production in the continental United States is harvested in the Gulf. The argument that Alaska is to be protected because of its “special” environmental concerns seems hypocritical given the vital importance of the petroleum industry to the Alaskan economy. Meanwhile the East Coast does not need the petroleum industry to survive or as a means of large scale employment like Alaska does.

Before President Clinton placed the Arctic Coastal plain off limits for drilling, the Department of the Interior conducted a study on the impact oil and gas drilling might have on the polar bear habitat in the region, an area equal in size to Rhode Island. The study found that there were less than four established polar bear dens in the whole region, suggesting the possibility, however remote, in the minds of Clinton administration officials, that Arctic wildlife and marine life can co-exist with development, as they have done at Prudhoe Bay since oil production commenced in 1978. Likewise, it is useful to remember that when the Trans-Alaska Pipeline system (TAPS) was built, many in the environmental community predicted a disaster for the migration of caribou herds across northern Alaska. Today, the caribou population is in fact larger than at the time the pipeline was built.

Mr. President, your actions would be hard enough to understand if they only centered on diverse points of view about the nature of fossil fuel usage and how fast we can transition to a non-fossil fuel era—not only in the United States but also around the globe. While your administration may see the closing of Alaska and the opening of the East Coast to oil and gas drilling as giving each side a bit of what they want, you fail to see that these are not juggling the interests of two constituencies. Rather, these are localized issues with high stakes, especially for the people of Alaska who often do not have the diverse employment opportunities found along the East Coast. In Alaska, the economic vitality of the state is deeply tied to resource extraction. The royalties and taxes from those industries fund the state’s public education and health care systems, while also providing Alaskans with jobs as ship captains, oil field workers, fishery workers, etc.

Further, your actions on ANWAR and the Coastal Plain are seen as likely to end any hope of revitalizing the TAPS flow rate and the resulting enhanced revenues generated through new sources of production. Mr. President, for thousands of years native Inuit populations have inhabited regions bordering the Beaufort and Chukchi Seas, living on local fish and wildlife and native flora and fauna. With the discovery of oil and the inflow of oil-related money, the Inuit people have seen vast improvements in their health, life expectancy, education and financial security. Now with Prudhoe Bay production in serious decline and TAPS running at less than 600,000 mbd (down from 2 mmbd), the benefits that have accrued to them—as well as all Alaskan citizens through the royalty and taxes placed in Alaska’s Permanent Fund—are in danger of being lost, casting Alaska once again into the status of a subjugated territory of the lower 48 states.

Mr. President, in May, the United States will take over chairmanship of the Arctic Council, a pan-Arctic organization designed to address Arctic issues in a multilateral context. Alaska is our only state in the Arctic, and because of Alaska we are an Arctic nation. It also is the only place where we share a border with Russia providing an opportunity for collaboration rather than the confrontation we see today. It seems strange that, at a time when we will be in a position to lead the Arctic nations on mitigating the threats posed to the region by climate change and in insuring that the opportunities for resource development are done using environmentally-sound practices through effective regulation and oversight that we choose now to close off this great resource rather than allowing their benefits to flow to the local Alaskan population while providing resources for the nation as well as the rest of the world.

In a few short weeks, the National Petroleum Council, after months of painstaking work, will submit a report on the future direction of the nation’s Arctic policy and on offshore oil and gas development in Alaska. This report was done at the request of Secretary of Energy Ernest Moniz. As a member of the deliberative study group that consulted on the report, I hope you will examine its findings closely and hopefully will reconsider the opportunities afforded by prudent development of this vast resource in a way that recognizes the interests of Alaskans as well as the broader interests of our nation.

      

This week, Royal Dutch Shell announced that it would postpone oil drilling in the Chukchi Sea and the broader American Arctic indefinitely. The decision came in the wake of disappointing output from its Burger field, the high costs associated with the project (already nearing $7 billion), the “challenging and unpredictable federal regulatory environment in offshore Alaska,” and a growing public relations problem with environmental groups opposed to Arctic drilling.

This decision is a momentous one—both for the future of the U.S. energy policy and the ability of the international oil industry to balance global oil supply and demand. The announcement came only days after Hillary Clinton spoke out against the Keystone Pipeline, not only because it would lead to the consumption of more fossil fuels but also because much of the oil might be exported. With broader opposition to lifting the ban on crude oil exports gaining momentum in the White House, it is clear that at least part of the nation’s political leadership is moving in a nationalistic direction. This means that the United States—with its vast resources—is unwilling to help meet the burgeoning energy needs of the world’s population: especially the 1.2 billion people who have no access to commercial energy.

Shell’s decision highlights four significant and diverse areas of concern for the future of energy globally and energy policy here in the United States.

Mapping supply and demand

Shell and much of the rest of the international petroleum industry had viewed the Chukchi Sea as one of the last great oil frontiers. The Chukchi and adjoining Beaufort Seas are vital for meeting the estimated 12 to 15 million barrels per day (mmbd) of additional oil demand projected by almost all oil forecasts (both inside and outside the industry) needed between 2035 and 2040. 

Without the U.S. Arctic, the other areas projected to make major contributions by this time are Iraq, Iran, Saudi Arabia, shale oil around the world (including North America), the Orinoco region of Venezuela, and the pre-salt offshore Brazil. Needless to say, given the political turmoil in Iraq, Iran, Venezuela, and Brazil—as well as concerns about the long term stability of Saudi Arabia—one has to wonder: Where will the world discover additional, reliable crude oil supplies without a major contribution from the Arctic?

Many in the environmental community argue that we will not need fossil fuels in the future, predicting a turn to renewables, enhanced energy efficiency, large scale battery storage, and electric vehicles. Unfortunately, this has no basis in fact. Clearly renewables will grow exponentially as their prices fall, new technologies will increase energy efficiency, large scale battery storage will commence, and many electric vehicles will hit the road. But there are currently more than 260 million gas and diesel vehicles running on U.S. roads alone, with less than 1 percent of these running on electricity. With transportation fuel demand mushrooming globally, it’s unlikely that oil consumption in the transportation sector will die or even decline significantly. 

Fossil fuels for development

Drilling in the Arctic poses unique environmental risks which must be managed through state-of–the-art technology and accompanied by the most stringent regulatory enforcement. A recent National Petroleum Council examination of all possible challenges involved in Arctic offshore drilling found that drilling can be done safely. Yet despite these findings, most major national environmental groups have opposed any drilling in the Arctic and have even asserted that Shell’s decision is a vindication of their position. But these groups don’t seem concerned or even thoughtful about the long-term implications of the U.S. energy industry’s abandonment of the Arctic.

With the world’s population forecast to rise by 1.6 billion people by 2035, do we really think global oil demand won’t continue to rise? While I recognize that we must do everything to limit the growing use of fossil fuels to attack climate change, do we really have no moral obligation to help countries emerge from poverty, which will almost certainly involve continued use of fossil fuels? 

During his recent visit to America, Pope Francis called for the world to make a renewed commitment to help the “poorest of the poor,” and the United Nations has also put forward new sustainable development goals that include an expansion of energy access to those who are either unserved or underserved. Focusing our policies exclusively on shutting down U.S. fossil fuel development, as some environmental groups advocate, takes away resources that can be used to improve global health, education, clean water, and women’s empowerment—all of which are all directly related to energy access. In looking at girl’s education, for example, increasing energy availability allows water to be pumped up from the river, obviating the need for arduous, tedious work for the women and girls that would otherwise have to carry this water by hand to their communities, limiting time for education. The availability of energy allows vaccines to be safely stored, crops to be refrigerated, and children to have the electricity available to study at night. 

All of these benefits—and many others—cannot happen without improving electricity access, which still involves fossil fuel. The United States can and should play a role in this effort.

Jostling for Arctic access

Shell is not the only company to experience setbacks in the Arctic. Italy’s ENI SpA and Norway’s Statoil ASA just yesterday had another regulatory setback due to delays in obtaining permission from Norway to commence production. In June, a consortium including Exxon and BP PLC suspended its Canadian Arctic exploration, noting insufficient time to begin test drilling before the expiration of its lease in 2020. In addition, Exxon had to curtail its plans to drill in the Russian Arctic after the United States imposed sanctions on Moscow and its energy industry following the annexation of Crimea. 

Russia, though, remains active in the Arctic, and it can be assumed that once sanctions are lifted, many oil companies will try to gain a toehold. China, Korea, India, and Singapore, among other countries, have expressed interest in gaining access to the region’s mineral, energy, and/or marine resources. In several cases, they are building ice-worthy vessels to give them the capability to do so. The Bering Strait is emerging as a significant new maritime route in desperate need of enhanced regulation.

In a report last year, my colleagues and I looked at key recommendations for offshore oil and gas governance as the United States assumed chairmanship of the Arctic Council. Beyond highlighting the resource potential of the region, our work looked at increasing needs for safety and security as a result of increasing transportation across the Arctic. Even as the United States stands to be less involved in Arctic energy development, it is our duty as chair of the Arctic Council to lead in region. 

Alaska is a state, not a park

The promise of the Arctic has inspired adventurers, explorers, geographers, scientists, and entrepreneurs for generations and will continue to do so in the future. The United States should be actively involved in helping to ensure that Arctic resources are developed and used prudently—rather than sit on the sidelines with myopic dreams of leaving the region a pristine wilderness. Arctic inhabitants—both natives and others—of course want to keep the Arctic safe, but they do not want to make it a museum. 

Development of the region’s resources accounts for nearly 95 percent of Alaska’s revenues. If we deny its development, are we prepared to make a line item in the federal budget to pay for Alaska to remain a park? 

       

       

       

       

On his fourth trip to the U.S. as Indian Prime Minister, Narendra Modi will spend some quality time on Capitol Hill on Wednesday, where he'll address a joint meeting of the U.S. Congress. House Speaker Paul Ryan will also host the Indian premier for a lunch, which will be followed by a reception hosted jointly by the House and Senate Foreign Relations Committees and the India Caucus. What's the significance of this Congressional engagement and what might be Modi's message? 

Given that all the most-recent Indian leaders who've held five-year terms have addressed such joint meetings of Congress, some have asked whether Ryan's invitation to Modi is a big deal. The answer is, yes, it is an honour and not one extended all that often. Since 1934, there have been only 117 such speeches. Leaders from France, Israel and the United Kingdom have addressed joint meetings the most times (8 each), followed by Mexico (7), and Ireland, Italy and South Korea (6 each). With this speech, India will join Germany on the list with leaders having addressed 5 joint meetings of Congress: Rajiv Gandhi in 1985, P.V. Narashima Rao in 1994, Atal Bihari Vajpayee in 2000 and Manmohan Singh in 2005. India's first premier, Jawaharlal Nehru, spoke to the House and Senate in separate back-to-back sessions in 1949 as well. 

Congress is a key stakeholder in the U.S.-India relationship and can play a significant supportive or spoiler role. While American presidents have a lot more lee-way on foreign policy than domestic policy, Congress is not without influence on U.S. foreign relations, and shapes the context for American engagement abroad. Moreover, the breadth and depth of the U.S.-India relationship, as well as the blurring of the line between what constitutes domestic and foreign policy these days means that India's options can be affected by American legislative decisions or the political mood on a range of issues from trade to immigration, energy to defense. 

The Indian Foreign Secretary recently said that the U.S. legislature was at "very much at the heart" of the relationship today. He noted it has been "very supportive" and "even in some more difficult days where actually the Congress has been the part of the US polity which has been very sympathetic to India." But India's had rocky experiences on the Hill as well--which only heightens the need to engage members of Congress at the highest levels. 

The speech and the other interactions offer Modi an opportunity to acknowledge the role of Congress in building bilateral relations, highlight shared interests and values, outline his vision for India and the relationship, as well as tackle some Congressional concerns and note some of India's own. He'll be speaking to multiple audiences in Congress, with members there either because of the strategic imperative for the relationship, others because of the economic potential, yet others because of the values imperative--and then there are those who'll be there because it is important to their constituents, whether business or the Indian diaspora. There is also the audience outside Congress, including in India, where the speech will play in primetime. What will Modi's message be? A glimpse at previous speeches might offer some clues, though Modi is likely also to want to emphasize change. 

The speeches that came before

The speeches of previous prime ministers have addressed some common themes. They've acknowledged shared democratic values. They've mentioned the two-way flow of inspiration and ideas with individuals like Henry David Thoreau, Mahatma Gandhi, Martin Luther King getting multiple mentions. They've noted the influence of American founding documents or fathers on the Indian constitution. They've highlighted India's achievements, while stressing that much remains to be done. 

They've noted their country's diversity, and the almost-unique task Indian leaders have had--to achieve development for hundreds of millions in a democratic context. Since Gandhi, each has mentioned the Indian diaspora, noting its contributions to the U.S. Each prime minister has also expressed gratitude for American support or the contribution the U.S. partnership has made to India's development and security. They've acknowledged differences, without dwelling on them. They've addressed contemporary Congressional concerns that existed about Indian policy--in some cases offering a defense of them, in others' explaining the reason behind the policy.

Many of the premiers called for Congress to understand that India, while a democracy like the U.S. and sharing many common interests, would not necessarily achieve its objectives the same way as the U.S. And each subtly has asked for time and space, accommodation and support to achieve their goals--and argued it's in American interests to see a strong, stable, prosperous, democratic India.

In terms of subjects, each previous speech has mentioned economic growth and development as a key government priority, highlighting what policymakers were doing to achieve them. Since Gandhi, all have mentioned nuclear weapons though with different emphases: he spoke of disarmament; Rao of de-nuclearization and concerns about proliferation; two years after India's nuclear test, Vajpayee noted India's voluntary moratorium on testing and tried to reassure Congress about Indian intentions; and speaking in the context of the U.S.-India civil nuclear talks, Singh noted the importance of civil nuclear energy and defended India's track record on nuclear non-proliferation.

Since Rao, every prime minister has mentioned the challenge that terrorism posed for both the U.S. and India, with Vajpayee and Singh implicitly noting the challenge that a neighboring country poses in this regard from India's perspective. And Rao and Singh made the case for India to get a permanent seat on the U. N. Security Council.

The style of the speeches has changed, as has the tone. Earlier speeches were littered with quotes from sources like Christopher Columbus, Swami Vivekananda, Abraham Lincoln, Lala Lajpat Rai and the Rig Veda. Perhaps that was reflective of the style of speechwriting in those eras, but perhaps it was also because there were fewer concrete issues in the bilateral relationship to address. The evolution in the areas of cooperation is evident in the speeches. 

Rao's speech about two decades ago, for instance, listed U.S.-India common interests as peacekeeping, environmental crises, and combating international terrorism and international narcotics trafficking. Compare that to Singh's address which talked of cooperation on a range of issues from counterterrorism, the economy, agriculture, energy security, healthy policy, humanitarian assistance and disaster relief (HADR), democracy promotion, and global governance.

The speech yet to come

Modi will likely strike some similar themes, acknowledging the role that the U.S. Congress has played in shaping the relationship and expressing gratitude for its support. Like Vajpayee, particularly in a U.S. election year, Modi might note the bipartisan support the relationship has enjoyed in recent years. He'll undoubtedly talk about shared democratic values in America's "temple of democracy"--a phrase he used for the Indian parliament when he first entered it after his 2014 election victory. Modi will not necessarily mention the concerns about human rights, trade and investment policies, non-proliferation or India's Iran policy that have arisen on the Hill, but he will likely address them indirectly. 

For example, by emphasizing India's pluralism and diversity and the protection its Constitution gives to minorities, or the constructive role the country could play regionally (he might give examples such as the recently inaugurated dam in Afghanistan). Given the issues on the bilateral agenda, he'll likely mention the strategic convergence, his economic policy plans, terrorism, India's non-proliferation record, defense and security cooperation, and perhaps--like Vajpayee--the Asia-Pacific (without directly mentioning China). And like Vajpayee, he might be more upfront about Indian concerns and the need to accommodate them. 

While he might strike some similar themes as his predecessors and highlight aspects of continuity, Modi will also want to emphasize that it's not business as usual. He'll likely try to outline the change that he has brought and wants to bring. In the past, he has noted the generational shift that he himself represents as the first Indian prime minister born after independence and the Modi government's latest tag line is, of course, "Transforming India." And he might emphasize that this changed India represents an opportunity for the U.S.

He won't wade directly into American election issues, but might note the importance of U.S. global engagement. He might also try to address some of the angst in the U.S. about other countries taking advantage of it and being "takers." He could do this by making the case that India is not a free rider--that through its businesses, market, talent and diaspora it is contributing to American economy and society, through its economic development it will contribute to global growth, and through Indian prosperity, security and a more proactive international role--with a different approach than another Asian country has taken--it'll contribute to regional stability and order. He might also suggest ways that the U.S. can facilitate India playing such a role.

Unlike previous leaders, he has not tended to appeal to others not to ask India to do more regionally and globally because it's just a developing country and needs to focus internally. The Modi government has been highlighting the contributions of India and Indians to global and regional peace and prosperity--through peacekeeping, the millions that fought in the World Wars, HADR operations in its neighborhood, evacuation operations in Yemen in which it rescued not just Indian citizens, but Americans as well.

His government has been more vocal in joint contexts of expressing its views on the importance of a rules-based order in the Asia-Pacific and Indian Ocean regions--and we might hear more on this in his address. Overall, a theme will likely be that India is not just a "taker," and will be a responsible, collaborative stakeholder.

It'll be interesting to see whether the Indian prime minister notes the role that his predecessors have played in getting the relationship to this point. With some exceptions--for example, he acknowledged Manmohan Singh's contribution during President Obama's visit to India last year--he has not tended to do so. But there's a case to be made for doing so--it can reassure members of Congress that the relationship transcends one person or party and is based on a strategic rationale, thus making it more sustainable. Such an acknowledgement could be in the context of noting that it's not just Delhi and Washington that have built and are building this relationship, but the two countries' states, private sectors, educational institutions and people. 

This wouldn't prevent Modi from highlighting the heightened intensity of the last two years, particularly the progress in defense and security cooperation. (From a more political perspective, given that there has been criticism in some quarters of India-U.S. relations becoming closer, it can also serve as a reminder that the Congress party-led government followed a similar path).

Modi will be competing for media attention in the U.S. thanks to the focus in the U.S. on the Democratic primaries this week, but he'll have Congressional attention. But it's worth remembering that Indian prime ministers have been feted before, but if they don't deliver on the promise of India and India-U.S. relations that they often outline, disillusionment sets in. Modi will have to convince them that India is a strategic bet worth making--one that will pay off.

This piece was originally published by Huffington Post India.

       

Executive Summary

During the first decade of the 21^st century the six states of the Mountain West — Arizona, Colorado, Idaho, Nevada, New Mexico, and Utah — experienced unprecedented political and demographic changes. Population growth in all six states exceeded the national average and the region is home to the four states that underwent the largest population gains between 2000 and 2010. As a consequence, the region is now home to some of the most demographically diverse and geographically concentrated states in the country— factors that helped to transform the Mountain West from a Republican stronghold into America’s new swing region. This paper examines the impact that increased diversity and density are exerting on reapportionment and redistricting in each Mountain West state and assesses the implications that redistricting outcomes will exert both nationally and within each state in the coming decade.  Nationally, the region’s clout will increase due to the addition of three seats in the House of Representatives (one each in Arizona, Nevada, and Utah) and electoral contexts in Arizona, Colorado, Nevada, and New Mexico that will result in competitive presidential and senate elections throughout the decade. At the state level, the combination of term limits, demographic change, and the reapportionment of state legislative seats from rural to urban areas will alter the composition of these states’ legislatures and should facilitate the realignment of policy outcomes that traditionally benefitted rural interests at the expense of urban needs.

Introduction

As reapportionment and redistricting plans across the 50 states are finalized and candidate recruitment begins in earnest, the contours of the 2012 election are coming into focus. One region of the country where reapportionment (redistributing seats to account for population shifts) and redistricting (drawing boundaries for state legislative and congressional districts) are likely to have significant consequences in 2012 and beyond is in the six states of the Mountain West: Arizona, Colorado, Idaho, Nevada, New Mexico, and Utah. Driven by explosive growth during the past decade, the Mountain West is now home to some of the most demographically diverse and geographically concentrated states in the country. As a consequence, the region has increasingly become more hospitable to Democrats, particularly Colorado, Nevada, and New Mexico and to a lesser extent Arizona. In this paper, I examine how these changes are affecting reapportionment and redistricting across the region. Specifically, after summarizing some of the key regional demographic and political changes, I offer a brief overview of the institutional contexts in which the maps are being drawn. This is followed by an assessment of outcomes in each state. I conclude with a discussion of the national and state level implications that reapportionment and redistricting are likely to engender across the Mountain West.

A Region in Transition

Between 2000 and 2010 population growth in all six Mountain West states outpaced the national average of 9.7 percent and the region contains the four states that experienced the largest percent population increase in the country (Nevada = 35.1 percent; Arizona = 24.6 percent; Utah = 23.8 percent, and Idaho = 21.1 percent).[i] As a consequence, Nevada and Utah each gained their fourth seats in the House of Representative and Arizona was awarded its ninth. Beginning with the 2012 election, the Mountain West will have 29 U.S. House seats (Idaho has two House seats, New Mexico has three, and Colorado has seven) and 41 Electoral College votes.

Across the Mountain West, population growth was concentrated in the region’s largest metropolitan statistical area (MSA).[ii] Most notably, the Las Vegas metro area is now home to nearly three out of four Nevadans — the mostly highly concentrated space in the region. In Arizona, roughly two-thirds of the population now resides in the Phoenix MSA, which grew by nearly 30 percent. The Albuquerque MSA experienced the largest overall increase as a share of total population (nearly 25 percent) and now contains 44 percent of New Mexico’s population. And while Idaho remains the state in the region with the least dense population, growth in the Boise MSA significantly outpaced that state’s overall population gain and nearly 40 percent of all Idahoans reside in and around Boise. On the other end of the spectrum are the Salt Lake City and Denver MSAs, which as shares of the Colorado and Utah populations decreased slightly from 2000. Still, better than half (50.57 percent) of all Coloradoans live in Denver and its suburbs and around 41 percent of Utah’s population is concentrated in the Salt Lake City MSA.

In addition to further urbanizing the region, the prior decade’s growth continued to transform the region’s demographics as all six Mountain West states are now more ethnically diverse as compared to a decade ago.[iii] The largest changes occurred in Nevada where the minority population increased by over 11 percent and now better than 45 percent of Nevadans are classified as non-white. While the bulk of this growth was among Hispanics, whose share of the population increased by 7 percent and are now 26.5 percent of all Nevadans, the Silver State also recorded large increases among Asian and Pacific Islanders. Arizona experienced similar increases as that state’s minority population mushroomed from 36.2 percent to 42.2 percent with Hispanics now constituting 30 percent of the population. In Colorado, the minority population increased by 3.5 percent to 30 percent. Nearly all of this change was caused by an increase in Hispanics, who now constitute 20.7 percent of the state’s population. New Mexico continues to be the Mountain West’s most diverse state as nearly three out of five New Mexicans are minorities and the state contains the region’s largest Hispanic population (46 percent). And while Idaho and Utah remain overwhelmingly white, both states’ non-white populations grew at levels similar to Colorado. Idaho is now 16 percent non-white (including a Hispanic population of 11.2 percent) and nearly one in five Utahans is a minority. Between 2000 and 2010, Hispanics increased by 4 percent to constitute 13 percent of Utah’s population.

Politically, these changes helped to create competitive electoral contexts across the region. Indeed, with the obvious exceptions of Idaho and Utah, the Mountain West is now more hospitable to the Democratic Party than it was in 2000. In particular, Democrats were able to make significant gains in Colorado, Nevada, and New Mexico and effectively flipped those states from Republican leaning in 2000 to Democratic leaning in 2010. In Arizona, the Democratic performance was highly variable and moved in near perfect tandem with the broader national political environment. At the same time, the downturn in Democratic support in 2010 indicates that the party has not yet consolidated its gains. Riding a favorable 2010 macro-environment, Mountain West Republicans gained one governorship (New Mexico), seats in ten of the region’s 12 state legislative chambers, and seven House seats (out of a total of 26 in the region).[iv] Thus, heading into the 2011 redistricting cycle, Republicans control the executive and legislative branches in Arizona, Idaho, and Utah and there are no Mpuntain West states where the Democrats have unified control as the partisan composition of the Colorado legislature is divided and Nevada and New Mexico have Republican governors and Democratic legislatures.

The Institutional Context

Because of variation in the institutional arrangements governing how each state approaches reapportionment and redistricting, the impact that the demographic and political changes outlined above are exerting on map drawing differs across the region. To be sure, there are a number of commonalities across the states such as requirements of equally populated U.S. House districts, minimum population variation for state legislative districts, and boundary lines that are compact, contiguous, and maintain communities of interests. 

Beyond these constraints, mapmakers across the region are afforded different degrees of latitude in how they go about doing their work. For instance, in Nevada and New Mexico, the residency of incumbents can be considered, while Idaho forbids it. Idaho allows for twice as much inter-district population variation for state legislative districts as Colorado and New Mexico, and Idaho only allows state legislative districts to cross county lines if the counties are linked by a highway. Arizona and Idaho mandate that two lower chamber districts be nested within the boundaries of a state senate seat, while Colorado, Nevada, New Mexico, and Utah do not. Nevada also allows for multi-member member state legislative districts. Lastly, Arizona’s redistricting plans must be pre-cleared by the U.S. Department of Justice. While Arizona is the only state in the region subject to preclearance, protection of minority voting rights also has been a point of contention in prior redistricting cycles in New Mexico.

The Mountain West states also vary in terms of who oversees the redistricting process. State legislators control the process in Nevada, New Mexico, and Utah, while Arizona and Idaho use commissions. In Colorado, the General Assembly draws the map for the state’s seven U.S. House seats, while a commission oversees the drawing of state legislative maps. For the three states that use commissions for either all or part of their processes, commission size and composition differs significantly and only the Arizona Independent Redistricting Commission (AIRC) is charged with drawing maps that are competitive.[v] 

However, the most significant constraint on reapportionment and redistricting in the Mountain West is the small size of the region’s state legislatures.[vi] The mix of small chambers, increased urbanization, and large geographic spaces means very large and increasingly, fewer and fewer stand- alone rural districts. This dynamic also helps to explain the region’s history of malapportionment that often allocated seats by county regardless of population.[vii] 

State Summaries

Based upon the overview presented above, expectations about the general contours of reapportionment and redistricting in the Mountain West are fairly straightforward: the clout of urban and minority interests will increase and to the degree that those factors benefit the Democrats, the Democrats should gain some partisan advantage. Realizing these outcomes, however, has proven to be less than amicable. With the exception of Utah, all other states in the region have had various aspects of their processes litigated, and map drawing for Colorado’s U.S. House seats and all of Nevada and New Mexico’s redistricting is being completed in state courts. Below, I summarize the status of reapportionment and redistricting in each state.

Arizona

Beginning its work amid criticism of its composition, calls for its abolishment, and an investigation by the Arizona attorney general, the voter-initiated Arizona Independent Redistricting Commission (AIRC) has struggled to balance the conflicting demands of drawing competitive districts with the protection of minority voting rights. The commission’s work has been further hindered by Republican Governor Jan Brewer’s unsuccessful attempt to impeach the commission’s nonpartisan chair. In addition, Arizona has filed a lawsuit in federal court challenging the state’s preclearance requirement.

Republican attempts to undermine the AIRC stem from the fact that given unified Republican control of the Arizona governorship and legislature, Republicans would otherwise be in a position to implement a partisan gerrymander. At the same time, the GOP’s present dominance is partially an artifact of the 2001 redistricting. To gain preclearance in 2001, the AIRC’s maps created a large number of majority-minority state legislative districts and minority-friendly U.S House seats by packing Democratic voters into these districts. In so doing, Democratic support in the surrounding districts was weakened; allowing Republicans to more efficiently translate their votes into seats.[viii] Thus, despite a slight partisan voter registration advantage (4.35 percent as of July 2011), Republicans presently hold more than two-thirds of the state legislative seats and five of eight U.S. House seats.

Given Arizona’s growth patterns between 2000 and 2010 coupled with the AIRC’s charge of creating competitive district, drawing a map as favorable to the GOP in 2011 is virtually impossible unless the size of the Arizona legislature is increased. Still, in order to protect minority voting rights, Arizona’s final maps are likely to tilt in favor of the GOP — just not to the degree that they have in the past. In particular, the elimination and consolidation of rural state legislative districts and a more urban orientation for Arizona’s nine U.S. House districts should provide the Democrats with electoral opportunities that will only increase as Arizona’s population continues to diversity and urbanize.

Colorado

As noted above, Colorado uses a commission (the Colorado Redistricting Commission) for redistricting state legislative seats and the Colorado General Assembly draws the maps for the state’s seven U.S. House seats. Neither process has gone smoothly. For the state’s seven U.S. House seats, the Democratic-dominated state senate and the Republican-controlled lower chamber failed to find common ground after exchanging two rounds of maps. Because Democratic governor John Hickenlooper refused to call a special session, redistricting of Colorado U.S. House seats was completed in state court. After a good deal of legal wrangling, the Colorado Supreme Court upheld a map favored by Colorado Democrats that creates two safe Republican districts, one safe Democratic district, and four districts where neither party’s registration advantage exceeds 4 percent. As a consequence, Colorado will feature a number of competitive U.S. House elections throughout the coming decade.

Map drawing for state legislative seats by the CRC has also been hindered by partisanship. Hoping to break a partisan stalemate, in late summer the nonpartisan chair of the CRC offered maps that combined parts of prior Democratic and Republican proposals to create thirty-three competitive seats (out of a total of 100) and twenty-four seats with Hispanic populations of 30 percent or more. After being approved by the CRC with some Republican dissents, the plan was rejected by the Colorado Supreme Court, which must sign-off on the CRC’s plans before they can be implemented. By attempting to draw more competitive maps — a criterion that the CRC is not obligated to consider – the CRC’s maps undermined its charge of producing districts that keep communities of interest intact. The CRC’s second set maps, which were widely viewed as favoring the Democrats, were upheld by the Colorado Supreme Court.

Idaho

While partisan considerations have loomed large in the reapportionment and redistricting processes in Arizona and Colorado, in Republican-dominated Idaho the main points of contention have been spatial. Indeed, because of the difficulty of satisfying a constitutional requirement limiting county splits and a state law constraining how geographic areas can be combined, the Idaho’s Citizen Commission for Reapportionment (ICCR) failed to reach an agreement before its constitutionally imposed deadline. After sorting through a number of legal and constitutional questions, a second set of commissioners were impaneled and completed their work in less than three weeks. Given Idaho’s partisan composition, the final maps are a regional anomaly as they benefit the GOP while being somewhat more urban oriented. This was accomplished by moving rural Republican voters into urban Democratic state legislative districts and adjusting the lines of Idaho’s 1st House district to shed roughly 50,000 citizens. At the same time, because of Idaho’s strict constraints on how cities and counties can be divided, the map for the state legislature paired a number of incumbents in the same district and one district contains the residences of five incumbents, setting up a number of competitive primary elections.

While growth patterns and demographic and partisan change in Nevada between 2000 and 2010 insured a redistricting process that would favor Democrats, Nevada Republicans sought to delay this inevitability as long as possible. The state’s Republican governor, Brian Sandoval, vetoed two sets of maps passed by the Democratic controlled legislature and Sandoval refused to call a special session to complete redistricting. Instead, he and his party hoped for a better outcome in state court. Despite drawing a supervising judge who was the son of a former Republican Governor, Nevada Republicans fared no better in state court. Ultimately, the process was turned over to three special masters who rejected Nevada Republicans’ claim that section 2 of the Voting Rights Act required a majority Hispanic U.S. House district.[ix] As a consequence, two of Nevada’s U.S. House seats favor Democrats, one is safely Republican, and the fourth is a swing district. In the Nevada legislature the representation of urban interests will increase as parts of or all of forty-seven of the sixty-three seats in the Nevada legislature are now located in the Democratic stronghold of Clark County. 

New Mexico

The 2011 process in New Mexico has essentially been a rerun of the gridlock that engulfed the state’s 2001 redistricting debate. Once again, the Democrats sought to use their control over both chambers of the New Mexico legislature to preserve their majorities and draw the boundaries for the state’s three U.S. House seats in manner favorable to the party. However, because of bickering among Democrats the legislature failed to approve its map for the state’s three U.S. House seats prior to the end of the special session and the plans for the state legislature that were passed on party line votes were vetoed by Republican governor Susana Martinez. Thus, once again, New Mexico’s divided state government coupled with the state’s history of litigating redistricting plans (in 2001 map drawing and court battles cost the state roughly $3.5 million) means that redistricting will be completed in state court. While the Republicans may be able to gain some concessions through the courts, New Mexico is the most Democratic state in the Mountain West and, as noted above, the state’s growth during the prior decade was concentrated in heavily Democratic Albuquerque and its suburbs. Thus, as in 2001, the likely outcome in New Mexico is a redistricting plan that will be favorable to the Democrats and weaken the influence of rural interests.

Utah

Utah is the only state in the region where conditions exist (e.g., unified partisan control in a non-commission state) for the implementation of a partisan gerrymander. However, to accomplish this end required the slicing and dicing of communities and municipalities particularly those in and around the state’s urban center. Most notably, in drawing the state’s four U.S. House seats, Republicans divided the Utah’s population center (Salt Lake City County) into four districts by combining parts of the urban core with rural counties - a plan that, not coincidentally, cracks the only part of the state where Democrats are able to compete. Similarly, maps for state legislative districts increase the number of seats that favor the GOP and, in many instances, protect incumbents from potential primary challengers by dividing communities into multiple districts. Democrats in Utah are so depleted that they were unable to get the Republicans to even agree to include recognition and protection of minority communities of interest to in Utah’s redistricting guidelines. Thus, despite constituting nearly 20 percent of the state’s population, minorities received no consideration in Utah’s 2011 redistricting.

Implications and Conclusions

Reapportionment and redistricting are often regarded as the most political activities in the United States; an expectation that is certainly being realized across the Mountain West. In the swing states where legislators draw the maps (for example, Colorado, Nevada, and New Mexico) but where state government is divided, partisan considerations loomed large, causing all of these states to conclude all or parts of their redistricting processes in the courts. The conflicts between Arizona’s preclearance requirement and the AIRC’s commitment to drawing competitive districts have partisan consequences as well. In one-party Idaho and Utah, the politics of space were at issue.  Geographic constraints on district boundaries imposed through statute and the Idaho constitution ensured that more rural seats were preserved and that the growing influence of urban interests will be checked. In Utah, Republicans moved in the opposite direction by carving up the very communities from which they are elected in order to implement a partisan gerrymander. 

Another school of thought, however, argues that the most typical redistricting outcome is not partisan gain or loss, but an uncertainty that shakes up the state political environment and facilitates political renewal. In the case of the Mountain West, there is evidence to support that claim as well. The biggest source of uncertainty will continue to be growth. While the economic downturn has slowed migration to the region, the Mountain West states remain poised to keep expanding in a manner that will further concentrate and diversify their populations. A second source of uncertainty is the region’s large number of nonpartisans. While redistricting is often framed as a zero-sum game played between Democrats and Republicans, the electoral hopes for either party hinges on its ability to attract the support of the region’s expanding nonpartisan demographic.[x] 

At the state level, with the exception of Idaho, the most significant consequence will be a reduction in rural influence. The combination of term limits in Arizona, Nevada, and Colorado, small legislative chambers, and fast growing urban populations will continue to decrease the number of entrenched rural legislators and the number of stand-alone rural districts. Consequently, urban interests should be positioned to align state policy with demographic reality. The void created by the demise of rural legislators will be filled by minorities, particularly Hispanics. To date, the increased political activism of Hispanic communities across the region has primarily benefited Democrats; helped in no small part by the hard-line rhetoric and policies championed by some Mountain West Republicans.[xi] More generally, depending on growth patterns, by 2020 Nevada and perhaps Arizona may join New Mexico as states with majority-minority populations. Thus, with or without Section 2 of the Voting Rights Act, minority legislators, primarily Hispanics, will increase their ranks significantly. The only question is whether all of these politicians will be taking office with a “D” next to their names or whether some will be elected as Republicans.  

Nationally, the impact of reapportionment and redistricting is mixed. Certainly, the addition of three U.S. House seats after the 2010 census will give more voice to regional issues in Washington D.C. At the same time, because the Mountain West’s House delegation will continue to be split along partisan lines and many of the region’s competitive House seats will rotate between the parties throughout the decade, it may be difficult for any but the safest Mountain West representatives to accrue the requisite seniority to become players in the House. Also, because of pending retirements in Arizona and New Mexico, a successful 2010 primary challenge in Utah, and a resignation in Nevada, the region’s influence in the U.S. Senate is likely to decline in the near term. Indeed, after the 2012 election the only senators from the region who will have served more than one term will be Nevada’s Harry Reid, Arizona’s John McCain, Idaho’s Mike Crapo, and Utah’s Orrin Hatch (presuming a successful 2012 reelection).

Thus, the arena where the region is likely to garner the most attention is in the coming decade’s three presidential elections. Colorado, Nevada, and New Mexico were all battleground states in 2004 and 2008, with Republican George W. Bush narrowly winning all three in 2004 and Democrat Barack Obama flipping them blue in 2008 by wider margins. Obviously, Idaho and Utah will remain out of reach for the Democrats in statewide contests for some time.  However, Arizona is likely to become the region’s fourth swing state in the near future. Thus, continued investment in Arizona and throughout the region will allow the Democrats to further expand the number of Mountain West states in play while forcing the GOP to spend resources to defend turf that it once could safely call its own.

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• The Impact of Density and Diversity on Reapportionment and Redistricting in the Mountain West

       

On the eve of the first anniversary of the Iran nuclear deal, Tehran has announced that Iranian-American Siamak Namazi (who has been detained since last October) and three other dual nationals have been charged with unstated crimes. Tehran’s acknowledgement of the charges—and the Obama administration’s anemic response to these arrests to date—underscore that managing tensions in the post nuclear-deal era remains complex, both for Washington and Tehran.

Siamak’s story

Last week, in a welcome but unavoidably symbolic gesture, Rep. Ed Royce (R-CA), chairman of the House Foreign Affairs Committee, and Rep. Gerry Connolly (D-VA) introduced a bipartisan resolution demanding that Tehran release Siamak, as well as his father Baqer. Siamak is a forty-something consultant who spent his formative years in the United States; his father, Baqer, served as a provincial governor under Iran’s monarchy and as a UNICEF official during his post-revolutionary exile. Outside their day jobs, both men long campaigned for greater engagement between Washington and Tehran. Like many in the Iranian diaspora, they returned to Iran whenever country’s shifting political winds seemed hospitable. 

It is a particularly cruel irony—and grotesquely consistent with the tactics of the Islamic Republic—that the diplomatic breakthrough that both Namazis hoped for precipitated their current nightmare. On the heels of the nuclear deal, Iranian security forces prevented Siamak from leaving the country; he was interrogated for months before he was brought to Iran’s infamous Evin Prison in October 2015. Then in February, Baqer was lured back to Iran on the false premise of visiting his jailed son; instead, he was arrested upon his arrival at the Tehran airport.

Unfortunately, their plight is not unique. Even after Tehran’s much-heralded release of five imprisoned Americans, including Washington Post reporter Jason Rezaian, in January, Tehran has arrested several other dual nationals on trumped-up charges. This includes Nizar Zakka, a Lebanese technology expert who holds a U.S. green card; Homa Hoodfar, a Canadian-Iranian academic; and Nazanin Ratcliff, a British-Iranian woman who was seized at the airport with her toddler daughter. They follow in the painful footsteps of many other dual nationals and countless Iranians arrested without cause.

Paranoia blues

You probably haven’t heard much about Siamak, Nizar, Nazanin, or Homa in the press. Some have deliberately avoided the spotlight, traumatized by their experience or hoping that an “inside strategy” to exert pressure within the system will generate results. It’s not hard; in the post-nuclear deal era, Iran’s abuses are overshadowed by ISIS atrocities, Brexit anxieties, and an unusually absurd American presidential campaign.

But Tehran’s targeting of Americans and others with foreign ties is a pattern that warrants public and policymakers’ attention, because it exposes the nature of Iran’s ruling system and the landscape for American influence in post-nuclear deal Iran. It may be tempting to dismiss these arrests on the grounds of bad luck or individual foolishness or the vagaries of Iran’s enduring power struggle. But none of those rationalizations—while perfectly plausible—does justice to the scope of the problem.

[T]hese arrests are purely political, the inevitable byproduct of a ruling system that is steeped in a culture of paranoia, particularly toward the West.

In fact, these arrests are purely political, the inevitable byproduct of a ruling system that is steeped in a culture of paranoia, particularly toward the West. As Iran’s leaders reopened to the world via the resolution of the nuclear impasse, they have instinctively sought to reinforce the ideological antipathies on which they built the post-revolutionary state. After all, flexing the muscles of theocratic authoritarianism offers a convenient way to persuade a population that is eager for change to steer clear of the temptations of globalization and “Westoxication.” Tehran’s deep-seated fears of a Western-orchestrated conspiracy to undermine the regime are echoed elsewhere; Egypt, China, and Russia have similarly clamped down on international organizations, with Americans and other foreign nationals caught in the crossfire.

For the Islamic Republic, seizing U.S. citizens is also a well-honed tactic for aggravating its foremost adversary in Washington. From the 1979 hostage crisis through the detention of U.S. sailors earlier this year, Iran’s insecure leadership appreciates the efficacy of using individual Americans as pawns in stoking bilateral tensions. It’s a maneuver that conveniently highlights the limits on Washington’s capacity to protect its own nationals abroad. As I wrote at the time of Rezaian’s arrest nearly two years ago: 

“When an Iranian-American is seized by the system, the world's sole superpower is forced to fall back on the least satisfying instruments of diplomatic influence: eloquent statements from the podium, third-party consular inquiries, and quiet efforts through cooperative interlocutors.”

The Congressional resolution appealing for the Namazis’ release represents an additional step in the right direction, but it also demonstrates the weakness of U.S. leverage in the wake of the nuclear deal. At the family’s behest, the resolution does not propose specific penalties that might; Siamak himself was a fierce critic of Washington’s use of sanctions as an instrument for influencing Iran policies. Unfortunately, that deference was probably unnecessary, as the Obama administration is particularly loathe to deploy new economic pressure against Tehran in these early days of the accord’s implementation. 

Shot in the foot

So these arrests go essentially unanswered, and the ripple effects deter Americans and Europeans from engaging in precisely the places and on precisely the issues where their contributions are most valuable. And when Washington appears unable to protect its own citizens from the long arm of Iranian repression, American advocacy on broader human rights issues carries even less credibility with Tehran. Given the proliferation of these cases around the world—launched by authoritarian regimes that fear a democratic contagion—Washington needs to devise an across-the-board strategy to counter intensifying efforts to target Western individuals and institutions. Imposing sanctions for each individual case would not be realistic or effective, but Washington should be prepared to deploy a clear, predictable and escalating set of responses for governments that routinely use American citizens as pawns for their authoritarian agendas.

For Tehran, dual nationals may seem like easy pickings, but ultimately these arrests—and the broad campaign of repression that has continued almost without interruption since the 1979 revolution—pose profound challenges for Iranian interests. After all, its far-flung, disproportionately well-educated, and wealthy diaspora could furnish Iran with a vast pool of talent and capital for its future development. But how many Iranian expatriates will trust their investments—and their personal freedom—to a system that baits 80 year old men into imprisonment and cleaves mothers from their young daughters (and then confiscates the baby’s British passport)? How can any foreign investor rely on official assurances and legal protections from a government that arrests individuals arbitrarily on the basis of wild-eyed conspiracy theories?

[U]ltimately these arrests...pose profound challenges for Iranian interests.

The risks should not be underestimated, and their repercussions will in time hit Iran hardest. This latest round of repression strikes at the very heart of what the nuclear deal was intended to accomplish—Iran’s rehabilitation from pariah status and its full reintegration into the global economy. Iranian leaders seem impervious to the one of the key lessons from their previous efforts to reopen the economy to the world: that provocative policies will undercut access to finance and the inclination of international investors.

Fundamentally, as I commented in January, after the Saudi embassy in Tehran was torched: 

“the requirements of any kind of resilient reentry to the global economy and achieving the stature that Iranians crave are simply incompatible with aspects of Iran’s official ideology. A state that refuses to rein in—or, more accurately, still relies on—semi-official vandalism will inevitably find its ambitions curbed instead…to fully come in from the cold, Tehran will have to disavow the revolution’s ideological imperatives.”

For an Iranian leadership that has complained incessantly about the slow pace of sanctions relief, there is an unabashed hypocrisy in this kind of self-sabotage, whose implications extend well beyond the economy. The arrests of dual nationals represent the tip of an iceberg of injustice that underpins—and will eventually undermine—the Islamic Republic. The stalwarts of the Iranian system have constructed an elaborate ideological and bureaucratic edifice aimed at preserving their own power. In the end, their disdain for rule of law and their phobias about Western influence represent greater vulnerabilities than any of the perceived threats that motivate the crackdown.

       

On his fourth trip to the U.S. as Indian Prime Minister, Narendra Modi will spend some quality time on Capitol Hill on Wednesday, where he'll address a joint meeting of the U.S. Congress. House Speaker Paul Ryan will also host the Indian premier for a lunch, which will be followed by a reception hosted jointly by the House and Senate Foreign Relations Committees and the India Caucus. What's the significance of this Congressional engagement and what might be Modi's message? 

Given that all the most-recent Indian leaders who've held five-year terms have addressed such joint meetings of Congress, some have asked whether Ryan's invitation to Modi is a big deal. The answer is, yes, it is an honour and not one extended all that often. Since 1934, there have been only 117 such speeches. Leaders from France, Israel and the United Kingdom have addressed joint meetings the most times (8 each), followed by Mexico (7), and Ireland, Italy and South Korea (6 each). With this speech, India will join Germany on the list with leaders having addressed 5 joint meetings of Congress: Rajiv Gandhi in 1985, P.V. Narashima Rao in 1994, Atal Bihari Vajpayee in 2000 and Manmohan Singh in 2005. India's first premier, Jawaharlal Nehru, spoke to the House and Senate in separate back-to-back sessions in 1949 as well. 

Congress is a key stakeholder in the U.S.-India relationship and can play a significant supportive or spoiler role. While American presidents have a lot more lee-way on foreign policy than domestic policy, Congress is not without influence on U.S. foreign relations, and shapes the context for American engagement abroad. Moreover, the breadth and depth of the U.S.-India relationship, as well as the blurring of the line between what constitutes domestic and foreign policy these days means that India's options can be affected by American legislative decisions or the political mood on a range of issues from trade to immigration, energy to defense. 

The Indian Foreign Secretary recently said that the U.S. legislature was at "very much at the heart" of the relationship today. He noted it has been "very supportive" and "even in some more difficult days where actually the Congress has been the part of the US polity which has been very sympathetic to India." But India's had rocky experiences on the Hill as well--which only heightens the need to engage members of Congress at the highest levels. 

The speech and the other interactions offer Modi an opportunity to acknowledge the role of Congress in building bilateral relations, highlight shared interests and values, outline his vision for India and the relationship, as well as tackle some Congressional concerns and note some of India's own. He'll be speaking to multiple audiences in Congress, with members there either because of the strategic imperative for the relationship, others because of the economic potential, yet others because of the values imperative--and then there are those who'll be there because it is important to their constituents, whether business or the Indian diaspora. There is also the audience outside Congress, including in India, where the speech will play in primetime. What will Modi's message be? A glimpse at previous speeches might offer some clues, though Modi is likely also to want to emphasize change. 

The speeches that came before

The speeches of previous prime ministers have addressed some common themes. They've acknowledged shared democratic values. They've mentioned the two-way flow of inspiration and ideas with individuals like Henry David Thoreau, Mahatma Gandhi, Martin Luther King getting multiple mentions. They've noted the influence of American founding documents or fathers on the Indian constitution. They've highlighted India's achievements, while stressing that much remains to be done. 

They've noted their country's diversity, and the almost-unique task Indian leaders have had--to achieve development for hundreds of millions in a democratic context. Since Gandhi, each has mentioned the Indian diaspora, noting its contributions to the U.S. Each prime minister has also expressed gratitude for American support or the contribution the U.S. partnership has made to India's development and security. They've acknowledged differences, without dwelling on them. They've addressed contemporary Congressional concerns that existed about Indian policy--in some cases offering a defense of them, in others' explaining the reason behind the policy.

Many of the premiers called for Congress to understand that India, while a democracy like the U.S. and sharing many common interests, would not necessarily achieve its objectives the same way as the U.S. And each subtly has asked for time and space, accommodation and support to achieve their goals--and argued it's in American interests to see a strong, stable, prosperous, democratic India.

In terms of subjects, each previous speech has mentioned economic growth and development as a key government priority, highlighting what policymakers were doing to achieve them. Since Gandhi, all have mentioned nuclear weapons though with different emphases: he spoke of disarmament; Rao of de-nuclearization and concerns about proliferation; two years after India's nuclear test, Vajpayee noted India's voluntary moratorium on testing and tried to reassure Congress about Indian intentions; and speaking in the context of the U.S.-India civil nuclear talks, Singh noted the importance of civil nuclear energy and defended India's track record on nuclear non-proliferation.

Since Rao, every prime minister has mentioned the challenge that terrorism posed for both the U.S. and India, with Vajpayee and Singh implicitly noting the challenge that a neighboring country poses in this regard from India's perspective. And Rao and Singh made the case for India to get a permanent seat on the U. N. Security Council.

The style of the speeches has changed, as has the tone. Earlier speeches were littered with quotes from sources like Christopher Columbus, Swami Vivekananda, Abraham Lincoln, Lala Lajpat Rai and the Rig Veda. Perhaps that was reflective of the style of speechwriting in those eras, but perhaps it was also because there were fewer concrete issues in the bilateral relationship to address. The evolution in the areas of cooperation is evident in the speeches. 

Rao's speech about two decades ago, for instance, listed U.S.-India common interests as peacekeeping, environmental crises, and combating international terrorism and international narcotics trafficking. Compare that to Singh's address which talked of cooperation on a range of issues from counterterrorism, the economy, agriculture, energy security, healthy policy, humanitarian assistance and disaster relief (HADR), democracy promotion, and global governance.

The speech yet to come

Modi will likely strike some similar themes, acknowledging the role that the U.S. Congress has played in shaping the relationship and expressing gratitude for its support. Like Vajpayee, particularly in a U.S. election year, Modi might note the bipartisan support the relationship has enjoyed in recent years. He'll undoubtedly talk about shared democratic values in America's "temple of democracy"--a phrase he used for the Indian parliament when he first entered it after his 2014 election victory. Modi will not necessarily mention the concerns about human rights, trade and investment policies, non-proliferation or India's Iran policy that have arisen on the Hill, but he will likely address them indirectly. 

For example, by emphasizing India's pluralism and diversity and the protection its Constitution gives to minorities, or the constructive role the country could play regionally (he might give examples such as the recently inaugurated dam in Afghanistan). Given the issues on the bilateral agenda, he'll likely mention the strategic convergence, his economic policy plans, terrorism, India's non-proliferation record, defense and security cooperation, and perhaps--like Vajpayee--the Asia-Pacific (without directly mentioning China). And like Vajpayee, he might be more upfront about Indian concerns and the need to accommodate them. 

While he might strike some similar themes as his predecessors and highlight aspects of continuity, Modi will also want to emphasize that it's not business as usual. He'll likely try to outline the change that he has brought and wants to bring. In the past, he has noted the generational shift that he himself represents as the first Indian prime minister born after independence and the Modi government's latest tag line is, of course, "Transforming India." And he might emphasize that this changed India represents an opportunity for the U.S.

He won't wade directly into American election issues, but might note the importance of U.S. global engagement. He might also try to address some of the angst in the U.S. about other countries taking advantage of it and being "takers." He could do this by making the case that India is not a free rider--that through its businesses, market, talent and diaspora it is contributing to American economy and society, through its economic development it will contribute to global growth, and through Indian prosperity, security and a more proactive international role--with a different approach than another Asian country has taken--it'll contribute to regional stability and order. He might also suggest ways that the U.S. can facilitate India playing such a role.

Unlike previous leaders, he has not tended to appeal to others not to ask India to do more regionally and globally because it's just a developing country and needs to focus internally. The Modi government has been highlighting the contributions of India and Indians to global and regional peace and prosperity--through peacekeeping, the millions that fought in the World Wars, HADR operations in its neighborhood, evacuation operations in Yemen in which it rescued not just Indian citizens, but Americans as well.

His government has been more vocal in joint contexts of expressing its views on the importance of a rules-based order in the Asia-Pacific and Indian Ocean regions--and we might hear more on this in his address. Overall, a theme will likely be that India is not just a "taker," and will be a responsible, collaborative stakeholder.

It'll be interesting to see whether the Indian prime minister notes the role that his predecessors have played in getting the relationship to this point. With some exceptions--for example, he acknowledged Manmohan Singh's contribution during President Obama's visit to India last year--he has not tended to do so. But there's a case to be made for doing so--it can reassure members of Congress that the relationship transcends one person or party and is based on a strategic rationale, thus making it more sustainable. Such an acknowledgement could be in the context of noting that it's not just Delhi and Washington that have built and are building this relationship, but the two countries' states, private sectors, educational institutions and people. 

This wouldn't prevent Modi from highlighting the heightened intensity of the last two years, particularly the progress in defense and security cooperation. (From a more political perspective, given that there has been criticism in some quarters of India-U.S. relations becoming closer, it can also serve as a reminder that the Congress party-led government followed a similar path).

Modi will be competing for media attention in the U.S. thanks to the focus in the U.S. on the Democratic primaries this week, but he'll have Congressional attention. But it's worth remembering that Indian prime ministers have been feted before, but if they don't deliver on the promise of India and India-U.S. relations that they often outline, disillusionment sets in. Modi will have to convince them that India is a strategic bet worth making--one that will pay off.

This piece was originally published by Huffington Post India.

      

       

       

Today in Seattle, Seattle Mayor Ed Murray will announce the Central Puget Sound region is joining a pilot program that will create and implement plans to attract foreign direct investment as part of the Global Cities Initiative, a joint project of the Brookings Institution and JPMorgan Chase.

Mayor Murray will make this announcement at a Global Cities Initiative forum, where Seattle area business and civic leaders will also discuss strengthening the global identity of the Puget Sound region and expanding opportunities in overseas markets. Following the announcement, Mayor Marilyn Strickland of Tacoma and Mayor Ray Stephanson of Everett will make additional remarks about the importance of this new effort.

The Seattle area is joined in the pilot by Columbus, Ohio; Minneapolis-Saint Paul; Portland, Ore.; San Antonio; and San Diego. This group will meet in Seattle today for their first working session, where they will discuss the process for developing their foreign direct investment plans.

Foreign direct investment has long supported regional economies, not only by infusing capital, but also by investing in workers, strengthening global connections and sharing best business practices. The Global Cities Initiative’s foreign direct investment planning process will help metro areas promote their areas’ unique appeal, establish strategic and mutually beneficial relationships and attract this important, underutilized source of investment.

With the help of the Global Cities Initiative, the selected metro areas will strategically pursue foreign direct investment such as new expansions, mergers and acquisitions, and other types of foreign investment. Forthcoming Brookings research will offer metropolitan leaders more detailed data on foreign direct investment’s influence on local economies.

Read the Forum Press Release Here »

See the Event Recap »

       

       

       

       

In last night’s Pennsylvania primary, Hillary Clinton won a sweeping if not quite overwhelming victory, receiving 55 percent of the vote and reducing Barack Obama’s overall popular vote edge by more than 200,000. Because of the Democratic party’s system of proportional representation, she netted fewer than 15 pledged delegates. These results have quieted calls for her to leave the race and will probably slow the steady flow of superdelegates to Obama. Nonetheless, her path to the nomination remains steep.

The demographics of the Pennsylvania vote followed a now-familiar pattern. Obama won among voters younger than 40, while Clinton prevailed among older voters. Obama won in big cities and some inner suburbs; Clinton carried suburbs overall while winning more than 60 percent of the small town and rural vote. Clinton did 9 points worse among men than among women, who constituted 59 percent of last night’s voters. She received 62 percent of the vote from gun-owning households and almost three-fifths of the vote from union households. Obama carried voters from families making less than $15,000 and more than $150,000; Clinton carried everyone in between. She received 64 percent of the vote from high school graduates but only 48 percent from college graduates. Obama won 55 percent of the vote among those who consider themselves “very liberal,” while Clinton got 60 percent of the vote among self-described moderates. Clinton took 56 percent among long-time Democrats, while Obama took 62 percent of new Democratic primary voters—principally Republicans and Independents who registered as Democrats to participate, but also the 4 percent of the primary electorate that previously been unregistered.

There is evidence that religion, gender and race all figured in the results. Clinton received 58 percent of the white Protestant vote and a stunning 71 percent of white Catholics. Obama got 64 percent of those who profess no religion and 56 percent of those who never attend church. Clinton did 22 points better among those who said gender was important than among those who did not. (Intriguingly, men who said it mattered were also more likely to support Clinton.) By contrast, race appears to have been a negative for Obama: whites who said it mattered gave 75 percent of their votes to Clinton, versus only 58 percent for those who said it did not. While nearly half the whites for whom race mattered refused to say that they would be willing to support Obama in the general election, their sentiments may well soften in coming months as differences between the parties come to the fore.

The long campaign mattered, and it left some bruises. 68 percent of the voters said that Clinton had attacked unfairly; 50 percent thought Obama had. Nearly a quarter of the electorate thought that Clinton was solely responsible for unfair attacks, versus only 6 percent who thought Obama was. Only 57 percent of the electorate thought that Clinton was honest and trustworthy, versus 67 percent for Obama. Only 40 percent said they would be satisfied if either candidate won; 32 percent wanted only Clinton, and 23 percent only Obama. But however negative the contest may have turned, it appears to have worked to Clinton’s advantage: she received 57 percent among voters who decided during the last week before the primary, 5 points better than she did among those who decided earlier.

The results also confirmed the surge in concern about the economy. Fifty-five percent of the voters regarded the economy as the top issue, versus only 27 percent for the war in Iraq and a modest 14 percent for health care. Obama prevailed only among voters who gave top priority to Iraq, while Clinton received 54 percent of the health care voters and 58 percent of the economy voters.

Attention now shifts to the May 6 primaries in North Carolina and Indiana. Obama is expected to prevail in North Carolina, but Indiana offers a level playing field. A split decision would be likely to prolong the race, while an Obama sweep might well induce many undecided superdelegates to declare for him and bring this protracted contest to an end. In addition, Obama’s fundraising edge is becoming increasingly important. Not long into her victory speech, Clinton made an urgent pitch for new contributions. Facing a mounting debt and dwindling cash on hand, her ability to continue on until the end of the primary and caucus season in early June may well depend on the size and speed of her supporters’ response.

      

       

       

       

       

       

       

       

       

       

In the United States, the official poverty rate for 2012 stood at 15 percent based on the national poverty line which is equivalent to around $16 per person per day. Of the 46.5 million Americans living in poverty, 20.4 million live under half the poverty line. This begs the question of just how poor America’s poorest people are.

Poverty, in one form or other, exists in every country. But the most acute, absolute manifestations of poverty are assumed to be limited to the developing world. This is reflected in the fact that rich countries tend to set higher poverty lines than poor countries, and that global poverty estimates have traditionally excluded industrialized countries and their populations altogether.

An important study on U.S. poverty by Luke Shaefer and Kathryn Edin gently challenges this assumption. Using an alternative dataset from the one employed for the official U.S. poverty measure, Shaefer and Edin show that millions of Americans live on less than $2 a day—a threshold commonly used to measure poverty in the developing world. Depending on the exact definitions used, they find that up to 5 percent of American households with children are shown to fall under this parsimonious poverty line.

Methodologies for measuring poverty differ wildly both within and across countries, so comparisons and their interpretation demand extreme care.

These numbers are intended to shock—and they succeed. The United States is known for having higher inequality and a less generous social safety net than many affluent countries in Europe, but the acute deprivations that flow from this are less understood. A crude comparison of Shaefer and Edin’s estimates with the World Bank’s official $2 a day poverty estimates for developing economies would place the United States level with or behind a large set of countries, including Russia (0.1 percent), the West Bank and Gaza (0.3 percent), Jordan (1.6 percent), Albania (1.7 percent), urban Argentina (1.9 percent), urban China (3.5 percent), and Thailand (4.1 percent). Many of these countries are recipients of American foreign aid. However, methodologies for measuring poverty differ wildly both within and across countries, so such comparisons and their interpretation demand extreme care.

This brief is organized into two parts. In the first part, we examine the welfare of America’s poorest people using a variety of different data sources and definitions. These generate estimates of the number of Americans living under $2 a day that range from 12 million all the way down to zero. This wide spectrum reflects not only a lack of agreement on how poverty can most reliably be measured, but the particular ways in which poverty is, and isn’t, manifested in the U.S.. In the second part, we reexamine America’s $2 a day poverty in the context of global poverty. We begin by identifying the source and definition of poverty that most faithfully replicates the World Bank’s official poverty measure for the developing world to allow a fairer comparison between the U.S. and developing nations. We then compare the characteristics of poverty in the U.S. and the developing world to provide a more complete picture of the nature of poverty in these different settings. Finally, we explain why comparisons of poverty in the U.S. and the developing world, despite their limitations and pitfalls, are likely to become more common.

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One of global society’s foremost structural changes underway is its rapid aggregate shift from farmbased to city-based economies. More than half of humanity now lives in urban areas, and more than two-thirds of the world’s economies have a majority of their population living in urban settings. Much of the gradual movement from rural to urban areas is driven by long-term forces of economic progress. But one corresponding downside is that city-based societies become increasingly disconnected—certainly physically, and likely psychologically—from the practicalities of rural livelihoods, especially agriculture, the crucial economic sector that provides food to fuel humanity.

The nature of agriculture is especially important when considering the tantalizingly imminent prospect of eliminating extreme poverty within a generation. The majority of the world’s extremely poor people still live in rural areas, where farming is likely to play a central role in boosting average incomes. Agriculture is similarly important when considering environmental challenges like protecting biodiversity and tackling climate change. For example, agriculture and shifts in land use are responsible for roughly a quarter of greenhouse gas emissions.

As a single word, the concept of “agriculture” encompasses a remarkably diverse set of circumstances. It can be defined very simply, as at dictionary.com, as “the science or occupation of cultivating land and rearing crops and livestock.” But underneath that definition lies a vast array of landscape ecologies and climates in which different types of plant and animal species can grow. Focusing solely on crop species, each plant grows within a particular set of respective conditions. Some plants provide food—such as grains, fruits, or vegetables—that people or livestock can consume directly for metabolic energy. Other plants provide stimulants or medication that humans consume—such as coffee or Artemisia—but have no caloric value. Still others provide physical materials—like cotton or rubber—that provide valuable inputs to physical manufacturing.

One of the primary reasons why agriculture’s diversity is so important to understand is that it defines the possibilities, and limits, for the diffusion of relevant technologies. Some crops, like wheat, grow only in temperate areas, so relevant advances in breeding or plant productivity might be relatively easy to diffuse across similar agro-ecological environments but will not naturally transfer to tropical environments, where most of the world’s poor reside. Conversely, for example, rice originates in lowland tropical areas and it has historically been relatively easy to adopt farming technologies from one rice-growing region to another. But, again, its diffusion is limited by geography and climate. Meanwhile maize can grow in both temperate and tropical areas, but its unique germinating properties render it difficult to transfer seed technologies across geographies.

Given the centrality of agriculture in many crucial global challenges, including the internationally agreed Sustainable Development Goals recently established for 2030, it is worth unpacking the topic empirically to describe what the term actually means today. This short paper does so with a focus on developing country crops, answering five basic questions: 

1. What types of crops does each country grow? 

2. Which cereals are most prominent in each country? 

3. Which non-cereal crops are most prominent in each country? 

4. How common are “cash crops” in each country? 

5. How has area harvested been changing recently? 

Readers should note that the following assessments of crop prominence are measured by area harvested, and therefore do not capture each crop’s underlying level of productivity or overarching importance within an economy. For example, a local cereal crop might be worth only $200 per ton of output in a country, but average yields might vary across a spectrum from around 1 to 6 tons per hectare (or even higher). Meanwhile, an export-oriented cash crop like coffee might be worth $2,000 per ton, with potential yields ranging from roughly half a ton to 3 or more tons per hectare. Thus the extent of area harvested forms only one of many variables required for a thorough understanding of local agricultural systems. 

The underlying analysis for this paper was originally conducted for a related book chapter on “Agriculture’s role in ending extreme poverty” (McArthur, 2015). That chapter addresses similar questions for a subset of 61 countries still estimated to be struggling with extreme poverty challenges as of 2011. Here we present data for a broader set of 140 developing countries. All tables are also available online for download.

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Before the City Club in Cleveland, Bruce Katz emphasized the importance of Ohio's older industrial cities for the state's overall prosperity and outlined, despite seemingly grim statistics, why now is the time for a rebirth of those places and how it can be achieved.

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Editor's Note: At a “Restoring Prosperity” gathering at Cleveland State University, Bruce Katz called upon Ohio’s leaders to take bold measures to stabilize the state’s economy by focusing on core communities—home to the assets that are key to recovery.

I want to thank Ned Hill of Cleveland State, Lavea Brachman of Greater Ohio, and Randell McShepard of Policy Bridge for hosting this important forum today.

Last Thursday I attended a keynote speech by Ban Ki Moon, the Secretary General of the United Nations.

The Secretary General provided a sober analysis of the stark challenges facing the global community:

• The worst economic and financial crisis since the Great Depression;
• the acquisition and testing of nuclear weapons by rogue states like North Korea and Iran;
• the existential threat of climate change; and
• the continued instability in the Middle East and other regions of the world.

The Secretary General ended his talk with a clarion call for new international frameworks and structures to govern our troubled world.

“This is not a time for tinkering,” he said, “but a time for transformation.”

Ban Ki Moon’s call for transformative thinking and action frames my talk today.

A housing crisis—fueled by reckless lending and regulatory abdication—has evolved into a full blown economic collapse, here and abroad.

In the last year, the US unemployment rate rose almost 4 percentage points, and now stands at 9.4 percent. In March, 13.2 million people were unemployed—the highest number since records started being kept in 1948.

On a whole series of indicators, in fact, we are at the worst levels since the government started tallying this information 40, 50, 60 years ago:

• continued unemployment claims
• consumer confidence index
• housing starts
• new home sales
• new home completions

Ohio doesn’t look any better, and on many indicators it is faring worse than the nation as a whole. The state’s unemployment rate is currently over 10 percent. Ohio is one of the four states whose metros were hit hardest in terms of employment figures over the last year (with Michigan, California, and Florida).

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China’s economic rise is one of the factors creating strains in the international financial order. China is already the largest trading nation and the second largest economy. It is likely to emerge in the next few years as the world’s largest net creditor. It is already #2 behind Japan. Until recently, China’s main foreign asset has been central bank reserves, mostly invested in U.S. Treasury bonds and similar instruments.

In the last couple of years, however, this pattern has started to change. China’s reserves peaked at about $4 trillion at the end of 2014. Since then, the People’s Bank of China has sold some reserves, but the country as a whole is still accumulating net foreign assets as evidenced by the large current account surplus. What is new is that the overseas asset purchases are coming from the private sector and state enterprises, not from the official sector. The Institute for International Finance estimated that the net private capital outflow from China was $676 billion in 2015. (That estimate includes outward investments by China’s state enterprises, which strictly speaking are not “private”; the point is to distinguish between official holding of foreign assets at the central bank and more commercial transactions.) As investment opportunities diminish in China owing to excess capacity and declining profitability, this commercial outflow of capital from China is likely to continue at a high level.

Tilted playing field

Most of the major investing countries in the world are developed economies; in addition to making direct investments elsewhere, they tend to be very open to inward investment. China is unusual in that it is a developing country that has emerged as a major investor. China itself is an important destination for foreign direct investment (FDI), and opening to the outside world has been an important part of its reform program since 1978. However, China’s policy is to steer FDI to particular sectors. In general, it has welcomed FDI into most but not all of manufacturing. However, other sectors of the economy are relatively closed to FDI, including mining, construction, and most modern services. It is not surprising that China is less open to FDI than developed economies such as the United States. But it is also the case that China is relatively closed among developing countries.

The OECD calculates an index of FDI restrictiveness for OECD countries and major emerging markets. The index is for overall FDI restrictiveness, and also for restrictiveness by sector. China in 2014 was more restrictive than the other BRICS countries (Brazil, Russia, India, and South Africa). Brazil and South Africa are highly open, similar to advanced economies with measures around 0.1 (on a scale of 0=open and 1=closed). India and Russia are less open with overall measures around 0.2. China is the most closed with an index above 0.4. Some of the key sectors in which China is investing abroad, such as mining, infrastructure, and finance, are relatively closed at home.

This lack of reciprocity creates problems for China’s partners. China has the second largest market in the world. In these protected sectors, Chinese firms can grow unfettered by competition, and then use their domestic financial strength to develop overseas operations. In finance, for example, China’s four state-owned commercial banks operate in a domestic market in which foreign investors have been restricted to about 1 percent of the market. The four banks are now among the largest in the world and are expanding overseas. China’s monopoly credit card company, Union Pay, is similarly a world leader based on its protected domestic market. A similar strategy applies in mining and telecommunications.

China is unusual in that it is a developing country that has emerged as a major investor.

This lack of reciprocity creates an unlevel playing field. A concrete example is the acquisition of the U.S. firm Smithfield by the Chinese firm Shuanghui. In a truly open market, Smithfield, with its superior technology and food-safety procedures, may well have taken over Shuanghui and expanded into the rapidly growing Chinese pork market. However, investment restrictions prevented such an option, so the best way for Smithfield to expand into China was to be acquired by the Chinese firm. Smithfield CEO Larry Pope stated the deal would preserve "the same old Smithfield, only with more opportunities and new markets and new frontiers." No Chinese pork would be imported to the United States, he stated, but rather Shuanghui desired to export American pork to take advantage of growing demand for foreign food products in China due to recent food scandals. Smithfield's existing management team is expected to remain intact, as is its U.S. workforce. 

The United States does not have much leverage to level the playing field. It does have a review process for acquisitions of U.S. firms by foreign ones. The Committee on Foreign Investment in the United States (CFIUS) is chaired by Treasury and includes economic agencies (Commerce, Trade Representative) as well as the Departments of Defense and Homeland Security. By statute, CFIUS can only examine national security issues involved in an acquisition. It reviewed the Smithfield deal and let it proceed because there was no obvious national security issue. CFIUS only reviews about 100 transactions per year and the vast majority of them proceed. This system reflects the U.S. philosophy of being very open to foreign investment.

A thorn in the relationship

Chinese policies create a dilemma for its partners. Taking those policies as given, it would be irrational for economies such as the United States to limit Chinese investments. In the Shuanghui-Smithfield example, the access to the Chinese market gained through the takeover makes the assets of the U.S. firm more valuable and benefits its shareholders. Assuming that the firm really does expand into China, the deal will benefit the workers of the firm as well. It would be even better, however, if China opened up its protected markets so that such expansions could take place in the most efficient way possible. In some cases, that will be Chinese firms acquiring U.S. ones, but in many other cases it would involve U.S. firms expanding into China. 

This issue of getting China to open up its protected markets is high on the policy agenda of the United States and other major economies. The United States has been negotiating with China over a Bilateral Investment Treaty (BIT) that would be based on a small negative list; that is, there would be a small number of agreed sectors that remain closed on each side, but otherwise investment would be open in both directions. So far, however, negotiations on the BIT have been slow. It is difficult for China to come up with an offer that includes only a small number of protected sectors. And there are questions as to whether the U.S. Congress would approve an investment treaty with China in the current political environment, even if a good one were negotiated.

The issue of lack of reciprocity between China’s investment openness and the U.S. system is one of the thorniest issues in the bilateral relationship.

The issue of lack of reciprocity between China’s investment openness and the U.S. system is one of the thorniest issues in the bilateral relationship. A new president will have to take a serious look at the CFIUS process and the enabling legislation and consider what combination of carrots and sticks would accelerate the opening of China’s markets. In terms of sticks, the United States could consider an amendment to the CFIUS legislation that would limit acquisitions by state enterprises from countries with which the United States does not have a bilateral investment treaty. In terms of carrots, the best move for the United States is to approve the Trans-Pacific Partnership and implement it well so that there is deeper integration among like-minded countries in Asia-Pacific. Success in this will encourage China to open up further and eventually meet the high standards set by TPP. Greater investment openness is part of China’s own reform plan but it clearly needs incentives to make real progress. 

For more on this and related topics, please see David Dollar's new paper, "China as a global investor."

      

Brexit has little direct effect on the Chinese economy though it does increase the risk of financial volatility. In the long run it is hard to see it as anything but a plus for China as the West continues to decline and China continues to rise.

In the immediate aftermath of the Brexit vote, stock markets all over the world tanked. The interesting exception was China: The Shanghai market fell 1 percent on Friday and then more than recovered it on Monday. In the short run, Brexit is a modest negative as Europe’s gross domestic product (GDP) and trade are likely to grow less rapidly, and the EU is China’s largest trading partner. But the Chinese economy is simply not that export-oriented anymore. In the aftermath of the global financial crisis, the contribution of net exports to China’s GDP growth has averaged around zero. China initially made up for lost external demand with a massive stimulus program aimed at investment. This has now led to excessive capacity in real estate, manufacturing, and infrastructure. As a result, investment growth is slowing (see figure below). But China’s GDP growth has held up well because consumption is now the main source of demand. It consistently delivers more than 4 percentage points of GDP growth and its contribution has been on an upward trend.

China has developed a virtuous circle in which wages are rising at a healthy rate (more than 10 percent over the past year), consumption is growing, consumption is mostly services so the service sectors expand, and they are more labor-intensive than industry so sufficient jobs are created to keep the labor market tight. There are plenty of things that could go wrong, but maintaining consumption is the big challenge for China, not the external sector.

Another feature of China’s new growth pattern is that there is a steady outflow of capital as investment opportunities at home diminish. The U.K. had been one of the favored destinations for China’s outward investment, seen as a welcoming location that could be used as a jumping off point for the rest of Europe. Chinese firms will now need to rethink that strategy but this should not be too difficult an adjustment. The United States has been the destination for the largest share of China’s overseas investment and it is likely that that trend will strengthen in the wake of Brexit.

Brexit does complicate China’s currency policy. The dollar and the yen have strengthened while the pound and euro decline. In past global crises, China has been a source of stability but the yuan fixing on Monday suggests that the central bank does not want to follow the dollar up if it is going to keep rising. Ideally they would like relative stability against a basket. There continues to be a risk that this policy will excite accelerating capital outflows so in that sense financial risks have increased somewhat. But probably the central bank will be able to manage the capital outflows so that the trade-weighted exchange rate is stable.

A U.K. no longer in the European Union will presumably be anxious to strengthen its ties with China so it may well be willing to make compromises on market-economy status and investment deals that a unified Europe would not have made.

Finally, from a larger geostrategic perspective, it would seem that China is the big winner from Brexit. Europe is likely to be a less influential player on the world stage and will be absorbed with internal issues of negotiating the British exit, controlling immigration, and keeping the periphery inside the eurozone. The United States is also likely to be distracted by these European challenges. This gives China more scope to pursue its reclamation activities in the South China Sea and to play divide and conquer with European states on various issues. For example, China would like to be recognized as a market economy, which is both symbolic and a practical matter for adjudicating anti-dumping cases. It is also negotiating investment treaties with both the United States and the EU, though so far China’s offers have not been very attractive in the sense that they exempt many important sectors from open investment. A U.K. no longer in the European Union will presumably be anxious to strengthen its ties with China so it may well be willing to make compromises on market-economy status and investment deals that a unified Europe would not have made. Brexit itself may not be that important but it may prove to be a good signal of the decline of Europe and the rise of China.

       

       

       

       

       

       

On March 5, Chinese President Xi Jinping spoke to the Shanghai delegates to the National People’s Congress (NPC) session in Beijing. China’s top leaders use these side meetings to convey policy guidance on a range of issues, and Xi used this particular one to offer his perspective on relations with Taiwan. There has been some nervousness in the wake of the January 16 elections, which swept the opposition Democratic Progressive Party (DPP) to power in both the executive and legislative branches. Because the Beijing government has always suspected that the fundamental objective of the DPP is to permanently separate Taiwan from China, observers were waiting expectantly to hear what Xi would have to say about Taiwan.

Well before the March 5 speech, of course, Xi’s subordinates responsible for Taiwan policy had already laid out what Taiwan President-elect Tsai Ing-wen and her party would have to do to prevent cross-Strait relations from deteriorating, and they continued to emphasize those conditions after Xi’s speech. But analysts believed that Xi’s own formulation would be the clearest indicator of Beijing’s policy. He is, after all, China’s paramount leader, and his words carry a far greater weight than those of other Chinese officials.

This is what Xi said to the Shanghai NPC delegation about Taiwan [translation by the author, emphasis added]:

Compatriots on the two sides of the Strait are blood brothers who share a common destiny, and are people for whom blood is thicker than water…Our policy towards Taiwan is correct and consistent, and will not change because of a change in [who heads] the Taiwan authorities. We will insist upon the political foundation of the “1992 consensus,” and continue to advance cross-Strait relations and peaceful development…If the historical fact of the “1992 consensus” is recognized and if its core connotation is acknowledged, then the two sides of the Strait will have a common political basis and positive interaction [virtuous circle] can be preserved. We will steadily push forward cross-Strait dialogue and cooperation in various fields, deepen cross-Strait economic, social, and financial development, and increase the familial attachment and welfare of compatriots [on both sides], close their spiritual gap, and strengthen their recognition that they share a common destiny. We will resolutely contain the separatist path of any form of Taiwan independence, protect state sovereignty and territorial integrity, and absolutely not allow a repetition of the historical tragedy of national separation. This is the common wish and firm intention of all Chinese sons and daughters, and is also our solemn pledge and obligation to history and to the people. The fruits of cross-Strait relations and peaceful development require the common support of compatriots on the two sides; creating a common and happy future requires the common effort of compatriots on the two sides; and realizing the great revival of the Chinese nation requires that compatriots on the two sides join hands to work with one heart.

The italicized sentences are key: They state what the new DPP government should do if it wishes to maintain healthy cross-Strait relations and affirms Beijing’s resolve to oppose any behavior it doesn’t like. Xi didn’t threaten specific actions, but he probably didn’t have to. As always, Beijing reserves the right to decide what DPP attitudes and actions constitute separatism and a quest for Taiwan independence. 

Xi didn’t threaten specific actions, but he probably didn’t have to.

Some background

There are two important points of reference contextualizing this statement from Xi. 

Xi on November 7, 2015. First, there are his reported remarks on the future of cross-Strait relations during his unprecedented meeting with current Taiwan president Ma Ying-jeou in Singapore last November 7. At that time, Xi first appealed to ethnic solidarity and national unity, as he did again on March 5. He asserted that the stakes to end the state of division between Mainland China and Taiwan were very high because it was a critical part of how he views rejuvenating the Chinese nation—a theme he repeated to the Shanghai delegation. 

Xi said Taiwan, under the new government, could either continue to follow the path it has walked for the last seven-plus years under the current Ma Ying-jeou administration (“peaceful development”), or it could take the path of renewed “confrontation,” “separation,” and zero-sum hostility. If Taiwan wished to follow the first path, Xi insisted, its leaders must adhere to the 1992 consensus and oppose “Taiwan independence.” Without this “magic compass that calms the sea,” Xi warned, “the ship of peaceful development will meet with great waves and even suffer total loss.” He was willing to overlook the DPP’s past positions and actions, but only if it identified with “the core connotation of the 1992 consensus” (a reference to the PRC view that the Mainland and Taiwan are both within the territorial scope of China, a view the DPP contests). Xi alluded to the “core connotation” on March 5 but did not re-state its content. Xi then made clear that if “disaster” occurred, it would be the DPP’s fault—it was therefore up to Tsai, he implied, to accommodate to Beijing’s conditions. 

In language and tone, Xi’s Singapore statement was far more strident and alarmist than what he said on March 5. He made that first statement more than two months before the election, when perhaps he thought that tough talk would weaken Tsai’s and the DPP’s appeal to voters. If that was his objective, he failed. The tone of his March 5 remarks was more modulated, but the substance was the same. Beijing would define the crossroads that Taiwan faced, and it was up to Tsai to take the right path—at least what it defined the right path.

Beijing would define the crossroads that Taiwan faced, and it was up to Tsai to take the right path—at least what it defined the right path.

Tsai on January 21, 2016. Second, there is an interview that Tsai gave to Liberty Times (Tzu-yu Shih Pao) on January 21—less than a week after the elections—in which she sought to meet Beijing partway. For the first time, she used the phrase “political foundation” and said it had four elements: 

• “The first is that the SEF-ARATS discussions of 1992 are a historical fact and both sides had a common acknowledgment to set aside differences and seek common ground;” 
• “The second is the Republic of China’s current constitutional order.”
• “The third is the accumulated results of the more than 20 years of cross-strait negotiations, exchanges, and interactions;” and
• “The fourth is Taiwan’s democratic principles and the will of the Taiwanese people to make sure that Taiwan voters understood the limits to his tolerance.”

So, Tsai accepts the 1992 meetings as a historical fact and acknowledges that the two sides did reach an agreement of sorts, but does not accept the 1992 consensus itself as a historical fact. She spoke more about process than content. The Republic of China’s “current constitutional order” is also part of the foundation, which some have read as Tsai’s acceptance that the Mainland and Taiwan are both parts of China’s territory (Beijing’s “core connotation”)—I, however, am not so sure. Tsai did not reject Xi’s requirements out of hand, but she framed them in her own way. 

So are ties growing friendlier?

Was Xi’s tonal moderation on March 5—relative to November 7—an indicator that mutual accommodation was going on? Perhaps. But the fact that the November meeting was ostensibly private while the March speech was public might explain the difference. 

Moreover, the stream of Chinese articles and statements since March 5 that explicitly restate Beijing’s long-standing preconditions are reason to doubt that much accommodation is actually occurring. The three basic scenarios I outlined last December—accommodation, limited Chinese punishment of the Tsai administration, and comprehensive punishment—are still in play, and the key variable remains whether Xi and his subordinates trust Tsai Ing-wen’s basic intentions. That is, will they accept her recent formulations as a good-faith effort to avoid deterioration? The next milestone will be May 20, when Tsai Ing-wen gives her inaugural address and may provide a more detailed formulation of her approach to China.

       

      

      

       

       

The biggest news at the end of the Brisbane G-20 on Sunday will be to confirm for the first time in an official G-20 communique that China will indeed chair the G-20 Summit in 2016. 

Coming on the heals of a momentous week of great power realignments and breakthroughs at the APEC Summit in Beijing and other one-on-one meetings of heads of state, the timing of China’s presidency of the G-20 Summit in 2016 could not be a better follow-up to this week’s accomplishments. It puts China in play as a global leader at a critical moment in geopolitical relations and in terms of several global agendas that will culminate in the next two years. It also provides an unusual opportunity for the U.S. and China to collaborate on a broader set of societal issues affecting everyone everywhere building on their agreements this week.

One of the reasons why the G-20 Summits have yet to realize their full potential is that the leaders-level summits have been captured by the finance ministers’ agendas and discourse. Leaders at G-20 Summits have individually and collectively failed to connect with their publics; ordinary citizens do not see their urgent issues being dealt with. Exchange rates, current account balances, reserve ratios for banks, and the role of the IMF do not resonate with public anxieties over their lives and livelihoods.

Three streams of global issues will culminate in 2015:  the forging of a “post-2015 agenda” on sustainable development with a new set of global goals to succeed the Millennium Development Goals (MDGs); the agreement on  “financing for development” (FFD) arrangements and mechanisms to support the new post-2015 Sustainable Development Goals (SDGs) to be realized in 2030; and the achievement of a United Nations Framework Convention on Climate Change (UNFCCC) by the end of 2015, which looks more promising now than it did a week ago.

What has been learned from previous global goal setting processes is that building on the momentum for the goal-setting process in 2015 and carrying it directly into the mobilization of national political commitment, resources and policies for implementation is vital. China as a member of the G-20 troika in 2015 through 2017 will be in crucial position of bridging the goal-setting and implementation phases of the new SDGs for 2030 to be adopted at the United Nations in September of next year.

China, as one of the five permanent members of the U.N. Security Council, will be in a pivotal position to create complementarities between the G-20 forum for the major economies and the U.N. as a forum for all countries for this critical period of setting the global sustainability agenda for the next fifteen years.  

The post-2015 agenda for social, economic and environmental sustainability is of high interest to the United States, and the new China-U.S. climate change agreement in Beijing this week augurs well for collaboration between the two countries on the broader agenda. White House Chief of Staff John Podesta was on the high-level panel for the post-2015 development agenda last year, which signals high U.S. policy involvement. The Shanghai Institute for International Studies has argued in a recent paper for the U.N. Development Program that “the G-20 and the U.N. could have certain complementary roles. The development issue could become the one linking the major work of both the U.N. and the G-20.”  

The world should welcome the unique role that China can now play in bringing the international community and the global system of international institutions together in charting a common path forward building on the progress made in the various summits this week.