I guess I owe you an apology, ‘’light posting’’ turned out to be no posting at all. The reason is that I have traveled to my native Holland (or The Netherlands which really is the proper name, Holland is only a part) for the usual round of family visits and, some holidays. I have not been here for almost two years and coming from North America it is always a surprise to me how small the place is. If I tell people in North America that it takes you three hours to drive from one end of the country to the other they look at me in amazement and do not know how to respond. It is hard to comprehend I know, but that’s Europe. But everything is tiny, from the coffee (and the Europeans still think they do better coffee than North Americans?), to the houses, to the roads, to the cars, but not to the people: they are not only well-sized thanks to an overabundance of dairy products; there are many of them. In fact, Holland is one of the most densely populated countries in the entire world and it shows. It is therefore not really a country, given its size and its 16 million inhabitants it is more appropriate to call Holland a city-state rather than a country. So, a bit of Dutch blogging in the next few days and today I start with a contentious issue here: immigration and integration.

My parents always collect a healthy dose of articles and newspaper clippings for me to read and I always spend quite a bit of time shortly after my arrival digesting interesting pieces of news and analysis that I never picked up online. Here’s an interesting one and it discusses the issue of immigration and integration, which continues to dominate Dutch and European headlines. While there are the obvious social and cultural obstacles that prevent many newcomers from being able to integrate it turns out that the key reason is economic. In the United States 10% of the total population consists of immigrants, but of the total working population in the US, 11.7% are immigrants. Immigrants in the US thus contribute disproportionately to production, which is good since it helps the integration process as well as the ability of newcomers to build up a secure economic position. Contrast this with Holland where an equal 10% of the population consists of immigrants, yet a paltry 3.4% of the working population are immigrants. It is not too much of a stretch to think that the same numbers can be found elsewhere in Europe and likewise the US numbers should be similar in Canada and Australia. The discrepancy between Europe and traditional Anglo-Saxon immigration countries results from the fact that the immigration countries apply very strict criteria as to who are let in and can join the workforce and are therefore loath to open their borders to those who will have to fall back on government support. In Europe, and Holland is a good example, immigration has not been subject to rigorous screening resulting in significant numbers of newcomers who have not been able to connect and integrate in their new home countries.

The next few days will see some light posting, despite all the terror alert warnings I will be boarding a plane for some traveling. I hope to resume with news and analysis early next week. In the meantime, ‘An Archaic Monopoly’ below, will give you the opportunity to be both amused and stunned.

One of the most baffling things I came across here in British Columbia is the monopoly that the government has on liquor sales. If you want to buy any alcohol you will have to go through a government owned and managed store, or through a private store knowing that the distribution network that got the booze to that private store is owned by the provincial authorities who have also set the retail price. For a Dutchman used to his freedoms this was not just inexplicable, it was scary, I could honestly not believe that such a thing still existed. It gets scarier if you look at the underlying mechanics that are at work here, especially the collusion of diverse interest groups that seek to maintain the status quo at all cost.

We all know the origins of a state monopoly on alcohol distribution. It dates back to the puritan days where any form of pleasure or fun was deemed to be close to immorality and an area where the authorities had to step in to prevent further reckless behaviour by the masses. They have to work; we cannot let them get drunk. Think of prohibition in the US. So, tightly controlled distribution led to a government cartel that proved to be extremely lucrative and a source of ongoing, and over time increasing, revenues. In a number of provinces in Canada and in Sweden it continues to exist to this very day. In British Columbia the mark-up on a bottle of liquor is phenomenal, I believe it is close to 90% resulting in the provincial government netting over a billion dollars in profits annually. Bizarre, especially in a province that has a nascent wine industry; the Okanagan Valley benefits from a moderate climate and while not in the Napa and Sonoma range that region is producing some very exciting wines. There are also great microbreweries here, all of whom have unlimited access to fresh clean mountain water in order to brew excellent beer that is guaranteed to not give you a headache.

The scary part came in when a new government, somewhat right of the center, started to privatize and cut back government involvement and it was only a matter of time before the liquor distribution branch came under review. That review was of course not very favourable and the idea to privatize the whole apparatus was recommended. Great idea as it came packaged together with scrapping hundreds of other related laws and regulations that were all designed to take the fun out of drinking. Privatization however set the alarm bells ringing in the offices of union leaders, as all employees in liquor distribution branches are unionized public workers and enjoy generous benefits. I understand they oppose privatization, if you are making twenty bucks an hour at the checkout and your buddies next door at Safeway are making ten bucks, then yes, privatization is something to be very fearful about. The unions then started a campaign, teaming up with a number of left leaning municipal councils, to spread the word of the danger of privatization. Drunkenness, public disturbances, all those great arguments used by the puritanical conservatives of the distant past were brushed off to prevent market forces from playing a role in retailing and consuming alcohol. The point is that they could not care less about alcohol’s adverse side effects; they care about their jobs and the unique benefits that the status quo provides them with by working in an area that is nicely sheltered from the laws of supply and demand. And who is footing the bill? Right, the consumer. The number of organized employees in the liquor network is only 3,500 but they plug into the larger union network of government employees who have vigorously taken up their case. The provincial government is halfway through its term and has cut and deregulated where possible, but it is now entering a phase where elections come into the picture again so it is time to backtrack and be nice and sweet. And so a number of proposed privatizations are now under review, the liquor branch plan being one of them.

The problem is that the absurd prices have been around for a long time and have deep roots so the urgency to bring them down is not all that pressing, people are used to it and there is no consumer campaign that addresses this piece of economic injustice. A strange majority of leftists and old style conservative puritans are able to continue to force a peculiar system of alcohol retailing on the citizens of British Columbia. For me it takes the fun out of buying a bottle of wine completely, although the liquor branch is doing everything to make the shopping experience more pleasant. I experience every visit to a liquor distribution store as a cruel humiliation by Stalinist forces that seek to control and belittle me and empty my wallet at the same time. This year I will turn forty, time to do a George W. Bush.

The discussion on al-Qaeda’s strength continues. I have put forward the argument that the organization remains a very serious threat and that their strategy has been adapted to the new realities of this world with a liberated Afghanistan and Iraq as well as a fortified North America. The Economist agrees with this idea:

“ … al-Qaeda may have sounded something of a retreat to its Arab homelands, where its operatives can more easily blend into the background. Some experts have even gone so far as to suggest that al-Qaeda has been reduced from an international network to a series of localised cells. Perhaps, but as the bombings in Riyadh and Casablanca have shown and the alerts around the world confirm, even in its new, disparate form, al-Qaeda remains a danger that should never be underestimated”

There is however a notion that the attacks from the group that we have seen over the past week are not of a scale that would have been commensurate with the group’s intentions and overall ambitions. Peter Wallison today refers to the “softness” of current targets. I tend to agree with his implied logic that given where we are today we probably should have seen attacks on high profile targets. The fact that they have not succeeded in doing so may be a sign that the group is temporarily disabled and that high profile targets are now well defended and protected. It does however not mean that the threat has disappeared or become immaterial. Wallison jumps a little too quickly to the conclusion that less spectacular attacks are evidence of al-Qaeda’s demise:

Thus, when we turn on our television sets in the months to come, and find that al Qaeda has attacked a school in Afghanistan, a church in Spain, or even a shopping mall in the United States, we should not see this as some kind of spectacular resurgence of the al Qaeda threat but as the final throes of a dying snake.

Yes, it appears that its modus operandi has changed. It could even be debated that its retreat to the Arab Peninsula and the Maghreb diminishes the risk to North America temporarily. But we can not for a second make the assumption that this death cult is in its final throes. Recent attacks have claimed numerous lives and American and European lives are at risk wherever they are. An attack on a shopping mall in the US to me would be evidence that the group has not lost one ounce of its lethal capabilities and bombing churches and schools would be equally disturbing and alarming, no matter where they occur. The worst thing to happen now would be to become satisfied and actually believe that al-Qaeda has been decapitated and that what is left are directionless cells that will gradually fade into irrelevance. If anything, I am even more worried that we will see less spectacular attacks and more attacks on a variety of soft targets, potentially resulting in more deaths and destruction around the world. The approach used in Riyadh and Casablanca may well be replicated in a number of other locations if the group is able to flex its muscle beyond the confines of the Arab world. The threat continues, unabated. Please let us not become complacent.

As a parent I can attest to this: the severe psychological strain that results from prolonged exposure to Barney songs. Iraqi prisoners exposed to this are going through hell, no doubt. Both the National Post and the Guardian report.

An interesting discussion has started over at Conrad’s about Indonesia, with some arguing that chaos is imminent, some arguing against that. I will argue against, although we may see quite a bit of instability going forward, especially with elections coming up next year. The Aceh situation may continue to deteriorate over a period of time and test the current political leadership which does not have the iron muscle for which Suharto was known. So, the intensity with which Jakarta imposes its will over the province may vary, but in the end the center will prevail. Apart from the political leadership, business and military interests will ensure that nothing will fall of the table. In any case, by sheer numbers, the Javanese will have the upper hand in the long run.

Those of you who have read my piece on how the Canadian government has destroyed value and covered up poor economic practices by encouraging a low value of the Canadian dollar in order to sustain exports to the US will no doubt have asked what to make of the bizarre collapse of the US dollar over the past few weeks. Many people may not realize it but the Bush administration, Treasury Secretary Snow taking the lead, has actively supported this reversal of dollar fortune, no doubt betting on an export led recovery for the US economy. Warren Buffett yesterday reintroduced the term Voodoo economics to criticize the Bush dividend tax cut, and I did not really agree with him. But the term Voodoo economics may well apply to those who tinker with the value of a currency in order to secure some political mileage. Some argue that the fall of the dollar is a fundamental correction, adjusting a situation where the dollar was overvalued. That is true, but it seems to me that many players in the economic process take their cues from the Treasury department and Secretary Snow’s comments have not exactly been helpful. If you want the markets to set the price you do not say anything, now the markets are aggressively shorting the dollar, leading to an unwarranted and dangerous slide. Yes, a cheap dollar may fend off deflation but it may also lead to foreign investors abandoning Wall Street. In any case, there's more uncertainty ahead according to Federal Reserve Chairman Greenspan today.

While on the subject, I received an e-mail from a not so rich American taxpayer who also disagreed with Warren Buffett but took a different angle. Many Americans have, following the technology crash, refocused their stock portfolios and tilted them toward safer, dividend paying stocks. The proposed plans thus have some very tangible benefits to these not so wealthy investors, as they will see that these dividends will hit their accounts untaxed. Benefits like this may be small in dollar terms, but relative to average and lower incomes they may be quite significant. And these investors may not only boost the economy with the extra few hundred bucks in their accounts, they may well cast their vote for Bush in 2004.

The asymmetrical peace process is in full swing, the fact that I did not post on the horrific and sickening suicide attacks over the past five days does not mean I ignored them. I believe they were just more evidence of what many of us had suspected would happen but I cannot post on every suicide attack, I will try to focus on the larger picture. It was interesting to see that Bush got on the phone with Palestinian PM Abbas yesterday and one can only imagine the tone of the conversation that took place, I have a hard time believing it was “friendly and hopeful” as this article suggests. The Bush team has succeeded in finally sidelining Arafat, relegating him to irrelevance for good, but that does to mean that we are any closer to a resumption of peace talks. On the contrary, the latest bombings I think make it abundantly clear that we can forget about that for quite a while.

What is hopeful though is that some Palestinians have come out against Islamic militants, protesting that the violence and destruction brought to their villages is a direct result of the way these fanatics behave themselves. It is to be feared however that, like so many other terrorist groups, Hamas and other Islamic groups will not only continue to terrorize Israelis, they will also extend their rule of violence to their fellow Palestinians in order to crush any dissent. That’s how these groups work and that’s why there is an inherent asymmetry in any peace negotiation between Israel and the Palestinians.

Thanks for the feedback on my post of last week, discussing how Moroccan youths desecrated World War II memorial services in The Netherlands. The piece got some bandwidth as Dilacerator picked it up yesterday and his piece was subsequently linked by InstaPundit. Earlier today, Spleenville linked it directly. It is indeed a very troubling development and some readers expressed their amazement at the inability of Dutch authorities to deal with this. As my frequent visitors will now, that is what Fortuyn was all about. His attempts to wake everyone up by standing up against complacent multiculturalists as represented by the political establishment came in direct response to the social, political and economic challenges posed by unintegrated and disgruntled Muslims in Western Europe. It is a problem that will not go away, in fact as one other reader pointed out, the Muslim immigrants have one factor that is working to their benefit in an enormous way: demographics. Demographic trends will make it more likely that things in Europe will get worse before they get better, if they ever will. The fact that the Dutch press underreported these events is equally worrying.

The sage from Omaha, Warren Buffett, argues against the proposed dividend tax cut in the Washington Post today. When the sage speaks, one listens. He is making the point that tax-cuts that benefit the wealthier classes in society do not necessarily work. The traditional argument is that an economy that is stalled because investors are on the sideline needs an impetus that will prompt investment. Hence a tax cut that benefits those who invest will help society at large as it creates new jobs across the board. This as opposed to stimulating the economy by creating consumer demand through a tax cut that benefits all. Buffett dismisses this logic:

Administration officials say that the $310 million suddenly added to my wallet would stimulate the economy because I would invest it and thereby create jobs. But they conveniently forget that if Berkshire kept the money, it would invest that same amount, creating jobs as well.

This point is well taken, although I do not agree entirely. A tax cut funneled back to the wealthy is more likely to lead to the creation of new jobs than if it stays in the coffers of Berkshire Hathaway, Buffett’s company. In my consulting work I see first hand the enormous amounts of money that wealthy individuals pump back into the economy by investing in start-up situations or invest money in business propositions that Berkshire would not even touch. I know of many companies where the road to profitability has been long but where, thanks to wealthy investors, many people have stayed on the payroll and many (young) families have been fed. True, that flow has dried up over the past few years, which is why the Bush administration wants to get it going again. Where Buffett makes a real strong point however is in the staging of the tax cut:

The Senate's plan invites corporations -- indeed, virtually commands them -- to contort their behavior in a major way. Were the plan to be enacted, shareholders would logically respond by asking the corporations they own to pay no more dividends in 2003, when they would be partially taxed, but instead to pay the skipped amounts in 2004, when they'd be tax-free. Similarly, in 2006, the last year of the plan, companies should pay double their normal dividend and then avoid dividends altogether in 2007.

Let’s see what happens. I for one would love to see some numbers that support my thesis that a tax refund to the wealthy promotes investment in areas that do not attract traditional sources of capital.

Good weekend, I feel much better. I will kick the new week off with a post (below) on Indonesia. There has been an interesting flow of news coming out of that country with the start of the trial of those responsible for the Bali bombings but also because of increased restiveness in Aceh, one of the country’s renegade provinces. In fact, hostilities between the Indonesian army and rebels started yesterday. I will start with the underlying mechanics of regional issues in Indonesia in a historical context but I will also try to post more on a regular basis on this country. Apart from a few like the Gweilo, the blogosphere is underreporting this nation which is odd given that it is the 4th populous in the world with about 210 million inhabitants, its stretches a geographical area that is equivalent to the distance of London to Baghdad, it has undergone some major social, political and economic changes in recent years and is also the world’s largest muslim nation. So starting today, more Indonesia on Peaktalk.

It was during my first trip to Indonesia, almost exactly ten years ago, that I visited the national monument, Monas, in the capital Jakarta. In the basement was a display consisting of models and figures depicting the history of the country, before, during and after Dutch rule, which lasted from the early 1600s to 1949. Amazingly, the part of the historic display that dealt with the years prior to Dutch colonial rule included various models of wooden battleships carrying the red-white Indonesian national flag. I immediately registered this historic fallacy for there was nothing like an Indonesian nation state prior to the 1600s, it was established only after the archipelago gained its own independence in 1949 at which time it formally adopted the red-white national flag. The display that I saw was put together on purpose by the authorities in order to strengthen and maintain the notion that Indonesia is one country with one national identity and that identity, according to them, had been a constant factor over the centuries. Nothing could have been further from the truth.

The Dutch, who established a colonial empire based on trading posts, as opposed to capturing and populating vast land areas like the British did, settled Indonesia first in the early 1600s by kicking out the Portuguese and establishing the port of Batavia, the area that is now Indonesia’s capital, Jakarta. It was not until the late 19th century, i.e. almost 300 years later that the Dutch conquered all of the area that is now Indonesia. By occupying all these islands the Dutch established the boundaries and composition of modern day Indonesia, prior to that it was a collection islands that were largely independent as separate sultanates or other forms of administrative organization with distinct cultural and religious identities. Some parts did not have any organization, the western half of New Guinea (now called Irian Jaya) inhabited by the Papua’s was still pretty much in the Stone Age when the Dutch arrived and large parts continue to be that way to this very date.

The Japanese occupation accelerated the road to Indonesian independence much to the chagrin of the Dutch who fought a largely unnecessary war from 1945 to 1949 (which the Dutch still euphemistically call “police actions”) in order to prevent such independence. The Dutch believed that Indonesian independence would be a tricky proposition and they were not entirely wrong in making that assumption. The Dutch consequently had a very large hand in drafting the new republic’s constitution and recognizing the unique diversity of the new independent Republic of Indonesia it envisioned a federal republic where the constituent parts enjoyed some measure of independence. Consequently the new country would be called the Republic of the United States of Indonesia. This was a concept that did not entirely fit into the worldview of the Javanese elites who essentially took power after the Dutch left. With the bulk of Indonesia’s population living on Java and with military and economic power centered on the same island, the new rulers under President Sukarno and later President Suharto wasted no time to establish the dominance of the center and the subjugation of the various cultures present in the new island republic. And that cultural variety was significant: from the conservative muslims of Aceh, to the roman Catholics on Flores, Moluccans in the east, Hindus on Bali, the Papua’s on New Guinea to name a few, and of course the different groups on the large islands of Sulawesi and Kalimantan. The basic rationale was simple, under the banner of the new nation’s creed of nationalism (called “Pancasila”) unity would be established through five key principles: belief in one supreme God, justice and civility among peoples, the unity of Indonesia, democracy through deliberation and consensus, and social justice for all. So the very foundation was centered around unity and how better to sustain that very unity other than by accessing the vast wealth of all these islands, from oil, to gold, to copper, to coal, natural gas and as well as plethora of other riches. Combining the political goals with the economic incentives made any form of flexible federalism next to impossible. By the way, Muslim fundamentalists saw Pancasila at the time as a mechanism that would prevent Indonesians from building an Islamic state. Indeed, to this date that has not happened and there’s no Sharia to speak of, a rather complex legal framework based on some outdated Dutch law books continues to underpin the legal system in Indonesia.

The Indonesian rulers thus very quickly fed the Dutch inspired constitution through the shredder and set upon the course of establishing one centralized nation state. They had essentially a free-hand: the Dutch had lost any ability to play a meaningful role and the world’s new superpower, the US, used its influence to promote that very unity sought by Jakarta. With the growing influence of communism in South-East Asia the US had a vested interest in stability and a break-up of Indonesia into rebellious nation states would have created a phenomenal market for the export-oriented rulers in Moscow and Beijing. So, any attempts by these aspiring ethnic groups to escape from the Indonesian fold and achieve a measure of independence were suppressed not only domestically, any international help was virtually non-existent. This is a situation that has continued to this day, with occasional flare-ups, the latter giving the Dutch their first experience with terrorism when Moluccan refugees in The Netherlands started to hijack trains and execute innocent commuters in the mid-1970s. And over the past few weeks the situation in Aceh has deteriorated. Aceh, an enclave in Northern Sumatra, has been notoriously restive, even the Dutch fought a bloody thirty-year war there in the late 19th century.

So the Indonesian umbrella has remained pretty much intact over the past 54 years with the help of an iron fist from Jakarta. With settlement of Javanese in ethnically different parts of the republic as well as increased economic activity in these various parts it is ever less likely that the leadership in Jakarta will become more flexible in dealing with its various ethnic minority groups. A likely break-up Soviet or Yugoslav style is simply not on the cards, it is more likely that Indonesia will follow the Chinese model where far flung areas such as Tibet remain firmly under Beijing control, helped by increased colonization by ethnic Chinese. The Indonesians, or Javanese to be more precise, have followed the same approach. The intimate relationships between the Indonesian army, the Javanese business elites and their ability to manipulate the political leadership is a virtual guarantee that Indonesian unity will be preserved at all cost. No matter what political leader exercises power in Jakarta, unity of the Indonesian state is and remains sacrosanct, which is why the Aceh rebels face an almost certain defeat at the hands of the Indonesian army.

Evidence of what some of us have been saying since the beginning of this week emerged last Wednesday: al-Qaeda remains a credible and potent threat, despite the anti-terror efforts to date (link via LGF).

With that I sign off for the weekend. I have been both busy and really miserable; some sort of flu has kept the creative juices from flowing so I hope to return next week, reinvigorated.

The Saudi bombings earlier this week put the fate of seven westerners jailed in Saudi Arabia back into the spotlight. Some of them were facing capital punishment after a secret trial for their alleged involvement in an earlier bombing which was said to be related to a war among expats in Saudi Arabia over an illegal liquor business. Apparently they had confessed to their crimes amid rumors of torture, but the suspicion has always been that the Saudis needed a scapegoat in order to deflect attention from the fact that terrorism is a homegrown Saudi commodity. The initial reaction on last Monday was that the attacks of that day would no doubt shed new light on the plight of these seven westerners, and surprise, today it appeared that King Fahd is looking favorably at a request for clemency. This is justice Saudi style. Let’s be glad some people that have been wrongly accused and abused can finally come home.

Dutch people have historically not taken the Belgians very seriously as a nation and as the English have Irish jokes, the Dutch have jokes about Belgium. Yesterday’s report that a left-wing candidate in Belgium's parliamentary elections has lodged a war crimes complaint against Gen. Tommy Franks, will certainly test the American sense of humor. This can hardly be considered a joke and the US administration has made it clear that this may have a lasting impact on relations with Belgium and, more importantly, Belgium’s role as a venue for NATO meetings (NATO is headquartered in Brussels) could be jeopardized. The Belgians have apparently taken steps to fix this ridiculous situation earlier:

The Belgian parliament revised the law last month after complaints were filed against Israeli Prime Minister Ariel Sharon, former President Bush and U.S. Secretary of State Colin Powell. Under the new amendments, Belgian courts should refer foreigners facing war crimes charges to their own countries if they are democracies with a record of fairness in justice.

Great, that would mean a referral of the case against Tommy Franks to the US Justice Department. The change in legislation did not stop the complaint against Gen. Franks, which of course included the accusation that the Americans failed to stop the looting of cultural treasures. This bizarre complaint serves nothing but the political agenda of a number of fringe politicians in Europe who are prepared to do anything to soil the reputation of those who fight and stand up for freedom and democracy. It may be yet another isolated action by a madman, but taken together with the German, French and Belgian position prior to Iraqi Freedom it is hard to see how relationships across the Atlantic can even begin to heal. For Belgium it appears that the journey to irrelevance on the international stage is now well underway.

The dismissal of Mark Steyn by the National Post is not good news for the right in Canada, as it is yet another, and maybe a final, installment in the destruction of what once was a good center-right newspaper that provided much needed counterweight to the left-of-center Canadian newspapers such as the Globe and Mail. The National Post was founded by Conrad Black, now Lord Black, who renounced his Canadian citizenship in 2001 and sold the National Post to the Asper family who are solid supporters of the governing, left-leaning Liberal government under Jean Chretien. The Mark Steyn episode brought back the memory of Lord Black and I remember a speech he had given at the Fraser Institute, a Vancouver-based conservative think tank in 2001. If you want to have an understanding of the decline of Canada as an economic force this is mandatory reading. Interestingly the speech contained some comments on the slide of the Canadian dollar that I discussed earlier today. Here’s what Lord Black had to say about it:

From the Diefenbaker regime on, Canada has generally accorded higher social benefits to virtually all categories of employees than did the United States. Our productivity levels steadily lagged those of the U.S., the wage and security components of our industrial cost structure were higher than the American and the result was that in the last 45 years Canadians maintained their ability to export to the United States, upon which 87% of Canada's foreign trade and 43% of its Gross National Product now depend, by reducing the comparative value of the Canadian dollar by over 40%. Thus Canada's standard of living, compared to that of the United States, factoring in tax reductions and productivity increases in the U.S., has declined by almost 40%.

Black set out to give a platform for his views in the press by founding the National Post:

Then, and particularly with the founding of the National Post in 1998, we set out to achieve commercial success while drastically raising the quality of the country's written press. We would offer the country an alternative to the soft-left path on what had become, with the fragmentation of the old federal Progressive Conservative Party, a one-party federal state.

and

I am proud to say that we shattered that oppressive little world in the Toronto media, which had resisted the publication or airing of any views not in lock-step conformity with the official version of Canada as a humane paradise superior in all respects except size to its neighbour.

When I arrived in Canada four years ago I quickly realized that although the Globe and Mail is a great newspaper, it lacks the objectivity to criticize the state of affairs in Canada. The National Post was a welcome diversion from what Black calls the lock-step conformity propagated by the majority of Canadian media. Dark clouds set upon the sky when Black sold the newspaper in 2001 and many were alarmed when a few weeks ago some drastic changes were made to the Post's editorial board. With Mark Steyn’s exit we can start writing our obituaries for the National Post. The demise of the newspaper and Steyn’s exit have even hit US headlines. It is another nail in the coffin of the Canadian right and that is a very sad conclusion. More than ever, Canadians will have to look south for alternative news sources. But then, they can always turn to the blogosphere.

So it appears that some Arab media are starting to condemn this week's terror attacks in Saudi Arabia. This probably reflects the new realities on the ground following the success of Iraqi Freedom. Here’s a noteworthy conclusion:

Several observers say that the attackers are aiming at nothing less than taking power in Saudi Arabia.

Many observes in the west have been making exactly that point for a long time and it appears that the reality is starting to sink in, finally. Yet, it does not give us any reason for comfort yet, especially on a day when it became evident that the missing tourists in Algeria where indeed kidnapped by Islamic extremists (and 14 remain missing), when two female suicide bombers in Chechnya kill 30 during a religious ceremony and the Saudi government is not exactly giving us a lot of help in investigating the Riyadh bombings. While there have been encouraging developments recently, the reality is that we have long way to go in ridding this world of terror networks and their sponsors.

I have been meaning to write about this for a while but haven’t had the time to sit down and put the pen to paper. The issue is that of the sliding US dollar and the impact it has on the currency of its closest neighbor and trade partner, Canada. For a number of years now the Canadian economy has been ‘saved’ by the favorable exchange rate, one US dollar on average bought you almost 1.60 Canadian dollars, making it cheap for Americans to buy and produce in Canada and in turn giving the Canadian economy a solid influx of funds, contributing to healthy growth rates. The Liberal government in Canada benefited enormously from the rosy economic picture, but many critics pointed out that the US$/C$ exchange rate covered up some real problems. The problem is that on the face of it, Canada was competitive, but a closer examination revealed that it wasn’t really. What if the exchange rate had been 1:1 ? Would we still have seen US investors, business and tourists flocking to their Northern neighbor as they did in recent years? Probably not. The Canadian economy was competitive primarily by virtue of the exchange rate, not because it produced better and cheaper goods. That problem is now becoming more evident and in a way the rising value of the Canadian dollar is a blessing in disguise. Note that today one US dollar buys you only 1.38 Canadian dollars, the latter appreciating in value by about 14%. It will now force Canadian businesses to increase productivity and become more efficient in order to offset the reduction in profitability resulting from the change in exchange rates. That in turn means that many Canadian businesses will have to model themselves after their southern counterparts, which in practice will not be an easy process as many external factors such as government regulation, taxes and organized labor have had a value destroying impact on Canadian businesses. These external variables can not be turned around overnight, but the complacency prevalent in Canadian society at large will no doubt have to experience some form of shock therapy in order to maintain a position of relative competitiveness vis-à-vis the US.

There’s one other important effect which is the fact that the sliding Canadian dollar made imports into Canada fairly expensive. This is a much overlooked aspect but it shouldn’t be as it was slowly destroying Canadians’ buying power as phenomenal amount of goods and services from the US are imported into Canada. The Liberal government never paid much attention to this aspect either as their economic thinking to a large extent continues to be mired in the notion that consumers should be buying domestically, a flawed concept that predates the days of free-trade and globalization. You will not believe how many businesses continue to advertise their products as “Canadian” and how many people (although a minority) in Canada disapprove of buying at Wal-Mart. The rise in the value of the Canadian dollar now allows consumers in Canada to buy more imported products for their dollar and that is a move in the right direction as it ultimately creates wealth for consumers.

It is now up to the Canadian government and businesses to respond to the new realities by together working towards a framework in which Canada stays competitive. That means lower taxes, less rules and regulations and more flexibility with regards to labor. In the end this will benefit both Canada and the USA. A currency union with the US, favoured by many in Canada, has a long way to go. The current Canadian government has a hard time getting its head around joint security arrangements so the idea of one North American currency may be generations away, but it is a concept that will be discussed intensively over the next few years.

Over at Michele’s a discussion is taking place about the fact that the Saudi bombings are not getting sufficient media play, Glenn thinks that the bombings deserve little airtime as these attacks are “desperate” and look like “small potatoes” in the wake of what happened in Iraq. Well, I do not entirely agree with that and believe that the attacks deserve big time media attention. The reason, as I have said earlier today, is that the bombings are evidence of a revised strategy by al-Qaeda. The new approach was predicted by a number of experts shortly after the war in Afghanistan and the argument was that many Saudi fighters would flee Afghanistan and Pakistan and return to their native grounds to continue the battle there in order to focus on their key strategic objective: establishing a caliphate in the holy land of Mecca and Medina itself.

So what we are seeing is a change of venue in the war against terrorism. In addition to the savage murder of innocents, that is the key reason for this situation deserving close media attention. I do not think these attacks are desperate, I think they are clear signs that al-Qaeda is alive and well and that they have now taken their battle to Saudi Arabia itself. Any success by them in undermining the rulers in Riyadh would set the stage for serious long-term upheaval in the Arab and Muslim world. As I have argued on these pages, the appointment of Paul Bremer as the new administrator for Iraq for a period that is getting longer and longer by the day, should not be seen in isolation. His background as one of the top counter terrorism experts in the US may very well be taken as the establishment of on the ground anti-terror expertise in the region and his role should extend to Iran, Syria and as of yesterday, definitely, Saudi Arabia.

The suicide bombings in Saudi Arabia yesterday are evidence that al-Qaeda is still around. More importantly, they underline that the al-Qaeda strategy has changed and that the focus of their operations has shifted. Using Afghanistan as a launching pad for international operations has made way for a regrouping on the Arabian peninsula where the key target will now be the destabilization and ultimate overthrow of the House of Saud. Whatever the Saudi royal family does with regards to its relationship with America is irrelevant, and US troop withdrawals will have no impact on al-Qaeda’ s strategy. Anyone who believes that a restructuring of our relationship with the Saudis will reduce al-Qaeda activity is therefore mistaken. On the contrary, if America starts to abandon the House of Saud there is a unique window of opportunity for the Muslim terrorists to step into the void and use the social and economic pressures in Saudi Arabia to bring about dramatic changes in that country. Yesterday’s bombs were just a start in a new campaign.

One of the most solemn days in The Netherlands is May 4, the day that the Dutch remember all the victims of World War II. I remember the day very well for my father always took me to the remembrance ceremonies on a little square not far from our home which was appropriately called Square 40-45, as the war in Holland lasted from 1940 to 1945. It was always a very sober ceremony, some music, a speech by the mayor, veterans and survivors placing some wreaths in front of the statue on the square and a silence of two minutes followed by the Dutch national anthem. It was always deeply moving and standing there as a child I could feel the pain and sorrow of those who suffered and died under Nazism. Or so I thought.

I remember one time, I must have been about ten years old, that I was standing next to an older man who was there together with a younger man who I had seen before in our hometown. The younger man was probably somewhere in his thirties, had very dark, black hair and was mentally challenged or so it seemed to me. The older man started talking to me and I could not really follow what he was saying. I just couldn’t, I was paying attention to the ceremony and I always get somewhat uneasy if strangers engage me in a conversation I am not looking for, even as a child I had an issue with that. So, all I did was smile to the man, nodding yes, and thinking: “whatever”. As he talked on it became evident that he was talking about the mentally handicapped younger man standing next to us. All of a sudden he cut right to the heart of the matter, pointing to the young man and said to me: “they made him watch his parents’ execution”. I froze completely and I instantly pictured this poor soul having to watch the brutal killing of his father and mother. I also was deeply embarrassed for trying to dismiss the old man while trying to focus on the ceremony. The only thing he was trying to do was share his grief for I assume he had adopted the young man, and explain to me as a representative of the younger generation what had happened during those dreadful terror laden years. He gave me enough to think about during the two minutes of silence that followed.

I wanted to share this with you as Dutch newspapers last week reported that Moroccan youths had disturbed a number of these ceremonies throughout the country earlier this week. In one instance by throwing eggs onto participants and in another by playing football with the wreaths. The absolute bottom was reached when during the ceremony in one of Amsterdam’s suburbs a number of these youths shouted “we must kill the Jews”. This under any circumstance is a grieving and depraved comment, but to shout it out in a city from which 100,000 Jews disappeared never to return during the most sensitive of commemorations is beyond belief and it was no doubt perpetrated on purpose. I am not writing this as yet another piece seeking to provide further evidence of the ever growing levels of anti-Semitism Europe, although that would certainly warrant a post on this site. What happened last week goes well beyond anti-Semitism.

What happened last week is evidence of a complete disconnect of one group of people with society at large. The disconnect manifests itself in a manner that not only betrays a complete disregard for a culture’s sacred institutions, it also reveals a willingness to inflict further pain upon that society during a moment of grief and sorrow. You have to wonder how deeply some have fallen to produce such reckless venom and indeed wonder whether any of these individuals are beyond moral repair. We know that a lot of these groups have essentially become so marginalized that they are excellent targets for terrorist recruitment. But more than potential recruits, they are representing a domestic decay that is eating away at the normative foundations on which many western societies are built, as their despicable behavior may very well (and it very often has) find its way into other groups in society. Juxtaposing my memories of remembrance day with the evil defiling that took place last week, I came to realize that there is a very long way to go to stop the moral unraveling that is taking place in Western Europe today.

Whatever we do mitigating the North Korean situation (see below), we may want to use the lessons learned and apply them to the situation in Iran, to the extent that is possible. Michael Ledeen today points to the progress that the ayatollahs have made so far in developing their nuclear ability and that we should now focus on fostering democracy in Iran as a matter of urgency.

A reader pointed me to Den Beste’s analysis on North Korea which supports the notion that patience is probably the best way to go. I have, to be honest, considered the patience option for a little while but in doing my analysis I came to the conclusion that what we are essentially trying to do is risk mitigation. And in using the facts available to us now, I happen to believe that there are just too many variables outside our control to sit back comfortably and let time take its course. We have some experience at that and over the past decade we have learned that the situation in North Korea could either implode or explode, and under both scenarios it remains very unclear what will happen to both the nuclear and conventional capabilities that the country has amassed. This is why I qualified my analysis last week with the statement that I did my assessment based on what we know. If the Bush team has information that leads them to believe that we can continue to play the patience game then that is fine, and we can assess progress based on developments that come from the regional negotiating effort.

Using my risk mitigation approach, I have tried to picture some alternative scenarios (and there are many, from exports of nuclear materials to renegade North Korean generals to conventional or nuclear missiles ending up intentionally or unintentionally in downtown Seoul) that I consider to be such risks that we may we want to start considering other options. Pre-emptive measures can be both dangerous and controversial, so I would not advocate taking these steps lightly. On the contrary, we would have to carefully assess any such approach together with regional players, especially South Korea before moving forward. My impression is that with the current approach we are moving forward slowly and in doing so we may be ignoring some serious perils along the way.

A trip around the blogosphere as well as close examination of multiple news sources has not brought me any closer to a firm understanding of where the Bush team is going with North Korea. In addition, there were some conflicting messages earlier this week and they did not really raise the overall confidence level I have about this administration dealing effectively with this issue. The completion of operations in Iraq would allow for a new focal point in disarming rogue nations as I have argued here before, but to date very little progress has been made, or so it appears. As Pyongyang is upping the rhetoric and physical evidence of a growing nuclear capability is readily available, it is time to do an inventory and assess where we are and what particular hurdles we are facing.

Regional Solutions
The “regional solution card” is the card that the Bush administration has been playing to date. This effectively means getting China to buy into the seriousness of the situation and get the Chinese leadership on the same page as the US administration. On the face of it a very sensible approach, the Chinese are in a position to do so as North Korea relies to a very large extent on economic support from Beijing and the Chinese have obviously very little to gain from a wayward nuclear power next door. Apparently, Beijing has interrupted the oil supply to North Korea for a few days earlier this year, just to show Kim Jong Il and his team who’s calling the shots. This is an unconfirmed report but it underlines the potential that Beijing has as a key partner in this matter. Beijing in turn has a clear incentive to become more pro-active. There is of course the potential refugee issue but more importantly there is a risk that in China’s absence other regional powers may resolve to increase their leverage by developing nuclear or other military capabilities. These options would be perfectly reasonable for countries such as Japan and South Korea in the absence of a fully fledged US-Sino solution. There may be ways to go for both nations in this respect, but the potential that they might, should alert any Chinese leader let alone a leader like Hu Jintao who has just been anointed and for whom it is imperative to establish hard-line credentials going forward.
On the other end of the regional map are South Korea and Japan and to date they have not exactly been solid players. While the proximity of big population centers in South Korea to North Korean arms is good reason for them to be careful, it should not preclude a tougher position vis-à-vis their fellow Koreans. The South Korean government should know that its security to a very large extent is backed-up by the USA, a luxury that North Korea no longer has now that the Soviet-Union has evaporated and China has changed its stance towards communist rogue states. Japan’s positioning has been very disappointing, the velvet glove approach is something that just does not work, yet the Japanese have been far too accommodating with Pyongyang, resulting in calls this week by Japan’s Defence Agency for a much harder approach.

The problem with the regional approach is that it so far not only has failed to yield any results, it is not even clear as to what a potential result will look like. It may yet be another long process which takes place behind the scenes and at the negotiation table with no clear end point and no clear path of action that will lead to disarming North Korea. In fact, it may be a tool used by the Bush team to procrastinate on this issue in the hope that it will at least produce some results down the line without running any immediate risks.

The Multilateral Approach
There may be appetite under the Iraqi Freedom detractors such as Russia, France, Germany and Canada to make good with the Bush administration. And not only that, some of these countries have a direct interest in the potentially explosive situation, Russia borders on North Korea and Canada may well be within in range of North Korean missiles in the not so distant future. If the US stays away from any military option these countries may well be willing to work with Bush and the UN and the IAEA to put pressure on North Korea with a view of disabling its nuclear program. Yet, even if there was such a clear willingness and multilateral understanding, it is hard to see how it would translate into the desired results. Arms inspectors and resolutions simply do not work when you are dealing with totalitarian dictators and Kim has nixed previous deals that were made in a multilateral context.

Regime Change: Action
One other option is the Rumsfeld Card, although it is not entirely clear how it is going to be played. One option might be to choke the regime in Pyongyang to death with a very drastic package of sanctions. The net of such an approach would no doubt be a desperate attack of the North Koreans on their Southern brethren, prompting the US to step in, resulting in significant numbers of refugees flooding into China, many of whom may already have fled to China in the wake of the sanctions in the first place. Whatever the outcome, the start of hostilities by North Korea may result in substantial casualty numbers and most of these casualties will likely be South Korean and civilian. So given this likely scenario, a very drastic sanction package does not seem to be an ideal approach. Nor does a moderate sanction package as they have a reputation for not working.

The other option would the pre-emptive strike. There is very little analysis as to the parameters of such an action as opposed to the seemingly endless strategic papers and maps that were available prior to the actual invasion of Iraq. If the Bush administration is serious about disarming the “Axis of Evil”, then a pre-emptive strike on North Korea is something that should be given serious consideration given the complete failure of all diplomatic efforts to date, knowing that we have been at it for well over 10 years. There should be a serious analysis of the merits of pre-emptive action, disabling the capabilities of the North Korean command structure at the outset of such a conflict could well provide a key to a quick resolution of the crisis without running the risk of huge casualty numbers. Again, there is little material available that would allow us to do this analysis but purely from a policy perspective it is an option that should definitely be on the table.

The Domestic Angle
Very little has been written about the domestic appetite for another armed conflict. While Bush is savoring the clear victory in Iraq and moving over to domestic issues with an upcoming election in mind, it may be that another armed conflict with a potential for far greater casualty numbers than Iraq may not work with the 2004 presidential election in mind. Democratic opponents will (and some already have) no doubt jump on this but Bush may gamble that North Korea will not resonate with the American voters and that continued talks and regional approaches may be sufficient for now. While taking such a risk is understandable, it may cost him a few points during the upcoming campaign and debates. Any serious deterioration in the potentially explosive relation with North Korea may damage his campaign.

What Next?
The regional solution contains far too many variables for Washington to control and it is not likely to lead to any meaningful results in the near term. Things have been quiet on this front this week, but today the Chinese have set the regional train in motion again.

A surrender and focus by the US on preventing nuclear exports from North Korea only, as was suggested earlier this week, is hard to implement and would mean a very disappointing retreat from the policy of rolling back rogue nations. If we want to get to an outcome that would resolve the issue once and for all we need to seriously look at pre-empting this threatening situation in a manner that would minimize casualties and have the support of North Korea’s immediate neighbors. Not an easy formula but unless there is something that we do not know, it could well be the formula that ultimately needs to be applied.

Just when you thought that the anti-war, anti-Bush rhetoric had abated, the mayor of London, Ken Livingstone, pipes up with these incredible comments:

"I think George Bush is the most corrupt American president since Harding in the Twenties. "He is not the legitimate president." He later added: "This really is a completely unsupportable government and I look forward to it being overthrown as much as I looked forward to Saddam Hussein being overthrown.

The comments were made during an address to schoolchildren that were visiting City Hall, earlier today. What a way to introduce children to the workings of local government. This could have come from a Canadian politician, but this time London will have to bear the brunt of American exasperation.

Of course the mainstream media are always quite silent on certain events. When I wanted to blog about pro-war rallies in the run-up to Iraq, I had a hard time finding any solid reporting by mainstream media and abandoned the plan to put a pro-war demonstration post together. The latter is also the reason why I largely ignored the entire anti-war movement, they got too much coverage elsewhere and I did not agree with their message anyway. I had to visit Sari’s blog today to find out that a crowd of about 15,000 had gathered in Montreal yesterday to celebrate Israel’s day of independence (another example of the growing primary news gathering role of weblogs). The march apparently was a big success and when I read that Hatikva was sung by a large group I just got goose bumps. This is by far the most haunting and emotional of all the national anthems that I know and it beats my beloved Wilhelmus and even the Star Spangled Banner in terms of emotional appeal. It gets to you especially when you grasp the meaning, history and background, so if you can deal with a little emotion today go here, I recommend the choral version.

John Hawkins has done some analysis on 2004 and believes that Bush is set for a second term. He is indeed in a very strong position and with Cheney’s announcement that he is going to be on the ticket again we will have continuity, which is extremely important given the challenges, both domestically and internationally. Yet, as I have argued before, it may not be a repeat of Reagan-Mondale as there are far too many voters stuck in the middle and with the domestic economic challenges it may not be an easy win. This is compounded by the ability of candidates like Lieberman and Graham to attack Bush from the right on foreign policy. They will have to walk a careful line in order to secure the Democratic nomination but they are the only credible candidates who together on a ticket could derail the Bush-Cheney train.

As for Al Gore, he is not running as no one in his right mind is going to finance another self-destructing campaign. He has severely damaged his credibility as a candidate which is why he bowed out so early. As for Hillary, she follows John’s analysis and has no doubt set 2008 as her target. That by the way is a good bet for her as there is no clear crown prince who is likely to take over from Bush after his second term ends, but now I am getting a little bit too far ahead of the game, although it is a interesting question.

Whenever I report some interesting news I always make it a point of letting you know where things end up. Well, the committee in the northern part of The Netherlands that had recommended that CNN be taken off the cable has retracted its recommendation and it appears that Dutch cable news fans can continue to tune in to CNN. I cannot even consider this to be good news, as it is still preposterous that such ideas can take the form of a formal recommendation, especially in light of the claim that CNN was deemed to be too pro-American during operation Iraqi Freedom. A phenomenal outcry among the cable network’s clients and even parliamentary questions did in the end prompt cooler heads to prevail. That did not stop the chairman of the committee to comment that some “overreacting” had taken place after their recommendation. Well, what did they expect, that viewers would thank the committee for their well-informed observation that viewers should be prevented from making an independent choice as to where they should gather their news?

Preparing a somewhat longer post on North Korea I stumbled across this piece of market news. North Korea is tapping the capital markets by raising money to prop up their bankrupt economy through a bond offering, but instead of interest bondholders will get an expression of affection from the people’s republic. Now there’s a great return on your investment, and, if you win in a lottery you may even get some interest after all.

This is, believe it or not, for real and the manner in which the funds are raised is reason for serious concern. It appears that the North Korean government is finding subscribers for the bond offering by approaching the sizeable Korean community living in Japan, many of whom are sympathetic to Pyongyang. You can compare this to Osama bin Laden raising funds in the US among sympathetic American muslims, following which he can apply the proceeds to further intimidate the US. Or, what about Fidel Castro tapping the market among Hispanic Americans who see some benefit in helping out his flagging communist dictatorship? This is evidence of the extremely soft and appeasing attitude that the Japanese have taken towards North Korea. The regime in Pyongyang has kidnapped Japanese citizens most of whom have not returned, but the Japanese authorities do not blink an eye if the same regime uses Japan as a base to raise financing? This is a piece of evidence that the so-called regional solutions have a very limited chance of success, at least where it concerns working with Japan. Apparently some Japanese agree and are asking for tougher stance vis-à-vis Pyongyang.