Friday, June 13, 2008

Derek Tonkin: Further response on sanctions

Derek Tonkin (author of the response to our piece published earlier) has responded to our response (in a comment). As usual, our response follows in a comment to this post.


It may surprise you that I agree generally with the logic of almost everything you say. But you concentrate too much on the theoretical aspects of economic and financial sanctions and overlook both the reality in Burma today and the psychological and political effects.

The reality is that the generals are not suffering, but the ordinary people are. What the US and EU didn’t and perhaps couldn’t reasonably have been expected to take into account when they first imposed sanctions was the emergence of a tremendous bonanza in the shape of revenues from natural gas, which has eclipsed other export earnings and goes straight into the pockets of the generals. Already touching US$ 3 billion annually, they are likely to touch US$ 6 billion when the pipeline to China is opened. So the punitive role to which you refer is mitigated to the point of insignificance. Another reality is that Burma’s neighbours, including those two powerful and dynamic economies China and India, cocoon the Burmese economy from the effects of trading sanctions. You cannot conduct an effective sanctions policy against a country when all the countries within a radius of 2,000 miles are opposed to the policies you advocate. Finally, if you have been to Burma recently, you might have found that the people grumbling most genuinely about the actual the effects of sanctions are not the generals (though they grumble like hell and use sanctions as an excuse to argue away their own incompetence), but the burgeoning private business community who feel they are being forced into “cronyism” in order to survive. They are also increasingly deprived of the added-value from manufactures while the State sells off its raw materials. The most dotty recent example of sanctions has been the targeting by the EU of some 1,207 private businesses, and if you extract the few which are State or crony, you are still left with over 1,000 mostly small to medium-sized enterprises whose sole misfortune is to be involved in the furniture (timber), jewellery (gems) and metals (private foundries) businesses even though most of the families concerned would have voted for pro-democracy parties in the 1990 Elections. Whose side, after all, are we on?

As regards the psychological and political effects of sanctions, these have been so negative that any responsible overall assessment would in my view conclude that the damage of sanctions generally to Western interests and to the humanitarian welfare of the Burmese people has negated the theoretical "benefits" of sanctions which you adduce. A very clear reflection of the growing isolation and eccentricity of the Burmese leadership may be found in their denial of US, British and French offers of humanitarian aid when their warships appeared off the coast of Burma. Defense Secretary Robert Gates has called this denial "criminal neglect", but a number of commentators have recently asked some very pertinent questions about the extent of Western responsibility, however unwitting, in inducing a state of mind in Burmese leaders which has undoubtedly cost so many lives through delays in the provision of aid and logistics. When warships appear off the coast of Burma from countries already engaged in economic warfare against you, should we be surprised that the Burmese leaders are perhaps likely to doubt their motives?

So long as we ostracize the military regime and deny them the expertise, tools and facilities to reform their economy, so long will they continue to retreat into their shells. The window of opportunity afforded by Cyclone Nargis for a more open relationship is closing fast. We should be doing everything we can in our own interests as well as those of the Burmese people to establish critical contact.

All I would argue is that the West should back-pedal on the sanctions issue for the present. Clearly, it would be politically impossible to remove them just like that, but to ratchet them at the present time makes absolutely no sense in terms of furthering the interests of the international community and the welfare of the Burmese people.

Derek Tonkin



BEW Team said...

Thanks Derek, for your comments. It seems that there has been some movement in your position in that you have (wisely) moved away from the claim that trade sanctions are to blame for the current economic predicament in Burma. I'm heartened by this and trust that we shall no longer see you making such claims in public fora or, indeed, in submissions to Committees etc (House of Lords or elsewhere). It appears now that your economic case is that there is a specific cohort of producers that would be better off if sanctions were removed. I will return to this point subsequently.

You claim that I concentrate too much on theory at the expense of reality. In fact my arguments were based explicitly on the institutional realities of Burma in terms of the overarching military/regime involvement in and influence on economic activity. I think that it is you (and those that share your position) that continue to deny a fundamental reality in that regard. I note that in your evidence to the Lord's Economic Affairs Committee (more explicitly) and here (implicitly) you make reference to the 'private' economy and its importance in Burma. I often find that anti-sanctions advocates like to wield the relativism stick and accuse us of applying inappropriate "Western' templates to Burma in many of our arguments. I would contend that you are committing the most egregious 'Western template' abuse of all in continuing to uncritically employ the 'public-private' distinction in relation to Burma's economy. That distinction is a creation of Western liberalism/democracy that does not and *cannot* have any meaning outside of such a system. The public-private distinction is meaningful only when there are real barriers to State action, actual sanctions (in the legal sense) that can be brought to bear against the State in defense of individuals. This requires separation of powers, rule of law etc to be effective. But more fundamentally, the very idea of such a distinction is anathema to authoritarian regimes. After all, it implies an area of non-State sovereignty which, by definition, cannot be tolerated by a State apparatus whose raison d'etre is absolute control. Hence there is very little meaning to be attached to the idea of a 'private' economic sphere in Burma. Once we take account of the extent of 'official' State activity, and the ostensibly 'private' firms that are owned by regime officials and their families, and the extensive network of crony-owned enterprises and the degree to which rents are forcibly extracted by the military throughout the economy through the various holdings corporations, investment commissions etc and the monopoly over official access to foreign exchange, and the allegedly 'private' institutional features such as the USDA etc, and the forced labour and compulsory acquisitions to which the Tatmadaw are so partial, we can see how ephemeral the notion of a 'private' economic sphere in Burma actually is. The military is not a *sector*, opposed to and distinct from a private sector. They are more akin to a radioactive dye in the bloodstream - staining even the extremities with the extent of their dispersion. Which is why the bulk of the effect of trade sanctions will always fall on the regime and claims that sanctions are missing their target and hitting the 'private' economy make no sense.

Now it may be true that there is a cohort of producers (your 1000 enterprises) who may yield some benefit from the removal of trade sanctions. But as in any economic decision these benefits must be weighed against the costs in order to proceed rationally. The costs are that by so doing we will further enrich the regime and their cronies with no guarantee or reasonable grounds for expecting that by so doing we will induce a change in their approach to economic 'management'.[As an aside, I note that you persist with the unfounded idea that they will change their ways: "so long as we ostracize the military regime and deny them the expertise, tools and facilities to reform their economy..." - which, of course, they intend to do and would employ all ODA in so doing forthwith! How about a dose of reality with reagrd to that position?] Furthermore, as I noted in my previous comment, we would morally compromise ourselves by giving material aid and succour to those who have an ocean of blood on their hands. It isn't clear that the small portion of the gains that would accrue to your 1000 enterprises would be sufficient compensation for aiding and abetting a murderous regime. I have no difficulty choosing sides.

As a final point on economic effects, I note the duality with regard to sanctions that I have come to expect in anti-sanctions arguments. You argue that the gas windfall eliminates any punitive effects of sanctions on the generals and yet you note that they 'grumble like hell' about them. Grumble about something that has no effect? Similarly in your previous post you argue that the gas windfall totally insulates the generals from the effects of sanctions, yet it is the passing-down of these effects that causes economic misery and stagnation. Once again, sanctions are simultaneously devoid of impact and productive of tremendous, even calamitous impacts! The anti-sanctions lobby really needs to come up with a consistent line and stop trying to walk both sides of the street in what is ultimately an intellectually dishonest way.

As for your references to the 'psychological' effects, I'm left wondering what, if anything, the regime will be considered responsible for once this bizarre process of doublethink has been taken to its conclusion. The regime's refusal to accept aid was our fault; our isolation of them via sanctions and rhetoric produced an ostensibly understandable isolationist response? The same military that made Burma post '62 one of the paradigmatic isolationist regimes has been driven into its shell by Western political action? Absurd. As for our responsibility for the unaided dead, perhaps I might point to the regimes refusal to allocate *internal* resources to rescue and recovery (as opposed to carrying out a sham referendum and apparently conducting a painstaking yet rapid census of the number of pigs, buffalo, chickens etc killed). This refusal stems from the same source as their innate isolationism - their overriding priority is the maintenance of control. Their actions cause the problems and all responsibility must be sheeted home to them.

Maintenance of existing trade sanctions and significant widening and strengthening of targeted financial and other personal sanctions is the appropriate policy response. It is true that surrounding countries are not necessarily cooperative, but then again the regime and their hangers-on appear to prefer to live (travel to, send their children to school/university in and so on) in richer Western countries like Australia than in more accommodating destinations such as India or China. So shutting the door on them will have a noticeable non-transferable impact. The more the better.

Derek said...

We are, Wylie, still poles apart. I have never claimed, as you allege, nor even remotely hinted that “trade sanctions are to blame for the current economic predicament” in Burma, so it is impossible for me to abandon arguments which I have never used.

But Cyclone Nargis has shown that there is an emerging civil society in Burma which has taken on the military establishment. This society includes entrepreneurs, businessmen, doctors, lawyers, entertainers, truly non-governmental organisations, rank and file Buddhist and church organisations, journalists and others who provide sound evidence that Burma still operates in a Public-Private dichotomy, much as the regime and Burma Economic Watch would like to compel conformity and obeisance. The incompetence of the regime was illustrated starkly through the failure of their Union Solidarity and Development Association, an organisation of supposedly over 20 million members, to play any effective role whatsoever in the relief and rehabilitation effort now in progress. So while the regime might well like to exercise, as you say, “absolute control”, they are simply not able to do so. As you and I agree, they are grossly incompetent. This means, though, that they are also grossly incompetent as dictators.

The evidence suggests strongly that the private sector is close to flourishing, and could soon pose a major challenge to the regime. During my latest trip around Burma in January, I was struck by the extent of local construction and business development in many towns outside Rangoon, which had nothing at all to do with “cronyism” and was in some cases funded from overseas by private Thai and Chinese sources not channelled through the Myanmar Foreign Investment Commission. But instead of encouraging them, Burma Economic Watch seem hell-bent on driving private entrepreneurs into the arms of the junta, who are only too keen to co-opt them. Why play their game? Was it not the private business community which was one of the main supports of the National League for Democracy in the 1990 elections? But not so nowadays because the NLD has abandoned its November 1989 Election Manifesto and worked instead for sanctions and boycotts, which has been largely responsible for leaving them in a pathetically weakened state since their policies and programmes are now so negative and unappealing.

So while, as Thant Myint-U has often said, the Military is the State, and the State the Military, seeking to control all the levers of power, you simply don’t know the Burmese entrepreneurial class if you write them all off as toadies of the junta. You complain about my support for the 1,000 or so entrepreneurs targeted in the latest EU measures, businesses which you lambaste for “aiding and abetting a murderous regime”. Yet these businesses are mostly private family concerns have nothing whatsoever to do with cronyism, so much so that Mark Farmaner of the Burma Campaign UK, who are not exactly noted for their opposition to sanctions, agreed with me on a public platform that their inclusion in the EU Regulations was a nonsense and should never have happened.

Of course the generals complain about sanctions. When the only superpower on the globe, the United States, declares economic warfare on an impoverished regime, it is bound to have some effect. You may rejoice that the generals are being punished, but my greater concern is to ask whether such punishment has induced them to change their behaviour, and the answer is that quite clearly it has not. Indeed, it has only made matters worse. The generals are as a result more recalcitrant, more entrenched and more isolated than ever before (since 1988), and they take it out on the Burmese people. So all this may make you “feel good”, and we can talk as the US does about the “symbolic” effects of sanctions, but they are demonstrably very counterproductive indeed. We surely need to consider most carefully what is the point of it all, if it is leading us absolutely nowhere.

Derek Tonkin

abceasyas123 said...

Clearly Wylie has the much better side of the argument here.

According to Derek, "The evidence suggests strongly that the private sector is close to flourishing, and could soon pose a major challenge to the regime."

What is that evidence Derek? Please point to some actual data, beyond your anecdotal visits, that proves your point.

Here is what I know.

First, Burma ranked 153 out of 157 in the 2008 Index of Economic Freedom (see The report details numerous fundamental problems with how Burma's economy is managed. Examples include restrictive trade policies, import/export taxes, foreign exchange controls, customs barriers, 20.3% inflation, no licenses issued to foreign investors since 2002, private real property and intellectual property rights are not protected, etc. How would the lifting of sanctions do anything to address any of these core issues? You just think overnight with the lifting of sanctions, the regime would welcome international help for its economy with open arms?

Second, Burma is tied for last out of 180 countries in Transparency International's 2007 Corruption Perceptions Index. How would the lifting of sanctions do anything to address the problem of corruption endemic in Burma?

Third, it is well known and understood (in these reports and otherwise), that there is no independent judicial system in Burma. How does the removal of sanctions solve this problem? Even if I wanted to invest in Burma, why would I invest in a place where there is no rule of law, no sanctity of contract, and no enforceable property rights, let alone that foreign exchange makes it virtually impossible to repatriate funds. If I am a Chinese company, there are no laws about my paying bribes. Wonderful place to do business if you are Chinese and have money. But if I am a Western company and such laws exist, how do I compete that Chinese company that has no such constraints?

Fourth, you state that commentators (I read, people like you) have argued about the "extent of Western responsibility, however unwitting, in inducing a state of mind in Burmese leaders which has undoubtedly cost so many lives" since the Cyclone. My reading of Burmese history is much different than yours. General Ne Win launched the Burmese Way to Socialism in 1962, which started the country on a path to economic ruin through policies of severe isolation, discouragement of tourism, expulsion of foreigners, nationalisation of state industries, etc. Last I checked, the multiple devaluations in the currency that took place in 1987-1988 and led in part to 8/8/88 had nothing to do with the West. Or do you mean to say their self-imposed isolation starting in 1962 in your view was triggered by a post-traumatic trauma of British colonial rule?

Fifth, your view of international sanctions on Burma appears disconnected from history. Throughout the 1990s, the only Western sanctions that really existed were bans on weapons sales and some travel bans. Only the US imposed a ban on new investment in 1997. And again, the US only banned imports for the first time in 2002. EU sanctions had no real teeth until after the Saffron revolution. So to suggest these sanctions played any serious role in causing suffering of average Burmese people, when Western economic investment was miniscule compared to investment from China, Thailand, and Singapore, is not grounded in fact. I would say the suffering of the Burmese people, in fact, has been almost exclusively caused by the terrible mismanagement of the Burmese economy over decades. If sanctions had such an impact, we would have expected to see the Burmese economy flourishing from 1962-1997, and then plummet thereafter. But, in fact, the economy has been consistently terrible over decades and no such effect is observable.

Lastly, I would note that I don't find your anecdotal evidence remotely persuasive. You claim the construction you witnessed had nothing at all to do with cronyism and in some cases was funded by overseas investment. How can you be so sure? What evidence and documentation do you have of these facts? Was this a scientific randomized sample? I suspect not. Thus, you cannot generalize from your observations in any meaningful way whatsoever.

My assessment is that you are projecting on to Burma the kind of country you want it to be rather than seeing it for the country that it actually is.

To suggest that these so-called 1,000 entrepreneurs are deeply impacted by sanctions, and if somehow sanctions were removed they would just blossom into a private sector revolution ignores the Index of Economic Freedom, Corruption Perceptions Index, and everything we know about Burma's economy.

My experience traveling to Burma on numerous occasions (if anecdotes pass as "facts" in your book) is that any successful business person I have spoken to has drawn the attention of the government in some way or another, and has been forced to pay bribes. This is because the law is so opaque, so often changing, and civil servants are so underpaid that they can selectively enforce the law whenever and however they like to extract bribes and make a living from business people who want to do anything from the most simple to most complex of tasks.

Thus, I concur with Wylie that because the regime has its hand one way or another in everything, the sanctions, which have been and should continue to be targeted, will always impact the regime.

If you want to help the Burmese people, I'd recommend you encourage the regime to (1) reform its economy; (2) develop a real constitution with separation of powers and an independent judiciary; and (3) spend its billions in oil/gas revenue on its own people.

There is no doubt that sanctions are not a panacea that will solve the problems of the people of Burma. But they surely aren't the cause of their problems either.

In the final analysis, it is only national reconciliation that will yield the result we all want to see. And just as extensive engagement over the last 20 yrs by countless UN special envoys and rapporteurs has an important (and so far completely unsuccesful) role to play, so too does the imposition of targeted sanctions.

BEW Team said...

Derek, it is always heartening in an argument to see one's adversary begin to resort to ludicrous assertions and attributions, and ad hominem imputation of sinister motives etc. It is a sure signal that the end is nigh, that the bottom of the barrel of their ideas is being scraped. Although in this case it is really more of a small bucket than a barrel per se.

Starting with the least incoherent part of your response, you have indeed claimed and more than remotely hinted that the effects of sanctions account for Burma's current economic malaise. For example, in your original response to my piece you stated, with regard to the effects of sanctions, that "[t]he effects all get passed down the ladder to the people, whose economy has stagnated as a result". *Whose economy has stagnated as a result* ; that is as clear a statement of the proposition that sanctions are primarily the cause of Burma's current economic position as you can get without actually typing the words verbatim. Furthermore this position is a maintained hypothesis in your other arguments (e.g. your evidence to the Lords Economic Affairs Committee) and the anti-sanctions case generally. The argument that the negative economic effects of sanctions are unjustifiable can only be sensible if those effects are of sufficiently large scale relative to others. The fact (*acknowledged by you* - I'm presuming that they weren't just weasel words) that the policy actions of the regime are the overwhelmingly dominant cause of the economic outcomes is precisely why this particular anti-sanctions argument is specious at best and fraudulent at worst. It may cause you some cognitive discomfort to have your inconsistencies laid bare, but surely on the grounds of intellectual honesty you are obliged to stand by your statements and their implications.

abceasyas123 has done an outstanding job of dealing with your claims about 'private' activity in Burma, so I will defer to him/her in the main on that point, but I do need to comment on the more bizarre aspects of your remarks. "Burma still operates in a Public-Private dichotomy, much as the regime and Burma Economic Watch would like to compel conformity and obeisance" - did you pause even for a second before making such an idiotic assertion in the public domain? Who is it exactly that we are we trying to compel and how are we doing it? By pointing out in various fora the virtual impossibility in Burma of activity meaningfully independent of the regime? You describe that as compelling obeisance to the regime? Utterly ludicrous. And the suggestion that we are somehow active participants in the pursuit of the regime's agenda is striking coming from someone who appears incapable of coming up with stronger pejorative terms for the (murdering, raping, torturing) SPDC than 'incompetent' and 'recalcitrant' and who argues ceaselessly that they be given greater scope to carry out their plans. Breathtaking.

Then again, it appears that distinguishing between appearance and reality may present you with some difficulties generally. According to you the failure of the USDA to be 'effective' in post-Nargis relief shows the cracks in SPDC's control. This assertion could only be meaningful if in fact the USDA is actually as its name suggests some kind of giant Burmese Rotary club. Of course, that is absurd - the USDA is an agency for outsourcing Tatmadaw control responsibilities at the local level as well as acting as a preventive counterweight to any domestic political organisation . As such it performed precisely as required after the cyclone - harassing relief attempts, expropriating aid supplies and generally attempting to prevent any control-threatening autonomous behaviour (just as it was accorded the role of stifling protest during the ructions last year, as detailed in the recent NCGUB volume "Bullets in the Alms Bowl"). An inability to comprehend the true nature of the USDA suggests astounding credulity; a refusal to do suggests a slavish adherence to SPDC propaganda. Which is it?

Only in your fevered imagination did I 'lambaste' the 1000 firm cohort. Those firms/entrepreneurs in Burma who deliberately seek to utilise the oppressive State machinery in pursuit of their own interests are worthy of condemnation and we condemn them. By contrast, those who find it impossible to completely escape the reach of the regime are victims, not perpetrators. My point was that
while lifting sanctions may deliver benefits to the group in question, the case is yet to be made to our satisfaction that the costs involved (i.e. the benefits that will flow to the regime) are not greater still. Especially with regard to targeted financial sanctions, a topic upon which I note you remain silent, presumably because none of your arguments have even a superficial credibility on that score.

As far as aiding and abetting the regime, let me be clear in saying that I do not make that charge against the firms in question (and those like them) but I do make it against Network Myanmar and others who support the ideas in its charter. That is, all those who argue for 'engagement' on the grounds that sanctions haven't worked without ever explaining exactly *how* engagement (i.e. giving the generals free rein) is going to work. Arguing for engagement *without* articulating how and why it will lead to improvements in Burma is no more than special pleading on behalf of the 'engagers'. Aid groups and NGO's want greater access as they take ODA as inputs and produce aid programs as output. Greater access to places like Burma is just like opening new markets for firms.But the evidence on the non-effectiveness of aid is clear and manifest - it does not flow into investment nor even higher spending in targeted areas (Alison's analysis of the official Health Expenditure accounts for Burma, for example, show clear evidence of virtually dollar-for dollar substitution of external for internal financial resources over the last decade) Academics want access to Burma for the research opportunities to further their careers. Scholars going to Burma, visiting pagodas and writing articles that few read and none cite yields nothing beyond CV- fattening, promotions and grants for the individuals concerned.
Tourists want cheap holidays and scope to indulge their National Geographic fantasies (i.e. the relative 'purity' of Burma relative to Thailand. They contribute little (they go to places like Burma expressly to spend as *little* as possible) and gain much from their own selfish viewpoint.

In each case the benefits from engagement are skewed markedly if not almost exclusively toward the engagers (and of course the regime in the wider context - more hard currency, perceived legitimacy etc) rather than the people of Burma. If there is an argument linking engagement to genuine progress in Burma then the pro-engagement/anti-sanction forces should spell it out in detail. Failure to do so (which is typical) means that the pro-engagement argument is really a call to allow the generals to do as they wish so that the engagers can get what they want out of Burma. In other words, self-seeking, special-pleading hypocrisy.

Sanctions may not induce political and economic change in Burma. But they have more than one function - economic pressure is one, prevention of gain from illicit/illegal/immoral behaviour is another. On those grounds they must remain and be extended.

If I had a neighbour who was an abusive alcoholic who harmed his family, I believe I would be justified in refusing to lend him money or the use of my car for the purposes of buying alcohol even though I knew that my actions in this regard would not cause him to change his behaviour. There is a moral imperative not to aid and abet unacceptable behaviour. And an even stronger imperative not to continue to lend him money or the use of my car so that I could swim in his pool or use his billiard room or watch his giant TV, all the while maintaining that by doing so I was somehow in some unspecified, possibly magical, way preparing the ground for a better life for his wife and children.

This analogy goes to the heart of the questions in my first response to you: what is the moral justification for allowing the regime and its cronies to use our institutions to enjoy their ill-gotten gains? Why should we make it easier for murderers to prosper, irrespective of whether refraining from doing so would
change their behaviour or not?

Do you have an answer?

abceasyas123 said...

I find it rather interesting that Mr Tonkin first goes to the ad hominem attack and then just abandons the debate when he is clearly boxed in to a corner! Well said, Wylie. It seems like you have delivered the knock-out blow.