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In this Q&A session from the Council on Foreign Relations (reprinted in the New York Times), Shorenstein APARC visiting professor David Kang -- together with other experts on the region -- comments on South Korea's increasing independence from the United States, and other issues related to the "North Korea problem."

What is South Korea's strategic posture in East Asia?

After the Korean War ended in 1953, South Korea and the United States established a political and security alliance that has lasted more than half a century. "For a number of decades, South Korea primarily defined itself as a U.S. ally, with the enemy to the north," says Donald Gregg, president of the Korea Society and a former U.S. ambassador to Korea. However, South Korea is now trying to create a new role for itself in Asia. Seoul is exploring a growing economic relationship with China--which passed the United States in 2003 to become South Korea's largest trading partner--and its policy of engagement and growing cooperation with North Korea is pulling it away from the United States. "All we know for sure is that South Korea's role is no longer junior partner to the U.S.," says David Kang, a visiting professor of Asian studies at Stanford University. "The days when they would just unquestioningly follow the U.S. are over."

Kang and other experts say Seoul is beginning to shift its focus towards increasing regional ties with its Asian neighbors. The U.S.-South Korea relationship, while still strong, is not as exclusive as it has been in the past. "South Korea is still an ally of the United States ... nevertheless, it has been the most active country in promoting East Asian cooperation and integration, and will probably continue to do so," says Charles Armstrong, professor of history and director of the Center for Korean Studies at Columbia University.

What are South Korea's biggest foreign policy challenges?

Dealing with North Korea while preserving its relationship with the United States, maintaining relations with Japan, and addressing potential long-term military or economic threats from China, experts say. But "the major issue for Seoul is overwhelmingly North Korea, and everything else gets filtered through that lens," Kang says. South Korea looks to its northern neighbor with the goal of eventual reunification, and therefore seeks economic cooperation and political engagement to smooth relations and slowly move down that path. The United States, on the other hand, is primarily seeking to prevent North Korea from gaining nuclear weapons, and has refused to engage with Pyongyang until that issue is resolved.

Other experts see a disconnect between how South Korea views its role in the region and how other nations see it. South Korean officials talk of playing a "balancing" or mediating role in regional disputes, including tensions between China and Japan and the nuclear standoff between the United States and North Korea. But South Korea's "actual ability to mediate and balance is limited," says Armstrong. And while South Korean President Roh Moo-Hyun has expressed hopes of building Seoul into a logistics and business hub for the region, existing tensions on the peninsula--including international fears that North Korea is amassing a nuclear arsenal--cloud any long-term economic plans. As things stand, South Korea has the world's 11th largest economy, but not a corresponding level of political clout.

How is South Korea dealing with North Korea?

Through a policy of active engagement. In 1998, Former President Kim Dae-Jung introduced the "Sunshine Policy" aimed at improving ties with North Korea while assuring Pyongyang that Seoul is not trying to absorb it. Since then, "the degree of economic interaction between south and north has substantially increased," Armstrong says. Kim and North Korean President Kim Jung-Il met at a historic summit in 2000, and increasing progress has been made on a range of issues, from economic--increased rail links and joint projects like the Gaesung industrial complex--to social and symbolic, including cross-border family visits and Korean athletes marching together under a single flag at the Olympics. Trade between the two countries reached $697 million in 2004, and South Korea is now Pyongyang's second-largest trading partner after China.

South Korea sees engagement with North Korea as yielding far more benefits than confrontation. "South Korea is reorienting itself toward reconciliation and eventual reunification of the peninsula," Gregg says. South Korean officials say reunification would reduce the burden on each side of maintaining huge armies, help improve living standards, draw international investment, create employment, and help avert the worst possibility: open war on the Korean peninsula.

What is South Korea's relationship with China?

South Korea is developing increasingly warm relations with its giant western neighbor. "There is a real fascination with China in South Korea, and the flow of investment, exports, students, tourists, and businessmen going to China from South Korea has exploded in the last several years," Armstrong says. Bilateral trade between Seoul and Beijing reached $90 billion in 2004, a 42 percent increase from 2003. The two countries also agree politically on issues ranging from opposition to Japanese Prime Minister Junichiro Koizumi's visits to the Yasukuni war shrine, to accord on how to deal with North Korea's nuclear ambitions. China is also choosing the path of engagement with North Korea, and helping Pyongyang find a "Chinese way" to develop: that is, increasing economic openness without sacrificing political control. "On the whole, [South Korea and China] see pretty much eye to eye on the major geopolitical issues," Kang says.

Beijing, like Seoul, is investing in North Korea, which has ample natural resources--including coal, iron, and gold--and a low-cost labor force. In 2003, Chinese investment in North Korea was $1.1 million; in 2004, it ballooned to $50 million; and in 2005, it was expected to reach $85-90 million. The volume of trade between China and North Korea reached $1.5 billion in 2005, making Beijing Pyongyang's largest foreign trading partner. North Korean leader Kim Jung-Il, who rarely travels, emphasized Beijing's importance to his country by visiting China in January.

South Korea is positioning itself to be closer to an ascendant China, but trying to do it without jeopardizing existing ties with the United States. South Korea's biggest worry, experts say, is being pulled into a conflict between the United States and China over Taiwan.

What's the relationship like between South Korea and Japan?

"Very bad at the moment in terms of public diplomacy and popular opinion," Columbia University's Armstrong says. South Korean wariness of Japan dates back at least to 1910, when imperial Japan invaded Korea and ruled it as a colony for thirty-five years. During the occupation, Japanese efforts to suppress Korean language and culture earned Korean enmity. During World War II, the Japanese practice of using "comfort women"--women from occupied countries, mostly Korea, who were forced to serve as prostitutes for the Japanese army--increased the anti-Japanese feeling.

South Koreans, and others across the region, are also infuriated by Koizumi's annual visit to the Yasukuni shrine. The site honors more than two million Japanese war dead, but includes the remains of more than a dozen convicted war criminals. South Korea also has disputes with Japan over territory. Both countries claim a group of islands--and the fishing and mineral rights around them--in the Sea of Japan that the Koreans call Dokdo and the Japanese call Takeshima. And many critics in South Korea and across Asia accuse Japan of whitewashing its wartime atrocities in its grade-school textbooks.

But much of the South Korean conflict with Japan may be for domestic political consumption, some experts say. "Under the surface, I would say the degree of interaction [between Seoul and Tokyo] remains high and, in the economic realm, is rather good," Armstrong says.

How is South Korea dealing with the United States?

While experts say most South Koreans still consider the U.S.-Korean alliance the backbone of their security relationship, time has passed and attitudes are shifting. A new generation of South Koreans, assertive and nationalistic, are less mindful of the Korean War--and less grateful for American intervention in the conflict that left nearly three million Koreans dead or wounded--and more resistant to what they see as a U.S. attempt to impose its values and Washington's singular focus on terrorism. The United States has opposed South Korean engagement efforts with North Korea, and has also moved to increase its ties with Japan. The Bush administration's foreign policy, including the war on terror, its punitive stance toward North Korean nuclear weapons, and particularly the invasion of Iraq, is highly unpopular in South Korea, according to opinion surveys there.

South Koreans are also increasingly demanding more control over their country's military and political affairs. In 2004, the United States returned several military bases to Korean control, and agreed to withdraw 12,500 of the 37,500 U.S. troops currently stationed in Korea by 2008. U.S. officials, including Defense Secretary Donald Rumsfeld, had been pushing for South Korea to take more of a role in the defense of the Korean peninsula, to free up U.S. forces for deployment elsewhere. But, all differences aside, Seoul is still eager to cooperate with the United States. South Korea, with some 3,000 troops in Iraq, is the third-largest member of the U.S.-led coalition there, behind the United States and Britain.

What is the recent history of the region?

Poised between China and Japan, fought over by the United States and Russia, the Korean peninsula long has played a central role in Asia's geopolitical affairs. After World War II, Japanese colonial rule gave way to U.S. and Soviet trusteeship over the southern and northern halves of Korea, respectively. The peninsula was divided at the 38th Parallel. In 1948, the southern Republic of Korea and the northern Democratic People's Republic of Korea, under Kim Il-Sung, were established.

In 1950, North Korean forces invaded South Korea, starting a conflict that brought in China on the North Korean side and a U.S.-led UN coalition on the South Korean side. While an armistice was agreed to in 1953, a formal peace treaty was never signed. In 1954, the United States agreed to help South Korea defend itself against external aggression in a mutual defense treaty. U.S. troops have been stationed in Korea since then. In addition to this important security relationship, shared interests in the last fifty years have included fighting communism and, since the 1980s, establishing a strong democracy and fostering economic development. However, in recent years strain has emerged on a range of issues, none more important than how to handle Pyongyang.

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On 26 December 2004, an earthquake and tsunami struck Aceh in the Indonesian archipelago, killing an estimated 130,000 people. The catastrophe was a catalyst for the Free Aceh Movement (GAM) and the Indonesian government to come together in Helsinki to seek an end to the nationalist/separatist conflict that had wracked the territory since the 1970s. GAM agreed to drop its demand for outright independence in exchange for a high level of genuine autonomy, while the Indonesian government made various concessions, including allowing the creation of local political parties in Aceh. Jakarta wanted to end a costly, debilitating, and seemingly endless conflict; encourage needed foreign investment in the oil and gas sector; and bring the military in Aceh under civilian control. GAM, in turn, realized that the war was unwinnable; the Acehnese people had suffered enough; and many of GAM's aims could be achieved by democratic means in Indonesia's reforming political system.

Based on his unique experience as an advisor to GAM during the 2005 talks, Prof. Kingsbury will outline the peace process, explain how agreement was achieved, and comment on Aceh's future inside Indonesia.

Damien Kingsbury is director of the Masters Program in International and Community Development at Deakin University. His many publications include The Politics of Indonesia (3rd ed., 2005); South-East Asia: A Political Profile (2nd ed., 2005); and Power Politics and the Indonesian Military (2003). He has a Ph.D. and an M.A. from Monash University and an M.S. from Columbia University. He is presently writing a book on political development.

Professor Kingsbury's talk is co-sponsored with the Center for Southeast Asian Studies at the University of California - Berkeley

Daniel I. Okimoto Conference Room

Damien Kingsbury Director of the Masters in International Community and Development Program Speaker Deakin University, Australia
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Daniel C. Sneider
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Pre-emption used to be the watchword of Bush foreign policy. The world's sole superpower would not hesitate to wield force against an imminent threat to its security. The old doctrines of the Cold War era -- of containment and deterrence of a potential enemy -- were disdained as weakness.

Now, facing the most serious national security challenge since the end of the Cold War -- the nuclear weapons programs of Iran and North Korea -- the administration is reaching back to those oldies but goodies.

The determination of Iran and North Korea to develop nuclear weapons has so far been largely unchecked by this administration. The North Koreans, since breaking out of the freeze agreed to during the Clinton administration, have been steadily producing plutonium, and presumably warheads. The Iranians, after the election of hard-line President Mahmoud Ahmadinejad, reversed their deal to suspend uranium-enrichment activities, the crucial step toward nuclear weapons.

Diplomatic negotiations in both cases have produced little movement. But a military strike on their nuclear facilities is almost inconceivable. The danger of potentially horrendous retaliation and the sapping of American will and resources in Iraq have almost killed that option.

"As shaky as a policy of containment is, it is certainly preferable to confrontation, 'rollback,' or 'regime change' through military force,'' wrote conservative national security expert Thomas Donnelly in a recent analysis. "Containment is, in fact, regime change by tolerable means, and the solution to the problems of Iran and North Korea lie in an indirect approach.''

While we try to contain a nuclear Iran and North Korea, suggested Donnelly, we should surround Iran with movements for democratic change in Iraq and Afghanistan. North Korea, he believes, will be changed through Chinese influence.

Donnelly cautions that there may be circumstances when containment proves even more risky than intervention -- say if Iran tries to slip nuclear materials to Islamist terrorists. Iran is less stable than the Soviet Union, though it is worth remembering that the first 15 years of the Cold War brought us to the brink of nuclear war once and close to it several times.

For the administration, this is a stealth policy shift. That is no surprise. It flows directly from the mess in Iraq, a mistake the administration can never really acknowledge.

For those who once touted American global domination, it is still hard to face the reality that containment is impossible without allies and partners. By ourselves, we cannot press those regimes by cutting off their access to investment and advanced technology.

The administration is rightly moving to take Iran to the United Nations Security Council to seek a mandate to enforce the demands of the International Atomic Energy Agency. North Korea is undoubtedly watching this carefully.

China and Russia, who have veto power in the Security Council, are reluctantly going along. But they still resist any move to impose economic sanctions against Iran. Nor are the Europeans, Japanese and others who depend on oil and gas from Iran eager to halt their investment and trade.

Similarly in the case of North Korea, the Chinese and South Koreans are not prepared to cut the flow of economic aid and investment into the otherwise isolated North Korean state. This is less a case of economic interests than a fear that sanctions will escalate to greater confrontation, even war.

"The strategic challenge the Bush administration faced was to convince the rest of the world that Iran is more dangerous than the United States,'' says nuclear proliferation expert George Perkovich. "They finally did it -- and it took Ahmadinejad to do it,'' referring to the inflammatory rhetoric, including threats to "wipe Israel off the map,'' issued by the Iranian leader.

The administration made some headway down the same path with North Korea by engaging in direct talks with that regime this past fall, dispelling the image that the United States was unwilling to negotiate. But that progress has been undermined recently because hard-liners inside the Bush administration pulled the plug on such talks.

Managing an effective containment partnership will be a huge challenge. And there is still tremendous resistance inside the administration to engaging and negotiating -- and compromising -- with the enemy. But that was always a part of making containment succeed, even at the height of the Cold War.

Containment is no silver bullet. It is merely, as Donnelly puts it, "the least bad alternative, but not by a lot, and not under all circumstances.'' And right now, it is the only game in town.

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David G. Victor
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Sustainable development -- the notion that boosting economic growth, protecting natural resources, and ensuring social justice can be complementary goals -- has lost much appeal over the past two decades, the victim of woolly thinking and interest-group politics. The concept can be relevant again, but only if its original purpose -- helping the poor live healthier lives on their own terms -- is restored.

A FASHIONABLE NOTION

The concept of sustainable development first emerged from academic seminar rooms two decades ago, thanks to a best-selling report called Our Common Future. Put together by the World Commission on Environment and Development, the report argued that boosting the economy, protecting natural resources, and ensuring social justice are not conflicting but interwoven and complementary goals.

A healthful environment, the theory goes, provides the economy with essential natural resources. A thriving economy, in turn, allows society to invest in environmental protection and avoid injustices such as extreme poverty. And maintaining justice, by promoting freedom of opportunity and political participation, for example, ensures that natural resources are well managed and economic gains allocated fairly. Civilizations that have ignored these connections have suffered: consider the Easter Islanders, who by denuding their forests triggered a spiral of economic difficulties and strife that eventually led to their civilization's collapse.

Yet even as sustainable development has become conventional wisdom over the past two decades, something has gone horribly wrong. Because the concept stresses the interconnection of everything, it has been vulnerable to distortion by woolly thinking and has become a magnet for special interest groups. Human rights watchdogs, large chemical companies, small island nations, green architects, and nuclear power plant operators have attached themselves to the fashionable notion only to subvert it for their own ends. Instead of bringing together nature, the economy, and social justice, sustainable development has spawned overspecialized and largely meaningless checklists and targets. Particularly harmful has been a series of consensus-driven UN summits that have yielded broad and incoherent documents and policies. Sustainable development, the compass that was designed to show the way to just and viable economics, now swings in all directions.

This deterioration was probably unavoidable. But the slide matters, and not only because sustainable development has become a cover for inaction and a black hole for resources; it is also a wasted opportunity. The concept has gained such a powerful following over the past two decades that if it recovered its original meaning, it could become a guiding force for governments, firms, and nongovernmental organizations (NGOs). fixing this mess requires understanding how it came to be and recalibrating the compass so that it can reliably point in a single direction again.

THE PRICE OF FAME

One way to trace the slide of sustainable development is to follow the idea's degradation through the UN. After all, its earliest high-profile proponent, the World Commission on Environment and Development, headed by then Norwegian Prime Minister Gro Brundtland, operated under a UN mandate. The UN General Assembly and the UN Secretariat were always at the forefront in championing Brundtland's vision. And today, the conferences, commissions, and task forces that constitute the sustainable development apparatus all find their focus within the UN system. What happens there is worth observing -- not because the UN is solely responsible for what has gone wrong, but because the organization reflects the aspirations and flaws of the players that are.

The trouble began at the 1992 Earth Summit in Rio de Janeiro, which involved more than 100 heads of state, 170 governments, 2,400 representatives from NGOs, and nearly 10,000 journalists. The attention generated by the meeting kindled demand for more conferences. The result was a decade of summits, with one held almost every year, that covered a range of topics, including demographics (in 1994), the rights and roles of women (in 1995), social development (in 1995), and the expansion of urban habitats (in 1996). Most of these gatherings, the culminations of arduous negotiations, produced two documents: a detailed action plan for insiders and a crisper statement of principles for outsiders. At Rio, these were called, respectively, Agenda 21 and the Rio Declaration.

Action plans tend to be sprawling documents that offer something for everyone. They are crafted through a consensus process in which the easiest way for special interests to get what they want is to agree with everyone else. The result is often an incoherent and costly wish list. The secretariat of the Rio summit estimated that implementing Agenda 21 might cost $600 billion a year in new spending, of which $125 billion would have to come as foreign assistance from the industrialized countries. Since then, summit negotiators have not even bothered to tally the costs of their plans. And in the meantime, the international community has continued to behave like a child crafting his dream order of Christmas presents out of the Bible-size FAO Schwarz catalog.

Statements of principles have not had much effect either. The documents are usually drafted in lawyers' false poetry: they are meant to inspire without offending any specific interest group. Principle 2 of the Rio Declaration, for example, purported to offer a fresh interpretation of the conflict between a nation's sovereignty and its international responsibilities: "States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental and developmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction." Nobody really knows what the sentence means. Advocates for sovereignty (especially in developing countries) claim that it endorses sovereign freedom of action, whereas advocates for environmental responsibility (notably ngos from rich industrialized nations) claim that it establishes international duties.

The Rio process, moreover, bred a set of new institutions. Two new secretariats were created to oversee the implementation of two new treaties, one on climate change, the other on biological diversity. Summit participants also set up the Commission on Sustainable Development (CSD), which holds an elaborately prepared meeting every year and is charged with the impossible task of monitoring the implementation of the Agenda 21 commitments. The CSD, in particular, has accomplished very little.

DELUSIONS OF GRANDEUR

Governments and the UN system have also marginalized sustainable development by failing to articulate serious objectives and coherent strategies for its implementation. Agenda 21 embraced every goal offered up in anticipation of the Rio summit, but it set no specific priorities or targets, making it impossible to mobilize support for any strategy or to measure progress. At the 2002 World Summit on Sustainable Development, the process reached its lowest point with a sprawling and incoherent plan. Participants endorsed eight broad Millennium Development Goals (MDGS) -- including the eradication of extreme poverty, the provision of universal primary education, and the assurance of equality for women -- that had been crafted at the UN's Millennium Summit two years earlier. Since then, the UN Secretariat has parsed these broad objectives into 18 specific targets and 48 indicators. But the MDGS are already losing traction because governments have limited power to directly affect these outcomes. Most of the world is closer to meeting the MDGS now than it was a decade ago, but that is largely because human welfare has generally been improving. (The most striking exceptions are found in the many African countries that score worse today on most measures of human welfare.)

The MDGS, targets, and indicators do not constitute a strategy that informs the actions of governments, companies, and NGOS. Most of what the MDGS envision is beyond the power of any enterprise to deliver. Consider, for instance, the efforts that would be needed to meet the mdg to "develop a global partnership for development." The indicators designed to measure compliance with this goal include some activities that governments do control, such as the amount of untied official development assistance (ODA) they offer, which, in the right settings, can help alleviate poverty. But they also include special targets for ODA to small island nations and landlocked states that serve no strategic purpose -- reflecting these nations' special ability to manipulate UN commitments to their narrow advantage. And regarding the indicators on which progress has been most remarkable -- access to phone services, computers, and the Internet -- advances have been the fortuitous byproduct of technological development and have often reflected the accidental wisdom of governments' decisions to let the market work on its own.

The trouble with sustainable development and the MDGS is that they reflect a diplomatic process that has devoted too much effort to lengthening the international community's wish list and not enough to articulating and ranking the types of practical measures that are the hallmark of serious policymaking. Governments might have wondered whether any given dollar in aid would be best invested in water treatment, poverty alleviation, or structural adjustment, or if it would be better to treat the causes of underdevelopment, such as corruption, or its symptoms, such as inadequate health care. Yet these crucial questions were left unanswered -- and often even unasked.

THE POVERTY PRIORITY

The only way to fix the mess with sustainable development is to return to Brundtland's fundamentals. Sustainable development must be viewed afresh, as a framework for every aspect of governance rather than as a special interest. It can be revived by following four courses of action: making a priority of alleviating poverty, dropping the environmental bias that has hijacked the entire movement, favoring local decisions over global ambitions, and tapping into new technologies to spur sustainable growth.

First, and most fundamental, progress on sustainable development requires more success with economic development, in particular poverty alleviation; the other two prongs of sustainability, environmental protection and social justice, will lack force until basic living standards are improved. Development experts do not know exactly which policies best boost development, and without a well-accepted theory, many have tended to embrace grand schemes, such as the MDGS, that are politically unrealistic and unlikely to deliver results. But these uncertainties should not mask a growing canon of good sense about the policies that offer the best chances for eradicating poverty. One place to start is with some of the careful studies conducted over the last decade, especially those done by the World Bank. They show that a few key institutional factors -- such as fiscal discipline, openness to market competition, strong investment in education, political freedom, and low levels of corruption -- largely explain why some countries flourish while others wither. The breadth of consensus on these points is reflected in the comprehensive 2005 Human Development Report by the UN Development Program (UNDP), which endorses a similar institutional focus for alleviating poverty.

Yet very few of these factors, such as openness to competition or investment in primary education, appear among the MDG indicators. Equally vital levers for development -- including anticorruption measures, the protection of private property, and the containment of civic strife -- do not appear, because the soft-spined corps of believers in sustainable development has been unwilling to advocate policies that some view as intrusions into national sovereignty. Getting serious about sustainable development requires redrawing the lines of sovereignty; if sustainable development is a universal concept, then governments have a universal responsibility to promote it.

In the United States, some of this advice is already being put into practice through the Millennium Challenge Corporation (mcc), a governmental organization whose origins lie in President George W. Bush's promise to provide new development assistance to the countries that can best use the money. The plan was to offer a $5 billion annual increase in development assistance by fy2006. Unfortunately, as with so many of this administration's bold projects, progress on the idea is being hobbled by halfhearted implementation and perennial underfunding -- the partial result of a budget crunch brought on by unsound tax policies and the ballooning cost of the Iraq war. The mcc has run into trouble implementing its funding strategy. Countries with the best conditions for making effective use of mcc money are those best able to attract private investment on their own. On the other hand, countries with conditions that are least conducive to development -- and thus the least eligible for mcc aid -- are also likely to be the poorest and those in the greatest need of a hand. This Catch-22 most affects Africa, which includes, according to the UNDP's most recent tally, 14 of the 18 countries in the world whose human development has regressed since 1990. The United States has voluntarily increased foreign aid by $8 billion since 2000 and is the largest single supplier of aid to Africa. Other donors have also redoubled their efforts in Africa. But on most of the continent, governments have no viable plan to ensure economic growth, and sustainable development remains far from reach.

GREEN WITH ENVY

It is also necessary to challenge the environmental bias that has dominated the sustainable development agenda. From the outset of the Brundtland commission's work, developing countries have rightly feared that the developed world's concern about the environment would overshadow their interest in development. They insisted that the Rio summit be called the UN Conference on Environment and Development, but diplomats from the industrialized countries (even the conference's secretary-general, Canadian Maurice Strong) nonetheless referred to it informally as the Earth Summit. The two treaties signed in Rio, the UN Framework Convention on Climate Change and the UN Convention on Biological Diversity, mostly reflected the environmental priorities of the industrialized world. A treaty on protecting the world's forests was also considered. The developing countries, rich in forests and wary of intrusion, organized to kill it, but because nothing really dies in the diplomatic world, the stillborn convention has been resurrected as a set of new principles and institutions known as the UN Forum on Forests. So far, the forum has had little effect on forests -- except to further deplete them by generating a prodigious number of documents.

The tactical success of environmentalists, especially well-organized multinational NGOs based in industrialized countries, in moving their issues to the top of the sustainable development agenda is unhealthy -- even for environmentalism. Easy pickings in the UN have distracted environmentalists from the more urgent need to articulate ways in which they can contribute to the other pillars of sustainability: development and social justice. And this lapse has alienated them from an important base of potential partners in the developing world. Notably, the 2004 report of the high-level UN panel (which included Brundtland) convened by UN Secretary-General Kofi Annan to articulate new visions for world security was strikingly thin on environmental matters -- evidence that such issues have not sufficiently permeated mainstream policymaking in much of the world.

After being hoodwinked at Rio, the developing countries made sure that the 2002 World Summit on Sustainable Development did not include the word "environment" in its title. Nonetheless, the multinational environmental lobby has continued to score tactical victories in many areas that the industrialized states control, especially funding. The Global Environment Facility (GEF), which was created in 1991 to provide funds for the then nascent sustainable development apparatus, now finances projects in six areas: climate change, biodiversity, pollution in international waters, land degradation, ozone depletion, and persistent organic pollutants. These areas largely match the leading environmental priorities of diplomats from the industrialized nations, not the most pressing concerns of the states that GEF funds were intended to address. Climate change and biodiversity are top priorities for most industrialized countries and also, therefore, for the GEF: the two issues alone consume two-thirds of the GEF's resources. However, these concerns are disconnected from the real developmental priorities of the poorest populations in developing countries. In the area of climate change, for example, the GEF's funding strategy is to push for the development of technologies such as solar and wind-generated energy, which emit no carbon dioxide, a leading cause of climate change. These are darlings of environmentalists in the North, who claim that these exotic technologies, although currently expensive, will become cheaper with time. That argument is of dubious relevance to the 1.6 billion people who lack electricity today. For them, real progress usually comes in the form of less sexy but more cost-effective options, such as diesel generators and grid extensions.

THINK LOCAL

The third step toward recovering sustainable development is remembering that the theory works only if it is approached as a hardheaded calculation about tradeoffs, rather than as an amalgam of sacrosanct principles. The cocktail-party version of sustainable development gleams with promises of harmony and globalism: economic growth, environmental protection, and social justice can be achieved fully and simultaneously; because the ecosystems and economies of nations are interdependent, the problems they face require global solutions. In fact, however, the concept has practical relevance only if it can accommodate local preferences and capabilities. Cocktail-party visions of sustainability properly laud the benefits of electricity, for example, as a cure for darkness and a substitute for costly candles. Yet the diesel generators that bring electric lighting to the most remote areas are, in some respects, a paragon of unsustainability: diesel, which is derived from oil, is an exhaustible and polluting resource. Poor communities love diesel-generated electricity nonetheless: it has brought them television, high-quality lighting, and refrigeration, which were unavailable before. Similarly, whenever multinational environmentalists have sought to ban DDT worldwide, developing countries have resisted, wisely pointing out that the pesticide is crucial to controlling mosquitoes and other disease carriers in poor regions such as West Africa.

The last decade of UN summits propagated the myth that sustainable development can promote international harmony through "global action plans" and "universal principles." In fact, providing sustainability is a highly political activity governed by interests and resources that vary widely from one place to another. Advocating MDGS that apply equally to Latin America (where reaching them is fortuitously at hand) and Africa (where development is largely stagnant) makes little sense. The only way to craft serious goals is from the bottom up, focusing on responsible systems of government rather than disconnected global processes to do most of the work. But this approach, although pragmatic, is less satisfying ideologically and more demanding -- and therefore ignored by cocktail-party globalists.

The current disconnect between global ambitions and local realities helps explain why efforts to curb climate change, for example, have achieved so little. Although the problem's effects are inherently global, its causes are resolutely local. In most of the world, including many developing countries, domestic authorities choose what energy system to use, and because they decide how much fossil fuel to consume, they effectively control emissions of carbon dioxide. Globalists in industrialized countries are clamoring for "engaging" the governments of developing countries by pressing them to accept caps on emissions. But every major developing country has rejected the demand as an unfair limit on their development, leaving reform at an impasse.

So how can countries be compelled to enforce policies that deviate from their immediate interests in order to pursue the global good? Partly by allowing them to interpret the mandates of international agreements according to their local priorities. Take, for instance, Beijing, Shanghai, and Guangzhou -- three of China's most rapidly growing cities -- which are all struggling with local air pollution. To cut down on noxious emissions, they have (at least) two options. They can either move power plants and heavy industry outside their borders and import the goods and electricity they need, or they can change their primary fuel from coal to natural gas or nuclear energy, both of which are much cleaner. Although either solution would provide China's cities with the energy they need, each one has its drawbacks. Whereas the first would do little to curb China's total effluent of carbon dioxide -- the country as a whole would still burn prodigious amounts of coal -- the second would force Chinese officials to rely more heavily on a less carbon-intensive fuel (gas) that they have little experience using and would have to import in large quantities. To convince Chinese officials to adopt the second strategy even though it seems less favorable to them, the international community could offer a package of measures, including assurances to secure China's gas supplies and agreements to share related technology. In other words, industrialized Western countries could align their objective to slow global warming with China's domestic interests.

The primacy of local interests applies to highly industrialized countries as well. In Europe, governments are implementing the Kyoto Protocol on climate change by customizing it to local and regional needs: they are creating an emissions-trading system that lets individual companies trade credits for their carbon dioxide emissions, thus allowing greater flexibility in meeting the treaty's targets. Meanwhile, governments elsewhere are also developing their own locally tailored trading systems. The authors of the Kyoto Protocol envisioned a single global trading system with a single global price. But such a uniform system is not being implemented because the institutions that allocate credits, monitor compliance, and enforce agreements operate mainly at the local and national levels. Instead, a host of emissions-trading systems are emerging from the bottom up. (The United States, meanwhile, has refused to ratify the agreement for the compelling reason that it cannot satisfy the treaty's core commitment to bring down U.S. emissions of greenhouse gases to an average of seven percent below 1990 levels between 2008 and 2012. Although abandoning the protocol was a wise decision, Washington has not offered any credible plan to manage emissions in the United States.)

TECH SAVVY

Any serious effort at sustainable development will also need to harness the technologies that most affect economic growth and mediate the consequences of growth for the environment. Unfortunately, the sustainable development apparatus has been strikingly ineffective on technological matters. The only technological area in which governments have set specific goals is "technology transfer," the handing over of hardware to developing countries -- a gesture often espoused in UN talks but rarely witnessed in the field. Such goals are largely pointless anyway because most technologies spread through markets rather than thanks to transfers between governments.

Some efforts to harness technological progress for the benefit of sustainable development are under way. They include a long-overdue attempt to promote innovation in areas that matter to very poor countries -- such as developing a vaccine for malaria -- but that have been overlooked by private firms that normally focus their efforts on creating products to combat the diseases of wealthier consumers.

Governments have found it particularly difficult to set credible policies for the development and application of technologies that have long commercial lives. The problem is especially acute for investors in energy infrastructures who are contemplating new technologies that might help address the problem of climate change. In Europe, where the rules on emissions trading are in flux, utility companies have been wary of building new power plants in the absence of greater fiscal certainty, increasing the risk of severe electricity shortages. And in the United States, where there is no meaningful federal policy on greenhouse gas emissions, investors in long-term energy assets such as power plants (the single greatest emitters of carbon dioxide) must make multibillion-dollar commitments without knowing what regulatory regime may exist in the future. A few years ago, this problem was not particularly serious because nearly all new power plants in the United States were fired with natural gas. But today, natural gas costs five times what it did in the 1990s, there are no new gas plants under construction, existing plants are running at only 30 percent of capacity, and dozens of new coal plants are being designed. Unless the U.S. government soon announces a credible plan for the future regulation of emissions, utilities will invest in conventional coal-fired power plants. Within a few years, the country could be saddled with far more carbon dioxide emissions as a result of these plants than if the government had given investors a reason to fund less carbon-intensive sources of energy.

Governments and companies must find ways to keep sometimes tyrannical public opinions from blocking the development and use of certain essential new technologies. Today, there is latent public discomfort regarding carbon sequestration, a technology that entails injecting deep underground large volumes of carbon dioxide that would otherwise go into the atmosphere. Elements of the technology are already widely used in oil and gas operations, but carbon dioxide injection projects are under way at only two facilities in the world. This fix holds the promise of an elegant engineering feat, but the technology is not without danger. There are risks of leaks, some potentially catastrophic, and some countries (notably the United States) still lack adequate regulatory regimes for controlling underground disposal. The industry would do well to keep early demonstration projects at remote and especially safe sites in order to quiet public alarmism.

Worries that even ill-advised public resistance could stymie such worthy projects are not far-fetched: other promising technologies have run afoul of misguided opinions and poor regulatory policies. Across Europe, for example, public opposition to genetically engineered foods has prompted regulations to keep some of those foods off the market despite growing evidence that they are good for both consumers and the environment. Some of the key technologies for controlling carbon dioxide pollution may face a similar fate. Nuclear power, for example, is probably favored as a low-carbon means of generating electricity. Yet in many countries, it remains politically untenable.

BACK TO THE FUTURE

Despite its beginnings as a powerful animating concept, over the last two decades sustainable development has become meaningless. It has fallen prey to a collection of special interest groups that have both hollowed out the concept and lost track of what they can best do to implement it. When it has been applied, the theory has often distorted the real priorities of development.

Fixing the concept will require going back to its origins, and especially stressing the integration of economic and ecological systems while leaving it up to competent local institutions to decide how to set and pursue their own priorities. Advocates for sustainable development should not promote false universal goals. Because local needs and interests will necessarily vary, sustainable development must be redefined repeatedly, from the bottom up, wherever it is to be put into practice. Sustainable development can have worldwide relevance and appeal, but only if its original purpose of helping the poor live better, healthier, and fairer lives on their own terms is restored.

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In this paper we set out to accomplish three objectives. First, we wanted to track and describe the way the fiscal reforms have been implemented in China's townships. Second, we have tried to identify the effect that the fiscal reforms have had on the fiscal health of the township. This objective was pursued in three contexts: the effect on the average township; the effect on townships in different provinces; and the effect on townships in poor and rich townships. Finally, we sought to assess the impact that the fiscal reforms had on village fiscal health and farmer satisfaction.

Although farmers certainly have expressed their support for tax and fee reduction through a variety of media, our results show that the fiscal reforms are far more complicated and complex than tax reduction policies. They include a large set of policies that have sought to reassign expenditures, realign responsibilities (for control over resources that flow from county to town and town to county), reduce the importance of extrabudgetary and self raised funds, and increase investment into the public goods infrastructure in rural areas. When assessing the broad impact of these policies on township fiscal health, we find the average township has not fared well. Although county to town transfers have risen, the targeted transfers to offset the decline due to the tax and fee reduction policies do not nearly cover the losses of fiscal resources in the system as a whole. In addition, many policies are putting increasing control in the hands of the county financial office. through changes such as increasing requirement to hand up town to county transfers and expenditure reassignments (even though the fiscal resources come out of the township's budget). Hence, overall the fiscal condition of township's operating budget has clearly deteriorated between 2000 and 2004.

The bright side of the fiscal reforms has come in the area of capital budget management and flows of fiscal resources into new infrastructure investment. Between 2000 and 2004 there has been a veritable explosion of investment into the rural economy, mostly in roads, but also into irrigation, drinking water and to a lesser degree into clinics. The investments have risen largely due to the rising allocation by upper level governments. While we show that the rising investment from any source increases farmer satisfaction, there are some concerns with the new effort to improve rural infrastructure. First, in many places (and especially in Jiangsu and other richer townships) as investments from above have risen requirements for matching funds apparently have led to an increase in township debt. Second, the increasing reliance investment from above also has a drawback. While any investment from any source is shown to increase the satisfaction of farmers, ceteris paribus, when the investments come from above, they appear to reduce farmer satisfaction. Apparently, when villages are less involved with the project selection, design and implementation, the projects leave farmers less satisfied.

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Report to the World Bank, Fiscal Reform and the Role of the Township
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Scott Rozelle
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Health is an important factor in the process of economic development. Good

health is important for increasing the productivity of labor force and for raising the

income-earning ability of farm households. Health also has been shown to have positive and statistically significant effects on economic growth. For example, Fogel (1994) argues that about a third of income growth in Britain between 1790 and 1980 can be attributed to improvements in health. In developing countries, good health is viewed as a critical input into poverty reduction and long-term economic development. In short, it has been argued that investment in health is good business in many different settings and environments.

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Scott Rozelle
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\When developing countries announce debt relief agreements under the Brady Plan, their stock markets appreciate by an average of 60% in real dollar terms - a $42 billion increase in shareholder value. There is no significant stock market increase for a control group of countries that do not sign Brady agreements. The stock market appreciations successfully forecast higher future resource transfers, investment, and growth. Since the market capitalization of U.S. commercial banks with developing country loan exposure also rises - by $13 billion - the results suggest that both borrower and lenders can benefit from debt relief when the borrower suffers from debt overhang.

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Journal of Finance
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Peter Blair Henry
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In 1999, the Blue Cross and Blue Shield Federal Employee Program (FEP) implemented a pilot disease management program to manage congestive heart failure (CHF) among members. The purpose of this project was to estimate the financial return on investment in the pilot CHF program, prior to a full program rollout. A cohort of 457 participants from the state of Maryland was matched to a cohort of 803 nonparticipants from a neighboring state where the CHF program was not offered. Each cohort was followed for 12 months before the program began and 12 months afterward. The outcome measures of primary interest were the differences over time in medical care expenditures paid by FEP and by all payers. Independent variables included indicators of program participation, type of heart disease, comorbidity measures, and demographics. From the perspective of the funding organization (FEP), the estimated return on investment for the pilot CHF disease management program was a savings of $1.08 in medical expenditure for every dollar spent on the program. Adding savings to other payers as well, the return on investment was a savings of $1.15 in medical expenditures per dollar spent on the program. The amount of savings depended upon CHF risk levels. The value of a pilot initiative and evaluation is that lessons for larger-scale efforts can be learned prior to full-scale rollout.

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Disease Management
Authors
Mark W. Smith
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Analyzing a variety of cross-national and sub-national data, we argue that high adult mortality reduces economic growth by shortening time horizons. Higher adult mortality is associated with increased levels of risky behavior, higher fertility, and lower investment in physical and human capital. Furthermore, the feedback effect from economic prosperity to better health care implies that mortality could be the source of a poverty trap. In our regressions, adult mortality explains almost all of Africa's growth tragedy. Our analysis also underscores grim forecasts of the long-run economic costs of the ongoing AIDS epidemic.

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CDDRL Working Papers
Authors
Romain Wacziarg
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