The Failed States Index 2007

The world's weakest states aren't just a danger to themselves. They can threaten the progress and stability of countries half a world away. In the third annual Failed States Index, Foreign Policy and The Fund for Peace rank the countries where the risk of failure is running high.

It is an accepted axiom of the modern age that distance no longer matters. Sectarian carnage can sway stock markets on the other side of the planet. Anarchic cities that host open-air arms bazaars imperil the security of the world's superpower. A hermit leader's erratic behavior not only makes life miserable for the impoverished millions he rules but also upends the world's nuclear nonproliferation regime. The threats of weak states, in other words, ripple far beyond their borders and endanger the development and security of nations that are their political and economic opposites.

Few encouraging signs emerged in 2006 to suggest the world is on a path to greater peace and stability. The year began with violent protests that erupted from Indonesia to Nigeria over the publication of cartoons depicting the Prophet Mohammed. February brought the destruction of Samarra's golden-domed mosque, one of Shiite Islam's holiest shrines, unleashing a convulsion of violence across Iraq that continues unabated. After Hezbollah kidnapped two Israeli soldiers last July, southern Lebanon was bombarded for a month by air strikes, sending hundreds of thousands of refugees fleeing into neighboring states. And in October, the repressive North Korean regime stormed its way into the world's nuclear club.

What makes these alarming headlines all the more troubling is that their origins lie in weak and failing states. World leaders and the heads of multilateral institutions routinely take to lecterns to reiterate their commitment to pulling vulnerable states back from the brink, but it can be difficult to translate damage control into viable, long-term solutions that correct state weaknesses. Aid is often misspent. Reforms are too many or too few. Security needs overwhelm international peacekeepers, or chaos reigns in their absence.

The complex phenomenon of state failure may be much discussed, but it remains little understood. The problems that plague failing states are generally all too similar: rampant corruption, predatory elites who have long monopolized power, an absence of the rule of law, and severe ethnic or religious divisions. But that does not mean that the responses to their problems should be cut from the same cloth. Failing states are a diverse lot. Burma and Haiti are two of the most corrupt countries in the world, according to Transparency International, and yet Burma's repressive junta persecutes ethnic minorities and subjects its population to forced resettlement, while Haiti is wracked by extreme poverty, lawlessness, and urban violence. For a decade, Equatorial Guinea has posted some of the highest economic growth in sub-Saharan Africa, yet its riches have padded the bank accounts of an elite few. And in the Democratic Republic of the Congo, the inability of the government to police its borders effectively or manage its vast mineral wealth has left the country dependent on foreign aid.

To provide a clearer picture of the world's weakest states, The Fund for Peace, an independent research organization, and Foreign Policy present the third annual Failed States Index. Using 12 social, economic, political, and military indicators, we ranked 177 states in order of their vulnerability to violent internal conflict and societal deterioration. The index scores are based on data from more than 12,000 publicly available sources collected from May to December 2006. The 60 most vulnerable states are listed in the rankings, and full results are available here and www.fundforpeace.org.

For the second year in a row, Sudan tops the rankings as the state most at risk of failure. The primary cause of its instability, violence in the country's western region of Darfur, is as well known as it is tragic. At least 200,000 people -- and perhaps as many as 400,000 -- have been killed in the past four years by janjaweed militias armed by the government, and 2 to 3 million people have fled their torched villages for squalid camps as the violence has spilled into the Central African Republic and Chad. These countries were hardly pictures of stability prior to the influx of refugees and rebels across their borders; the Central African Republic plays host to a modern-day slave trade, and rebels attacked Chad's capital in April 2006 in a failed coup attempt. But the spillover effects from Sudan have a great deal to do with the countries' tumble in the rankings, demonstrating that the dangers of failing states often bleed across borders. That is especially worrying for a few select regions. This year, eight of the world's 10 most vulnerable states are in sub-Saharan Africa, up from six last year and seven in 2005

That is not to say that all failing states suffer from international neglect. Iraq and Afghanistan, the two main fronts in the global war on terror, both suffered over the past year. Their experiences show that billions of dollars in development and security aid may be futile unless accompanied by a functioning government, trustworthy leaders, and realistic plans to keep the peace and develop the economy. Just as there are many paths to success, there are many paths to failure for states on the edge.

The year wasn't all bad news, though. Two vulnerable giants, China and Russia, improved their scores sufficiently to move out of the 60 worst states. That is in part due to the fact that 31 additional countries were assessed this year. But some credit must be paid to the countries themselves. China's economic engine continues to propel the country forward at a breakneck pace, but the growing divide between urban and rural, as well as continued protests in the countryside, reveals pockets of frailty that the central government is only just beginning to address. Russia's growing economy and a lull in the violence in Chechnya have had stabilizing effects, despite fresh concerns about the country's democratic future.

The vast majority of the states listed in the index have not yet failed; they exhibit severe weaknesses that leave them vulnerable, especially to shocks such as natural disasters, war, and economic deprivation. The power of such events should not be underestimated. The war in Lebanon last summer helped undo nearly two decades of economic and political progress. But Lebanon was vulnerable because its political and security structures lacked integrity and remained tensely divided by factionalized elites. Those vulnerabilities not only helped turn the clock back on the country's development, but they reverberated across the region -- into Israel, Jordan, and Syria. It shows again that a country's problems are never simply its own.

That conclusion becomes especially worrisome when the weak states in question possess nuclear weapons. Today, two countries among the world's 15 most vulnerable, North Korea and Pakistan, are members of the nuclear club. Their profiles could hardly be less similar: The former faces the very real prospect of economic collapse, followed by massive human flight, while the latter presides over a lawless frontier country and a disenchanted Islamist opposition whose ranks grow by the day.

But while these states' failings may be frequent fodder for headlines around the world, it is obvious that there are few easy answers to their troubles. In highlighting which states are at the greatest risk of failure, we can only hope that more effective and long-term solutions emerge over time as we compare the index from year to year. In that way, positive reversals of fortune can occur for the world's most vulnerable nations and, in the process, improve the security and prosperity of everyone.


Flower Power

Picking up a bouquet of flowers isn't what it used to be. Biotech breakthroughs, aggressive new competitors, and eager customers who expect their blooms to be fresh and fragrant are radically reshaping the global flower market. The roses, tulips, and lilies that end up on your kitchen table are merely the end products of a long, global supply chain that increasingly relies on everything from the traffic in Amsterdam to the weather in Bogotá.

On a sunny Saturday morning in Santa Cruz, California, a flower stall lures shoppers out of the lively bookstores and cafes that line Pacific Avenue. The tiny shop, called Bonny Doon Garden Company, sits smack dab in the middle of the sidewalk, making it impossible to miss. Buckets of colorful tulips, peonies, and roses sit underneath market umbrellas, and customers are free to pull out the stems they like and arrange their own bouquets. Owner Teresa Sabankaya stands at a workbench next to the stall making an arrangement that she calls "Citrus Punch." It's a cosmopolitan bouquet that includes organic orange roses from Ecuador, red and yellow gerbera daisies bred in the Netherlands and grown in central California, and lime-green euphorbia from her own garden, all perched atop a tall, skinny glass vase filled with lemons and limes. "Citrus Punch" isn't cheap; it costs $125, the going rate for an upscale, designer bouquet in the Bay Area. But Sabankaya works hard to make sure her customers understand what they’re getting for their money. "Whenever people tell me that they think flowers are too expensive, I remind them that a lot went into that flower," she says. "When you think about where they've been, and everything that's happened to them, they're really quite a bargain."

Consider the roses, a bright orange variety called 'Impulse.' They were grown on a farm just outside Quito, Ecuador, that is known for its environmental and socially responsible practices. The heads of the Ecuadorian roses are twice as large as anything Sabankaya can get in California, the colors are always brilliant, and the varieties she favors are bred to hold their lush, full shape in the vase. 'Impulse' is a marvel of modern rose breeding. It was bred not just for beauty but for its ability to survive the long, complicated journey from farm to florist.

A rose like 'Impulse' could be harvested in a greenhouse in Latin America on a Monday morning; stripped, graded, and packed that afternoon; and stored in a cooler overnight while it drinks a special solution designed to fortify it for the next leg of its trip. The following morning, a refrigerated truck will pull up at the loading dock, and it will be taken out of water, packed into a box, strapped onto a pallet, and driven down a narrow mountain road to the airport. There, the roses will be loaded into the baggage compartment of a passenger jet departing for Miami. A few hours later, they will land in the United States and be driven down the runway to a perishables inspection facility. Uniformed officials from the U.S. Department of Homeland Security will inspect them for bugs, fungus, or contraband.

Every morning, trucks festooned with the logos of flower importers and wholesalers line the perimeter of the airport’s inspection facility and wait for their cargo to be released. Most of these flowers will make two or three more stops in warehouses, distribution centers, or wholesale markets before they arrive at one of the roughly 22,750 flower shops or 23,000 supermarkets that sell floral products. More than 2.8 billion stems -- representing 78 percent of the flowers Americans buy -- take this journey into the United States every year.


The flower industry didn't always work this way. A hundred years ago, most flowers were grown just outside the cities where they would be sold and rushed to market before they wilted. Hothouse blooms were a rarity. In fact, flowers didn’t become a popular Valentine’s Day gift until the early 20th century. It took sophisticated greenhouse technology and improved transportation to make it possible for a florist in Chicago to offer roses to lovers in the middle of February. Since then, those twin innovations -- technology and transportation -- have turned what was once a small-time pastoral occupation into a global, $40 billion industry, making it $10 billion larger than worldwide sales for music.

As trade barriers drop and economies open, the market for flowers continues to expand. And the nations that benefit are not necessarily the ones you would expect. Ecuador exports flowers worth $40 million in wholesale value to Russia, making up a quarter of its floral imports. Why Ecuador? It has a reputation for producing giant roses on 6-foot-long stems, which appeal to the post-Soviet market for luxury goods.

The fall of communism not only created new markets, it also created new suppliers. Thirty years ago, Poland was poised to become a major player in European cut-flower production, but its lack of an open market meant growers often ran short of critical supplies. After the transition to a market economy, its flower industry bloomed again. Now, Poland exports almost $8 million in flowers every year.

The globalization of flowers has gone eastward as well. As with so many other industries these days, China looms large on the horizon. Flower farms in Yunnan Province are benefiting from an infrastructure expansion that includes highways, airports, and bridges. Chinese growers hope to increase exports from $27 million per year to $200 million by the end of the decade. If that happens, flower workers in Latin America, earning only $175 per month, might find their jobs going to southern China.

Flower power has triggered anxiety in many corners of the industry. Florists worry that oversupply and competition from mass-market retailers will continue to push the price of their product down. Wholesalers struggle to maintain their slim margins of just a few cents a stem in a constantly changing global market. And what about the consumer? Certainly, flowers are more affordable. The market exists because people still rely upon bouquets to express those emotions that they can't quite put into words -- desire, affection, sorrow, and regret. The sentiments may be real, but the vehicle for their expression is an increasingly anonymous, mass-produced, global commodity.


In a small town 8 miles southwest of Amsterdam, there is a place where you can stand and take a snapshot of this worldwide flower commerce in action. That place is a catwalk high above the auction floor in the world's largest commercial building, the Bloemenveiling Aalsmeer, where 20 million flowers go up for sale every day. Visitors aren't allowed on the auction floor; there is too much danger of getting run down by one of the 135,000 trolleys loaded with flowers that shuttle between the auction rooms and loading docks. Instead, nearly 100,000 tourists a year roam the network of catwalks, along with the auction staff, and watch the millions of blossoms in constant motion below.

It is impossible to tell, looking down on this wash of color, where the blossoms have come from or where they might be headed. They could be harvested in Ecuador, Ethiopia, Israel, or Kenya, flown to Amsterdam, and then trucked the short drive to the auction house, where they are unpacked, placed on a trolley, wheeled into an auction room, and sold off by the thousands. Carts of yellow sunflowers rush past, followed by thousands of red, then pink, then lavender roses. Potted hydrangeas, forced to bloom on short stems for the gift market, are up next, and behind them come waves of white 'Casablanca' lilies.

The warehouse floor is in constant motion, with carts whizzing in and out of auction rooms. With all that motion, you might expect a lot of noise. But inside the auction rooms, it is strangely quiet. It takes only a few seconds for each lot of flowers to be sold, and the smallest distraction could cause a bidder to miss a coveted selection of tulips or carnations. After the auction, the blooms make a reverse commute; they go back in a box, and onto trucks or planes headed in the direction of flower shops or grocery stores as far away as Tokyo. All of this for a flower that might not fetch more than 20 or 30 cents at auction, and might only sell for a dollar or two at retail.

Why should something as delicate and perishable as a flower need to travel from all corners of the world to Aalsmeer to find a buyer? The answer, in part, is tradition. The Dutch invented this particular method of floral commerce a century ago, at a time when most of the flowers that passed through the auction were grown in the Netherlands and floated to market by boat through the canals. Today, the 1,050 buyers and 5,400 suppliers who participate in the Aalsmeer auction still find it convenient to converge at a central meeting place, even if it means flying their wares here. The auction house handles the money, simplifying 37,360 daily financial transactions worth $8.9 million and encouraging transparency in pricing. It administers a rigorous quality-control program that ensures that the flowers are fresh and free of pests and disease. And like any distribution center, it streamlines the process of buying two boxes of sunflowers from Kenya, several dozen orchids from Thailand, and a thousand roses from Colombia.

But when asked why they still find it necessary to travel all the way to a Dutch auction to take care of business, buyers and sellers say it gives them a chance to see each other. "Why are there still brokers on Wall Street? They want to be there to feel the ambience and the spirit," says one Portuguese wholesaler. "Before somebody buys 100,000 red roses, they want to see them and touch them. A picture will not help."

Even though business in Aalsmeer is brisk, that doesn't mean the effects of globalization aren’t being felt. The world's two largest auction houses, FloraHolland and Bloemenveiling Aalsmeer, have announced plans to merge in 2008 into a mammoth flower market that would dwarf its competitors in the rest of the world. Auction officials acknowledged recently that new markets in cities such as Dubai and Mumbai allow buyers and sellers to bypass them altogether. By joining forces, the two auction houses hope to maintain their dominant position and offer economies of scale that will still make it worthwhile to move flowers through the Netherlands.

Some industry insiders believe that globalization has its limits, and that the expanding world of floral commerce may eventually contract into regional markets that are still based on a handshake and -- well, the need to stop and actually smell the roses.


Consider the plight of a grower in an emerging market like India. Growers for the domestic Indian market produce traditional favorites such as jasmine, marigold, and chrysanthemum, usually on the short stems that garland-makers prefer. The flowers travel in the early morning by bus to open-air markets. As India's $800-billion economy continues to grow, the local business of flowers will probably prosper. But these small growers lack the technology, the know-how, and the infrastructure -- roads, airports, computer systems -- to compete on a global level.

For this reason, flower exporters in India have had to take a completely different approach than those growing for their local markets. Although India's cut-flower exports are valued at nearly $17 million wholesale and represent only about 1 percent of global trade, the farmers who are trying to make a go of it have invested in modern greenhouse technology and commercial rose varieties that they hope will appeal to foreign buyers. Competing in this market requires a tricky set of calculations that take into account exchange rates, transportation costs, and the demand for flowers on a holiday weekend in, say, Germany or Japan. An individual rose will only bring the farm 7 to 10 cents per stem. It's going to cost 7.5 cents per stem to ship it to Europe, but only 5 cents to ship it to Japan. At a wholesale market in Europe, that rose might go for 27 cents a stem, compared to 25 cents in Japan. With such slim margins, every penny counts.

Transportation may prove to be the limiting factor to expanding cut-flower production globally. Even if labor is cheaper, the price of that flower must be high enough to justify the shipping costs, explains Jaap Kras, publisher of the monthly magazine FloraCulture International, and former CEO of VBN, the umbrella agency for the Dutch flower auction houses. "In Holland, we say that you can only sell a cabbage as far as you can throw it," he says. "In the end, India, China, or Japan, or even North America -- meaning Mexico producing for the U.S.A. -- will produce more or less locally for their home markets."

The importance of personal relationships also tends to foster regional, rather than global, business opportunities. Would wholesalers be willing to abandon a familiar favorite such as a Colombian rose or a Dutch tulip in favor of a cheaper product from India or China? The first instinct of William Armellini, sourcing manager for Greenleaf Wholesale Florist in Miami Springs, Florida, is to say no. "China or India or Africa?" he says. "They are all far away in my mind and far away physically." Ultimately, though, he says that the lack of a personal connection wouldn’t stand in the way if a new vendor had a product he needed. Take African sweetheart roses, for example. While African nations, particularly Kenya and Ethiopia, have been producing these roses for the European market for years, they are still an unfamiliar product in the United States, representing less than 1 percent of imports. A sweetheart rose is much smaller than a standard rose, and is usually grown by taking a spray rose -- a rose with several miniature buds on one stem -- and pruning it to produce one dainty blossom. "There's not much demand for them here," says Armellini, "but if there was, we would first look at price. If we can land the flowers in the U.S. and make money on them, then we would ask if the supplier could guarantee freshness and consistency." But the globalization of the industry is still in its infancy, and until he gets satisfactory answers to those questions, he’ll stick with the Latin American vendors he knows.


There seems to be no end to the kind of global information that a wholesaler like Armellini might need in a typical day. The price of oil affects everything from the price of jet and truck fuel, to the cost of refrigeration, to the petroleum-based products such as agricultural chemicals and plastic greenhouse materials needed to grow the flowers themselves. Currency fluctuations can change the price of flowers from day to day. Ecuador, which uses the U.S. dollar as its currency, may find that its roses are at a disadvantage against Colombia's as the value of the dollar changes against the peso. Even the weather plays a role. A freak winter storm near Bogotá can affect flower supply months later for a holiday like Mother's Day, when field-grown crops like larkspur would have bloomed had they not been damaged in the freeze.

The status of free trade agreements is also a constant source of concern. Colombia -- which produces 60 percent of the flowers sold in the United States -- along with Bolivia, Ecuador, and Peru, has been able to export flowers tariff free under the Andean Trade Promotion and Drug Eradication Act, with the expectation that this favored status would offer an alternative to coca production and encourage those countries to cooperate in U.S. drug-eradication efforts. But that could change. Trade agreements with many flower-producing countries are the subject of new negotiations this year, and even a small tariff could force growers in those countries to search for other markets or lower their prices to stay competitive.

To add to the pressure, farmers, wholesalers, and retailers are coming to grips with increasing concern from their customers over environmental and labor issues. Offering eco-friendly flowers to socially responsible consumers is no simple matter. Nevado Ecuador, the farm that Santa Cruz florist Teresa Sabankaya places her orders with, participates in nine such programs so that it can sell its roses under fair trade and other eco-labels in the United States and Europe. The fees and paperwork are considerable, and wholesalers and retailers are still trying to understand how sustainability will play itself out in the market. "This is an emerging issue," said Armellini, "and one that is confusing even to those of us who are 'in the know.'"

Sometimes Armellini wonders if having all of this information at his fingertips makes him a more effective player in the global marketplace or simply creates added levels of distraction and complication. He remembers the pre-Internet days, when he relied more on routine than anything else. "The same 10 boxes arrived each week for a certain client," he says, "and if only nine arrived, we noted it and went on about our business. Today the problem is too much communication. You can spend as much time managing a single box of 100 roses as you would selling 20 boxes of 3,000 roses." Armellini might long for the good old days, but there’s not much he can do about it. Like most people in the flower industry, he's accepted the fact that he has to adapt in an industry that’s constantly changing.


How have flowers themselves adapted to this worldwide marketplace? Some varieties haven't survived and have all but disappeared from flower shops. In a global, industrialized market, only the most durable flowers survive. For example, old-fashioned sweet violets were all the rage a century ago, but the flowers are too fragile and short-lived for the modern market, surviving only two or three days at most. Only one commercial grower of sweet violets remains in the United States, and his flowers are all sold within a 100-mile radius of his northern California farm. It's no coincidence that roses, carnations, and chrysanthemums are among the most popular flowers today; they're also among the most durable. The flower business tries to give us what we want, but it limits our choices, too, offering us mostly what will work within its industrial system.

Customers cannot detect most of the ways their flowers have changed, but what they may notice is that the fragrance is gone. Some of the genes that regulate fragrance are recessive, so it is easy for a breeder to lose that trait while selecting for stem length, color, disease resistance, or longevity. Fragrant roses don't last as long in the vase, so a rose that is tough enough to handle global transport may not smell as sweet. But gene mapping makes it easier for breeders to understand the kinds of trade-offs they are making in the laboratory, and as these flowers are better understood at the molecular level, breeders are working to replace lost scent without sacrificing longevity. They're also trying other ways to push flowers beyond their natural limits.

For example, Florigene, an Australia-based subsidiary of the Japanese liquor company Suntory, has invested tens of millions of dollars in the quest for a genetically modified blue rose. Because the gene that creates blue pigment is entirely absent from roses, researchers isolated the gene in petunias and perfected the technology to implant it into a lavender rose. The process worked on a technical level, but the rose itself still looks more lavender than blue.

Should Florigene's scientists perfect the blue rose in the laboratory, the next step would be to win over the public. If Americans are slow to embrace the new color, Florigene might hope that it would appeal to different cultural sensibilities in Europe or Japan. As long as customers somewhere in the world are ready to buy, Florigene will earn back its investment, a few dollars at a time, with the royalties from every patented genetically modified plant it sells. And if its project is successful, more breeders may follow suit, using new technology to breed a black tulip, a chocolate-scented daisy, or a lily that lasts longer than the boyfriend who bought it.

International patent law. Trade agreements. Genetic engineering. Currency devaluations. The price of a barrel of oil. The cost of labor in China. This is hardly the stuff of romance, but the bouquet you send your sweetheart is infused with all of it. Even Teresa Sabankaya, standing in front of her cheery sidewalk shop, can’t ignore the global marketplace. "I started the shop with the idea that I’d grow flowers in my garden and sell them to my neighbors," she says, "but of course we needed more flowers than I could grow. We're lucky to be in a flower-growing region here in California. But I'll bring in something really special from Ecuador, and sometimes I'll drive up to the San Francisco wholesale market. You can get tropicals, Dutch tulips, anything you want. There's a whole world of flowers out there."