Argument

Unmanned and Dangerous

Why NATO's expanding use of drones is a disturbing trend.

This weekend, when NATO leaders meet in Chicago, they will unveil a series of new projects, among them, apparently, a program to develop and expand the use of unmanned aerial vehicles -- or "drones" -- so as to confront the security threats of the future and make better use of tighter budgets. Used first for surveillance, and increasingly for strikes, drones have considerable operational attraction. But killing with these stealth weapons stretches legal boundaries to the breaking point, and alienates people in Pakistan, Somalia, and Yemen, countries in which neither NATO nor the United States, its most powerful member, are actually fighting wars -- unless we count the "war on terror" has having opened the entire world as a battlefield.

NATO's attraction to drones, almost exclusively U.S.-built at the moment, is understandable. They are relatively cheap, can be deployed quickly in inhospitable terrain over vast distances, and help keep troops and airmen out of harm's way. But this push-button solution to warfare poses very real risks to civilians, especially as targeting criteria deteriorate to the point where a special rapporteur to the United Nations has described them as a "vaguely defined licence to kill." The rules for using strike drones should be clarified, and the tests that determine who is a legitimate target should be explicit. The standards that NATO sets and its respect for international law will stand as a powerful example to all, especially as many other governments seek to expand their production and use of drones.

The dangers of slippage are clear. Already under the cover of the war on terror, some states have challenged the fundamental premises of the protection of civilians in the Geneva Conventions, by including more civilians in their definition of combatants, and pushing the boundaries of acceptable "collateral damage."

After two long and costly wars in Afghanistan and Iraq, the United States is set to double its spending on drones over the next decade to more than $11 billion. This is an understandable choice. Senior defense officials say that remotely piloted aircraft can be flown for hours over treacherous terrain and great distances waiting to surgically shoot Hellfire missiles at enemies visible perhaps only for just a few minutes. The danger to soldiers -- and the financial and political costs of deploying them -- they argue, is massively diminished. Moreover, it's a more surgical enterprise: on-board cameras give "pilots" hundreds or thousands of miles away a clear picture of the target and any civilians who might be in the way.

But beyond being of dubious legitimacy under international law, the use of such technologies may be counter-productive. In Pakistan, Somalia, and Yemen, unmanned planes are being flown by the CIA -- an organization that clear lacks the military's culture and training in international humanitarian law.

Meanwhile, Washington interprets within its rights under the war on terror the use of lethal force against enemies in a foreign country when that state "consents or is unable or unwilling" to act. While Pakistan's position in the past has been ambiguous, the government said publicly just this month that drone attacks are illegal and violate its sovereignty and territorial integrity. But even this clear expression hasn't stopped the Obama administration's use of this tool.

Accountability has also declined as the use of drones has expanded. Top al Qaeda suspects were once carefully vetted for assassination, but the list for these killings has grown; targets now include, for example, drug lords in Afghanistan and militants in Somalia. Operations are conducted in isolated areas under the utmost secrecy, making it virtually impossible to determine who has been killed or injured, and whether the strike complied with the laws of war. Recent studies estimate that one civilian dies for every four to five suspects killed.

Many modern armies claim to be increasingly attentive to their legal obligations. But at the same time, they seem ever more reluctant to account for their actions publicly and transparently. This may be an unintended consequence of their perceived expanded exposure to prosecutions, whether before the International Criminal Court or elsewhere.

For instance, as much as the NATO leadership might be satisfied with its campaign in Libya, there has still been no transparent assessment of the number of civilians who were killed in the U.N.-authorized airstrikes there, which included the use of drones, and of the circumstances of their deaths.

While these strikes are described as clinical and surgical, there is no independent way for the public in NATO countries to evaluate the extent of their impact on civilians. It may well be that the requirement of proportionality in the laws of war -- that civilian casualties not be disproportionate to the legitimate military objective of the operation -- is satisfied in a given operation. But this cannot be taken for granted, particularly if these supposedly precision operations result in one civilian killed for every five combatants.

As NATO countries prepare to withdraw thousands of troops from Afghanistan and expand their drone programs commensurately, they must carefully weigh the policies and practices for using a weapon that distances them from the human, political, legal, and moral costs of war. Right now, Illinois authorities are doing just that -- debating the legal and ethical implications of using drones in non-lethal police work over cities like Chicago. The leaders of NATO member nations might want to look up when they're in Chicago this weekend and take note. They too must clarify under what conditions these hi-tech weapons should be used, who might constitute a legitimate target, and ultimately ensure that their use respects international law.

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Democracy Lab

Down, but Not Out

Just because Brazil’s growth rates are slowing, doesn’t mean the doomsayers are right.

Brazil, Latin America's Goldilocks economy for much of the last decade, has lately rekindled the pessimism of those who never quite bought the idea that this emerging market had actually emerged. As a recent piece in Foreign Affairs put it: "The would-be giant stands on feet of clay. The economy depends too much on high commodity prices, and as demand falls, so may Brazil."

Even believers are getting cold feet. Wall Street has decided that Brazil's central bank is a bit too soft on money, now that real interest rates (nominal rates less the rate of inflation) have fallen to record lows. Indeed, inflation seems to be perking up, a reality that may chill foreign investors' recent enthusiasm for all things Brazilian. Is Brazil's time in the sun as the center-left Latin American economy with a brain as well as a heart coming to an end?

After growing at an average annual rate of almost 5 percent from 2004 to 2010 -- years in which poverty fell sharply and some 35 million Brazilians joined the middle class -- the economy faltered in 2011. Last year (a very good year, by the way, in most emerging markets) growth registered a disappointing 2.7 percent. Manufactures suffered in particular, as imported goods gained market share at the expense of local products.

Under pressure to restore the economic luster, the central bank, under its new leader, Alexandre Tombini, chose to make growth the highest priority. Interest rates have been pushed down by two-and-a-half percentage points since last August -- a policy made more palatable by the coordinated fiscal restraint orchestrated by the administration of President Dilma Rousseff. This sort of coordination is new for Brazil (and unusual for a developing country). During President Luis Inácio Lula da Silva's years in office, when the government walked a narrow line between populist and business-centric policies, the bank almost always acted independently.

But the economy has not responded as hoped. Growth in the first quarter of 2012 probably ran at a tepid annual rate of 3.2 percent, and manufacturing is still suffering. Hence the latest efforts to improve Brazil's competitiveness in global markets through central bank intervention in the foreign exchange market. In the last month, the Brazilian real has depreciated by about 12 percent against the dollar, and some analysts expect further decline. Plans are also afoot to lower the social security taxes paid by industrial firms as a means of reducing their production costs and making them more competitive abroad.

These short-term fixes are entirely consistent with President Dilma's longer-term strategy of applying hands-on industrial policy to stimulate innovation and technological advance. Among her initiatives: increased government spending on R&D, and expansion of government development bank lending to businesses at below-market rates. The 2014 World Cup and 2016 Olympics are fine excuses for public works that will have value long after the fun and games are over. And there's no doubt that the country's need for physical infrastructure -- roads, railways, ports, airports, urban improvement -- is massive. Moreover, with municipal elections just months away, and an administration eager to polish its populist credentials, education, health care, public housing and various anti-poverty measures are likely to benefit.

A big question, then, is whether inflation (currently 5 percent) will hold steady, now that both monetary and fiscal policies are in full-speed-ahead mode. Certainly no one puts much faith in the government's forecast that inflation will actually fall to the central bank target by December. Indeed, some critics argue that the bank has fallen off the proverbial wagon -- that it will no longer contain inflation at the expense of growth.

I think they're wrong. What's really happening is that Tombini is betting the bank's statistical models for predicting inflation err on the side of pessimism in an increasingly integrated global economy. Despite the recent rise in employment, the argument goes, Brazilian industry can still accommodate some increased demand without hitting inflation-provoking bottlenecks. By the same token, excess global production capacity means that exporters to Brazil will be happy to soak up any spillover in domestic demand without raising prices.

To be sure, the prices of services are rising at an uncomfortable pace, reflecting demand pressures on sectors not disciplined by fierce foreign competition. But competition can still bite -- which is what's happening currently with interest costs for loans. The giant government-owned banks have now been aggressively charging less, and the large private banks do not have much choice but to go along.

This is not to say there aren't constraints on the pace of economic growth. After a fall in the exchange rate of 25 percent since the peak last year, Brazilian manufacturers are already competitive in global markets; further depreciation is unwarranted. Moreover, the spike that almost doubled the prices of Brazil's soybean and iron ore exports in 2011 is probably over, so the economy isn't likely to get much more of a ride from the global commodity boom.

That is where the above-cited article in Foreign Affairs by Ruchir Sharma, the influential Morgan Stanley fund manager, fits in. He argues that Brazil's great run was driven primarily by commodities. And he believes that what went up, will go down, once the Chinese economy cools and global commodity demand falls.

I think he sells Brazil's prospects short. First, he fails to factor in the consequences of a dramatic increase in oil exports, slated for the end of the decade.  Second, he exaggerates the importance of gains in the "terms of trade" -- the ratio of export prices to import prices -- to Brazil's recent successes. The economy is not as dependent on commodities as many other Latin American economies, notably Venezuela, Ecuador, Argentina, Colombia, Peru, and Chile. What's more, productivity gains (as opposed to price increases) played a big role in Brazil's emergence as a great commodity exporter.

Third, Sharma argues that the high rates of interest artificially sucked in foreign capital, which has only temporarily allowed Brazil to nourish its welfare state without immediate consequences in terms of inflation. In fact, interest rates have fallen considerably since the 1990s.

Brazil's long-term prospects, I believe, turn on its success in integrating the agricultural, hard rock mineral, petroleum, manufacturing and service sectors. Few countries have such a diversified economic base -- or potential for growth. But that process will require higher rates of investment than the country has enjoyed to date. The rate need not reach Chinese and Indian levels -- 40 percent or more of GDP. It does, however, need to climb to 25 percent on a continent with no tradition of saving. The critical issue is how to manage that transformation when the new lower middle class is eager to consume, and the poor are asserting their rights to social and economic mobility.

Raising taxes on the affluent is probably a non-starter. Among other problems, it would disturb the delicate political balance in a country with a center-left government that must coexist with free market capitalism. In theory, foreign investment could fill the gap, allowing Brazil to substantially raise the living standards of the bottom two-thirds of the distribution without squeezing investment in everything from education to high-tech manufacturing. But as the past makes clear, running a chronic balance of payments deficit in order to meet everybody's consumption expectations is problematic. The necessary capital flows have a way of reversing at the most inopportune times.

Brazil's best hope lies in freeing domestic economic resources for investment through public sector savings. The government budget, long a source of dis-savings, is for once in better shape. Thanks to lower interest rates paid on the public debt, chronic large deficits have morphed into modest shortfalls. A lot more could and should be done, though, to put the budget in the black.

New rules curbing overly generous public-sector pensions are slated to go into effect quite soon. But realization of the savings is decades down the road because those rules apply only to newly hired civil servants. Brasilia must tackle the entitlements of current retirees -- and, in particular, the automatic annual adjustments they receive.

The other logical source of public savings is from oil: higher profits from Petrobras, the state owned oil company, and higher royalties from private oil companies that have just begun to exploit Brazil's vast offshore reserves. The temptation will be to spend the coming windfall. However, if Brazil is to join the ranks of high-income countries anytime soon, it will need to plow the money back into productive investment -- probably through an independently managed sovereign wealth fund.

Brazil really is at a crossroads. The economy's potential has never seemed greater. Meanwhile, President Dilma has considerable political power, commanding the support of the cabinet, the congress, and the public. And as discussed above, she has even managed to secure the cooperation of the independent central bank. Now comes the harder task of persuading Brazilians that immediate gratification must be postponed for the greater good.

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