Illicit Financial Flows and Development, Tanzania

Dar es Salaam inception visit

I have been appointed International Project Manager for a very interesting exercise, an 18-month study of illicit financial flows, by the Bank of Tanzania, the central bank. The project is funded by the Norwegian government. The inception report visit is in October 2014. Dr Ameth Saloun Ndiaye from the University of Dakar, Senegal, is International Technical Advisor. More to follow.

Australia, Scotland

The Scottish referendum

(25/09/2014)  Thank goodness that is over. The high turnout reflected both the very large number of Scots voting with their heart (blame the Corries!) and their more numerous fellow-countrymen, urgently fighting back to contain the threat posed to Scottish welfare and opportunities if the independence push had got up. I wrote this as an Australian-oriented briefing as the results came in:

“So the YES vote in the Scottish referendum did not get up. But we should all pause and think through why Scotland nearly left the UK and the implications for Australia if it had.

Cutting out Scotland, close to 9 percent of the UK in population and GDP, would have diminished the UK in the world order and make it much less likely to continue to actively lead Western nations in the difficult challenges that Nato, the UN and the EU now face. Australia is strongly aligned, often at the forefront in supplying troops and equipment, but cannot itself lead. A bullet dodged.

A YES vote would have been genuinely shocking, unravelling the fabric of the world we wake up to each day. That something as apparently solid can change overnight, igniting what the Economist Intelligence Unit sees as ‘seismic’ economic, political, legal and constitutional repercussions, would have created uncertainty that would raise costs and slow growth (albeit marginally). The uncertainties would have been undoubtedly greatest for those in Scotland and the rest of the UK but, like a stone thrown into a still pond, the waves would reach the furthest shores.

Though the UK has been diminishing in importance for Australia in trade, overtaken by the US, continental Europe and Asia, in 2013 two-way trade between Australia and the UK was a still-consequential $20 billion. More significantly, the UK was Australia’s second largest source of and destination for foreign investment, behind the USA, with total bilateral cross-border investments valued at over $800 billion. The extra costs and uncertainties provoked by Scottish independence would create headwinds: a continuation of the post-GFC outflow of UK investment from Australia, mainly from debt securities, is likely.

Scottish independence would also impose some monetary costs on Australia, mainly renegotiation of the hundreds of treaties and agreements between Australia and the UK. The burden would probably have been contained: most of the new treaties could have been be simple duplicates, one with the rest of the UK and another with Scotland. Even Australia’s flag might have survived, as a remembrance (ever more anachronistic, nonetheless) of its British colonial origins.

But it is non-monetary costs that would be more potent. A vote for independence in Scotland would seem an extreme example of the decline in the legitimacy of democratically elected governments and a catalyst for ever-smaller nations, even verging on gated communities, so like-minded people can get the representation they seek. Secession movements would be encouraged again, as would the ease of jurisdiction-shopping.

On a wider view the lesson from this near-run referendum for the rest of the world is the danger of complacency and its ally, underestimation of risk. The potential for change through the ballot box is now vivid, and everyone must be alive to the risk of underestimating emerging political leaders, especially the successful politician that is not part of the conventional party structures. Some outsiders do win. The Scottish Government’s First Minister Alex Salmond was widely ignored by the leaders of other parties when they gathered in London, in denial about his popular appeal in Scotland because it did not fit their conventional mythology.

The substantial, if not majority, support for Scottish independence results from a dramatic failure of modern Britain to deliver democracy’s core promise of effective governance, as extolled by Francis Fukuyama in his new book Political Order and Political Decay: From the French Revolution to the Present.

Fukuyama presciently warns that no one living in an established liberal democracy should be complacent about the inevitability of its survival. “Democracies exist and survive only because people want and are willing to fight for them; leadership, organisational ability, and oftentimes sheer good luck are needed for them to prevail.”

Whether breaking up the UK could ever be seen as progress is moot, given the blow that Scottish independence would have dealt to the stability and order of the UK that led to civilisation as we know it: a broadening group of nations adhering to common law, democratic process and economic liberalism. The lesson from the vote in Scotland is that nothing is certain and what is valuable has to be fought for.”