Monday, June 22, 2009


Here's my take on what's going on in the Islamic Republic.

As I see it, what you and the world are witnessing is a game of multidimensional chess, with various forces pulling this way and that. Fundamentally, there are four forces operating within Iran:

1) The clerical supporters of the regime. Led by, of course, Ayatollah Khameni. These are fairly radical to very radical folks that truly believe in the religious destiny of the regime, and the odd (to western ears) tenants of Shia Islam. These folks are willing to countenance a totalitarian state if need be to preserve a regime they largely believe in. There is also some genuine popular support for the Islamic nature of the regime, albeit less than a few weeks ago....

2) The military/paramilitary supporters of the regime. Their most public face is President Ahmadinejad who won the Presidency (fair and square, by Iranian rules and standards, which include required approval from the regime to run for president!) four years ago, and has been declared the "winner" amidst such controversy recently.

#s 1 and 2 are in a pretty strong coalition. Should this coalition break down, a revolution is quite likely.

3) Clerical opponents of the regime. It is of course simplistic to simply label them opponents, but right now, at a time of maximum uncertainty, these people are calling the recent election fraudulent. Since Khameni has repeatedly said otherwise, and threw down the gauntlet in a defiant fist-banging, and somewhat threatening speech on Friday, it is fair to call these clerics opponents. The most visible person representing this faction, by far, is former president Rafsanjani. He is currently the Chairman of the Assembly of Experts, a fairly important behind-the scenes body which, among other things, elects the Supreme Leader. There are several Grand Ayatollahs that also fit within this description, many of whom have far superior religious credentials to Khameni.

The most interesting aspect of the the current Iranian crisis (and a crisis it is!) is that there is such a public split amongst clerical elements within the regime. Previous disagreements, with a few odd exceptions, have been papered over, and in the past, such as 1999, when there were visible splits within the regime, the Supreme Leader put his foot down, and everyone basically jumped back in line. This time, not so much.

Another key thing to keep in mind as the Iran situation unfolds. Rafsanjani was once a crucial supporter of Supreme Leader Khameni, and was the key person involved in elevating him to that status when former Ayatollah Khomeni died in 1989. He has been rumored, however, to have turned somewhat on his former protege, and acted within the Iranian government to maneuver against Kahmeni. Rafsanjani was once considered a moderate, and compared to Kahmeni and Ahmadinejad he really is. He does NOT believe in the overthrow of the regime or (god-forbid from his perspective) western democracy. He does, however, think the regime has led the country into a ditch . He apparently opposes the harsher clerical controls over people's daily lives, and has been a critic of the economic decisions made by recent governments, especially that of Ahmadinejad. His focus is on economics.

4) Pro Civil society (and in some cases far less anti-western than the regime, or even pro-Western democracy in rare cases). This group is represented by former President Khatami and to a lesser extent, of course, "defeated" presidential candidate Mir-Hossein Mousavi and many of the masses in the streets. Mousavi was perhaps better described really as an internal critic of the regime than some anti-regime outsider. However, he has recently stated that he is willing to "be a martyr," which paints him more as a regime opponent.

In order to run for president, you must be approved by the Guardian Council, a body appointed by the Supreme Leader of and 6 jurisits. These are crucial pillars of the regime, and not about to let a real rabble rouser run for the somewhat important job of president. I say somewhat important, because ultimate power rests with the Supreme Leader.

My take is that a lot of the public is unsure about whether they truly support a full overthrow of the regime. Many would probably blanch at the violence and uncertainty this would entail. They are united, however, in their loathing of the manner in which Ahmadinejad and his ilk have run the Iranian economy into the ground. Remember when oil prices were sky high? You'd think Iran, with the 3rd largest amount of proven oil reserves (Saudi Arabia, Canada, Iran, Iraq) would have had a rip roaring economy. Not so much! Instead, Ahmadinejad's blatant misrule has left the Iranian economy in a sad state. Kahmeni has obviously lost some influence in the eyes of the Iranian people.

In addition, Ahmadinejad is blamed by people in this group for foreign policy misadventures. Not that these people like Israel, by a damn long shot. Many are, however, neutral to slightly favorable about the US. But what they DO think is that Ahmadinejad has brought a world of negative attention onto Iran with his various diatribes, and that this has done no good and some harm to these people's day-to-day lives.

Predicting what will happen next is a fool's errand. But make no mistake; the regime is clearly threatened, and could fall, with Kahmeni likely winding up in exile in Iraq. More likely, unfortunately, is a Tianenmen like crackdown, where Kahmeni calls out the army for real, kills a few hundred or more, and makes crystal clear that its all over, time to pack up and go home. I fear this outcome greatly.

Wednesday, June 03, 2009

I was recently asked to comment on an op ed piece by David Brooks. Here's the piece:

For those who don't know, Brooks is a conservative that sometimes uses his brain, making him a rare bird indeed on the conservative side. He's really a moderate conservative, a northeastern "conservative" of the kind that dominated the GOP once upon a time, when it was by and large to the left of the democrats. He became fairly critical of Bush towards the end of the second term, disillusioned with what happened when the GOP ruled the roost.

Anyway, here are my thoughts.

Brooks' piece is thought provoking, but I think he's wrong in a few key respects.

First, let's start where he's RIGHT. GM's biggest problem, at the end of the day, has been that its corporate culture could not accurately allow reality to seep into the key decision makers' in-box. Roger & Me was 1989 for heaven's sake. GM's been mismanaged for Olympiads!

Second, and much more worryingly, Brooks is surely right that, "the Obama plan won't revolutionize GM's corporate culture." However, the realistic risk of oblivion might. And that's where Brooks is wrong. He says there won't be any more outside investors. Baloney. Banks/investment funds will be CLAMORING to invest in GM (owned by Obama and thus unlikely to go truly bust as Brooks himself argues) if they show any signs of life. Perhaps even if they don't. Brooks is making the always fatal error of projecting the recent past into the near future. Credit markets will be loosened, money will look for a home, and if GM climbs out of intensive care, money will find it.

Brooks is importantly right that Obama's plan DOES entrench the ancien regime, which is terrible. The internal resistance in the administration to actually get in the car business and RUN IT for a few years is monumental. Look, I don't like the idea of a government running a car company much either. Put the factories in the district of powerful chairman, kowtow to the unions, block imports, ease rules, etc. But GMs management has been SO bad for SO long that its really hard for me to believe that Uncle Sam could do too much worse. Where I do think Brooks is somewhat wrong is that it "would be politically suicidal for the Democrats, or whoever is in power, to pull the plug on the company -- now or ever." He's not WRONG here, for sure, but he forgets a somewhat likely scenario. GM shrinks, does not boost market share, shrinks further, eats up more money, shrinks further, etc. GM may not so much die as fade away, at least in North America. In fact, that's probably the most likely scenario. Now this is godawful because it WOULD mean that dems throw good money after bad (and rightly get roasted by the Southern/Western dominated GOP for doing so) but it would over a period of say 12 years mean the end of the company, at least its North American Operations. It is true that GM will have to beat to Obama's drummer. Given that its focus for decades has been on anything but innovation and building small cars that people want, as opposed to big trucks that warm the planet and drive up the price of oil, changing its focus to pleasing its new masters in Washington will be much less harmful than Brooks thinks it will. Its easy to be reflexively against government owning the commanding heights. It isn't totally wrongheaded. But GM is a bit of a special case b/c its management has been SO bad for SO LONG. To conclude, Brooks piece, although worthwhile, is, in main part, at war with itself.

1) GM's corporate culture is totally dysfunctional (totally true);

2) GM will now have to please new masters (totally true, and more than just Obama-- Congress too);

3) Therefore, things will get worse and more good money will be thrown in after bad (I submit false-- GM was so bad that pleasing DC should be an IMPROVEMENT.

Lastly, Brooks throws in a FASCINATING analogy to the Iraq war, without bringing himself to quite say that that's what he's analogizing to: "The end result is that G.M. will not become more like successful car companies. It will become less like them. The federal merger will not accelerate the company’s viability. It will impede it. We’ve seen this before, albeit in different context: An overconfident government throws itself into a dysfunctional culture it doesn’t really understand. The result is quagmire. The costs escalate. There is no exit strategy."

There are two possible exit strategies if things go wrong at GM:

First, bite the political bullet and let it go bust. Who knows, Obama might grow a set and do just that if the company just implodes. But let's stipulate that he/his successors won't.

Two, stand idly by as GM vainly struggles to right itself, and slowly fades away. Expensive, surely, to the extent any more money is put it. But the public is fed up with the bailouts, big time, and there may not be repeated bits at the apple. In any event, this would impose the market discipline that Brooks and the GOP so love, as oblivion nears. Then pleasing Obama/Congress would take a back seat to survival. After all, if DC isn't coughing up any more money, why kill yourself to please them. This exit strategy would be the "do nothing and watch them fade away" strategy. This is the strategy I predict Obama will take.