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T heC onsul A New Publication from the International Affairs Association of the University of Pennsylvania

Spring 2013路 Volume I 路 Issue 1

INTERNATIONAL AFFAIRS ASSOCIATION 2012-2013 Director of Publication: Head Layout Editor: Contributing Columnist:

David Schwartz

Editor-in-Chief: Michael Luo Content Editor: Henry Chang Savar Sareen

Jing Ran

Layout Editor: Amanda Ball Wing Cheung Iana Feliciano Kohei Fujikawa Linda Li Zach Wojtowicz Andrea Yeh Business Staff: Sam Blumenthal

Christine Du Avivah Hotimsky Minsoo Kim Julia Rossi Akshay Subramanian Karl Sjulsen

The C onsul World affairs

A Look on Indian Infrastructure

Page 4

By Akshay Subramanian Survival of the Richest: Saudi’s $109 Billion Quest for Solar Energy

Page 6

By Karl Sjulsen

Israel’s Next Four Years

Page 8

By Avivah Hotimsky Guatemala: to Arms or to Legalization

Page 10

By Wing Cheung

Social reforms

An End to Censorship?

Page 12

By Chrstine Du

Yes Scotland: A Fighting Chance or Doomed to Fail?

Page 14

By Julia Rossi

industry & technology

Microsoft, Google and Apple: Tech Wars

Page 16

By Jing Ran

A Story of Diamond

Page 18

By Minsoo Kim

The Consul

World Affairs

A Look on Indian Infrastructure

By Akshay Subramanian A few years back, it was an exercise in futility to find any article written on India and its economy that did not feature a generous use of superlatives. Any skeptics predicting an economic slowdown were considered to be under an illusion. India, along with Brazil, Russia and China, was universally considered as a member of the pantheon of future economic superpowers. Circumstances, however, have changed over the past year and a half and data seems to validate the hypothesis that India’s economy is losing its sheen. The Indian economy, however, seems to have run into traffic and is decelerating at an alarming pace. The GDP grew at 5.3% for the quarter ending in September 2012. While some countries would salivate over a growth rate of over 5%, this happens to be the slowest pace that India’s economy has grown in almost a decade. The industrial output is also far from satisfactory. The problem is also compounded by the fact the government is grappling with a fiscal deficit of 5.8% of GDP and appears to be paralyzed from legislating much needed economic reforms. The primary reason, however, that has been attributed to the downward trajectory of India’s growth rate is the rotten

state of the country’s infrastructure. India’s infrastructure is characterized by congested and potholed roads, trains bursting at the seams, antiquated drainage in big cities and frequent power cuts. To put things in perspective, as of 2010, India had less than 0.07 kilometers of highways per 1000 people and less than 4 kilometers of roads (including paved and unpaved roads) per 1000 people compared to a figure of 21 kilometers of roads in the US. Experts hold the opinion that the current state of India’s infrastructure trims about two percentage points from the annual GDP growth. This article aims to explore the problems associated with India’s fragile infrastructure and the importance of revamping and expanding this lifeblood of the economy to bring lift the country’s growth trajectory. The inadequacies of Asia’s third largest economy’s infrastructure are best reflected in the power sector. The accumulating problems in this creaky sector erupted in the biggest blackout the world had ever seen. In July 2012, more than 600 million people were affected by the massive power outage that affected most of the northern states of the country. The official reason attributed to the blackout was that some states in northern India withdrew more power from the regional power grid than what was allocated to them. The states were compelled to overdraw from the grid ·4·

because of the below average rainfall recorded during the monsoon season had led to drying irrigation pumps in the fields. In reality, the power outage is only a symptom of underlying issues that have been plaguing the power sector since time immemorial. A more than significant part of India’s power is generated by coal. Coal India, a state owned monopoly, owns India’s coal mines and has often been blamed for being ineffective in generating enough coal to meet demand. The situation is further deteriorated by the fact that the shoddy road and rail network leads to massive delays in transporting coal from the mines to the power plants. Additionally, mining for coal is often obstructed by environmentalists and Naxalites, militant Maoist groups that operate in central and eastern India. The extent of the shortfall in domestic coal production is so stark that although India boasts the 5th largest coal reserves in the world, power companies have been forced to resort to importing coal from Indonesia and Australia to feed their power plants. Private power companies have also been forced to purchase coal mines abroad to secure a stable source of supply. Many of these power companies that enthusiastically bid for contracts between 2007 and 2010 when the government announced that it was looking to boost investment in the power sector are unlikely to reap any profits. The

firms were eager to invest in the sector since they believed they would be able to acquire cheap coal from Coal India. The deplorable state of finances for players in the power sector also stems from the fact the inability of these firms to transfer the higher costs incurred from importing foreign coal to the consumers. Tariffs on electricity are artificially depressed by politicians who fear the potential backlash they would receive from voters if they raised electricity prices. To add to the endless list of woes, bureaucracy and red tape, words that are almost inevitably associated with the Government of India, contribute the delays in acquiring land and starting projects. As a result, private investors are hugely reluctant to invest in the power sector and banks are unwilling to offer financing to the power companies. This is particularly worrying since a study by McKinsey, a consulting firm, estimated that the modernization of India’s power transmission sector alone requires investment to the tune of almost $110 billion. The downward spiral the power sector finds itself in is only the tip of the iceberg. At present, India’s roads and railways are alarmingly ill-equipped to handle the rapid and unplanned urbanization of the country. The endless lines of traffic that clog the narrow and congested roadways of India’s metropolises and the overcrowded trains offer a prime exhibition of the deficiency at hand. As the spending power of India’s middle class continues to grow, the rate of migration to the cities is only going to increase. The burgeoning middle class also implies a higher number of cars on the country’s roads. Though India boasts one of the largest road networks in the world, the roads are rather poorly

maintained and more than 50% of the roads are unpaved. It is evident that the pace at which new projects are being implemented is far too slow to ease the ever-rising pressure that is being exerted on India’s road and rail network by its gargantuan population. To place things in perspective, Manhattan, which has a population of fewer than 2 million people, has 16 bridges, 4 underwater tunnels along with a ferry system which link the island to the mainland. In contrast, Mumbai, India’s most populous city with a population of over 18 million people has just 6 bridges. After decades of planning and reports by numerous committees, the only symbol of modernity that can be accredited to Mumbai’s roads is the Rajiv Gandhi Sea Link, 4.7 kilometer cable-stayed bridge. The poor quality of infrastructure is also one of the contributors to a stubbornly high rate of food inflation in the world’s second most populous nation. The deficient road and rail network coupled with poor and inadequate food storage facilities lead to wastage of millions of tons of food grains every year. This figure is particularly stark considering that a sizeable part of the country’s population lives below the poverty line. While there is unanimous agreement among all parties involved that there

is an urgent need to modernize the country’s roads, railways, and power transmission sector, the lack of political will to expedite this process in addition to corruption, which is deeply ingrained in India’s political fabric, have proved to be major impediments in implementing infrastructure related projects. For instance, the government has been hugely reluctant to privatize the coal sector. The government hopes that a whopping $1 trillion will be spent on infrastructure between 2012 and 2017 but considering the government’s track record, it would take a brave soul to accept these words at face value. It would, however, be unfair to say that the government has been entirely inactive. The government recently formed the Cabinet Committee on Investment (CCI), headed by the Prime Minister, to fast-track the clearance of infrastructure projects in excess of $200 million to avoid the bureaucratic delays that plagues the approval of nearly all projects. The CCI will also help simplify rules and procedures followed by certain ministries such as the Ministry of Environment and Forests. The story of India’s infrastructure is not all doom and gloom. There are certainly success stories that have ensued from partnerships between the public and private sector such as the modernization of the international airport in New Delhi, the metro systems in Bangalore and New Delhi, the Rajiv Gandhi Sea Link in Mumbai, and the 165 kilometer Taj Expressway in northern India. These successes, however, have been few and far between. Experts believe that India will need to invest almost 10% of its GDP or nearly $100 billion in infrastructure each year to maintain a GDP growth rate of over 8% - India most certainly has a long way to go before 8% growth becomes a reality again.C

Kala, Anant Vijay. India July-September GDP Grows 5.3%. 1 December 2012. January 2013 < 60389548782.html>. Wikipedia. Indian Road Network. <>. Guha, Romit. India Is Focusing on Growth. 12 November 2012. January 2013 < html>. The Economist. An Area of Darkness. 4 August 2012. January 2013 <>. The Economist. The future is black. 21 January 2012. January 2013 <>. The Economist. An Area of Darkness. 4 August 2012. January 2013 <>. Mckinsey & Company. "Powering India: The Road to 2017." Executive Summary. n.d. The World Bank. Roads, paved (% of total roads). <>. The Economist. Halfway to paradise. 22 December 2012. January 2013 <>. NDTV Profit. Cabinet Committee on Investments to review procedures followed in grant of clearances. 8 January 2013. January 2013 < news/corporates/article-cabinet-committee-on-investments-to-review-procedures-followed-in-grant-of-clearances-315830>. The Economist. The Half-finished Revolution. 21 July 2011. January 2013 <>.

World Affairs

Survival of the Richest

Saudi’s $109 Billion Quest for Solar Energy

By Karl Sjulsen Saudi Arabia, the world’s largest oil producer and exporter, recently revealed its intention to make the world’s single largest investment in solar power to date. The oil-rich monarchy plans to invest $109 billion in solar energy, just shy of the 2011 global aggregate of $136 billion. Its renewable energy program, spearheaded by the King Abdullah City for Atomic and Renewable Energy (Ka-Care), will receive the bulk of the money over the next two decades. The vice-president of Ka-Care, Khalid Al-Suliman, hopes that nuclear and renewable energy together will supply half of the country’s electricity needs by 2032. Coupled with Saudi Aramco’s new oil exploration initiatives, the turn towards solar energy would allow Saudi Arabia to maintain its position as the world’s leading oil exporter. So while Ka-Care’s expectations are ambitious, if met, they may ensure the stability of the Saudi regime, as it exists today, well into the 21st century. According to Bloomberg News Energy Finance, Saudi solar energy currently supplies a mere 3 megawatts, equivalent to less than one percent

of Saudi electricity demands. The investment plan calls for the construction of enough solar plants to supply 41,000 megawatts by 2032; enough to meet one-third of the country’s energy needs. The first new plant, scheduled to open in 2015, is set to be built in Mecca and will provide around 100 megawatts of electricity. While the number of plants alone is impressive, Ka-Care has demonstrat-

“The Saudi solar project, if well executed, would drastically reduce Saudi’s domestic oil consumption, allowing the government to sustain record oil exports.”

ed that Saudi Arabia is ideal for solar energy. In fact, the King Fahd University of Petroleum & Minerals in Dhahran estimated that Saudi Arabia has 4.5 to 7 solar kilowatts per square meter per day, more than twice of that anywhere in Europe. The Saudi solar project, if well executed, would drastically reduce Saudi’s domestic oil consumption, allowing the gov·6·

Photo by Martin Prochnik

ernment to sustain record oil exports. Furthermore, the Saudi government plans to invest as much as $100 billion in nuclear energy to supplement the $109 billion investment in solar energy. The plan would see the construction of 16 nuclear reactors by 2030 with a total capacity of 14,000 megawatts of electricity. In the past two years, the Saudi government has demonstrated its commitment to nuclear energy by signing nuclear accords with France, South Korea, Argentina, and most recently, China. Moreover, Aramco believes the country could reap a further 25,000 megawatts from wind and geothermal energy. All said and done, renewable energy would supply slightly more than half of Saudi electricity demands by 2032. While renewable energy is economically valuable in and of itself, it becomes strategically and politically valuable within the framework of oil. The solar investment and subsequent diversification of Saudi energy resources, would allow the gulf state to maintain its position as the world’s leading oil exporter, even as we approach global peak oil. Saudi Aramco has revealed that Saudi Arabia has 259.7 billion barrels worth of oil reserves, roughly one-fifth of the world

total. Moreover, they project that Saudi potentially has an additional 650 billion barrels of undiscovered reserves. In fact, Aramco has already pledged $35 billion towards future exploration initiatives. Even in light of its large reserves and commitment to exploration, Saudi Arabia could become a net importer of oil by 2030 due to rising domestic energy demands according to Citigroup. The country currently consumes around 850 million barrels a year for its own energy needs, a figure that could rise by as much as 8% a year. But Ka-Care’s renewable energy initiative could reverse that verdict. The plan would allow Saudi to cut domestic oil consumption in half, ensuring that the country could continue to export oil well past 2030. Furthermore, a diversification of energy resources reduces Saudi exposure to global market price shocks. It may even allow the Gulf state single-handedly influence global oil prices again, something it has been unable to do since the 1980s. Ultimately, Saudi’s dedicated pivot towards renewable energy guarantees them a steady, if not increasing, stream of income over the next century. And for the Saudi regime, income translates directly into legitimacy. The legitimacy of the Saudi monar-

chy is nearly entirely dependent on its large and steady annual income, 86% of which is composed solely of oil exports. The monarchy, while unrestrained and unaccountable, has worked to foster material gains for its population. By ensuring a stable business environment, the government has attracted vast amounts of foreign direct investment (FDI). In 2010, Saudi broke into the top ten most attractive nations for FDI with net inflows of $36 billion. But while the

“The legitimacy of the Saudi monarchy is nearly entirely dependent on its large and steady annual income, 86% of which is composed solely of oil exports.”

regime may have driven economic development, it has also consistently (and successfully) restricted political development. In fact, the monarchy has fairly explicitly “bought” the support and approval of its own people. Simeon Kerr of the Financial Times, notes that during the Arab Spring, “Riyadh paid out a two-month salary bonus to govern-

ment employees…while also raising the minimum public-sector wage and hiring an extra 60,000 staff for the interior ministry.” To further pacify the Saudi populous in late 2011 and throughout 2012, the government funded the construction of 50,000 homes as well as a new railway connecting Mecca and Medina. Saudi’s overflowing coffers (Saudi currently holds the world’s 4th largest FOREX reserves) have functioned as the royal family’s most salient basis of ruling legitimacy and will continue to do so in the future. While the Saudi quest for solar energy is an intrinsically economic decision, at its core it is driven by a much more potent force: political survival. The Saudi regime as it exists today is effectively a dictatorship, benevolent though it may be. Not only is the government unrestrained and unaccountable, but it also refuses its own people a plethora of basic civil rights, all in exchange for capital-driven economic growth. And as long as the regime can afford to buy legitimacy, it will continue to do so. Ka-Care’s proposed renewable energy revolution would not only stimulate Saudi’s domestic economy, but would also fundamentally guarantee the rule of the Saudi monarchy for the foreseeable future. C Ibid.

Core area of Saudi Aramco in Dhahran ·7·

Photo by Eagleamn

The Consul

World Affairs

Israel’s Next Four Years

By Avivah Hotimsky On January 22, Israelis will head to the polls to decide who represents them in the Knesset and whether Benjamin Netanyahu will have four more years as prime minister. Although these elections were originally scheduled for October, a disagreement in budgetary issues within the government led Netanyahu to call an early election.

Israeli elections are based on a system of proportional representation. Thus, when voters go to the polls, they will vote for a party, not a person. As a result, a government will form where each party is given its respective number of seats, a number representative of the percentage of the vote it receives. To form the coalition government, the president chooses a Knesset member, typically a leader of the party, to form the coalition. The member must then negotiate and win a vote of confidence from the Knesset. This member will then become prime minister of Israel. Throughout the race, Benjamin

Netanyahu has held a steady lead, and he will likely remain prime minister for four more years. Focusing on security issues, Netanyahu has continuously argued that his reelection is imperative for Israeli security, especially following the late 2012 Gaza Strip conflict and the increased nuclear threat from Iran. Following

“Netanyahu has recently had difficulties with President Obama after Obama was secretly recorded discussing Netanyahu’s performance as prime minister. ”

a relatively quiet election season, though, Netanyahu has recently had difficulties with President Obama after Obama was secretly recorded discussing Netanyahu’s performance as prime minister. He argued that Netanyahu has not been the best leader for Israel and that he does not have Israel’s best interests in mind. However, even with this criticism, Netanyahu still has strong report from Israelis throughout the country. ·8·

Although the prime minister spot has a clear predicted winner, the rest of the election is more competitive. With many voters still undecided, pollsters are less confident about the predicted results; however, it is likely that Netanyahu’s Likud-Beiteinu Party will likely win the most seats in the election and will have twice as many seats as its main competitor, the Labour Party, which should be followed by the Jewish Home Party. Depending on the results of the election, Israel may see one of many different situations in the next few years. Thus, the results may give Israel a glimpse of what the next four years will look like. If Netanyahu and his Likud Party do win, security will be stressed as the main concern, and there may be an escalated conflict following recent heightened tensions with the Palestinians. Netanyahu has recently stated that Jewish settlements in the West Bank will not be removed during his next term, angering many Palestinians and opponents of settlements. Additionally, Netanyahu has recently announced that homes will be built on land that Palestin-

ians have claimed for a potential future state. Much of Netanyahu’s criticism during the first term arose from Jewish settlements; thus, this could be a problem in the second term.

“With many voters still undecided, pollsters are less confident about the predicted results”

If Netanyahu and the Likud Party do win this election, there must be a focus on the economy. Throughout his tenure, Netanyahu has kept a relatively stable economy in Israel when compared to the rest of the world. However, even though Israel has more stable statistics than some of its Western counterparts, its growing deficit has been a concern for many citizens. Therefore, if Netanyahu is elected again, there will be a strong pressure for him to focus

on the economy.

Although Netanyahu’s reelection may cause heightened tensions with the Palestinians, his reelection, and the election of a Likud led government, could also be very beneficial for Israeli security as a whole. Netanyahu has continuously been lauded as someone who knows Israel’s security needs and as someone who will always fight to keep Israel safe. He makes his positions clear, especially in important issues such as Iran. Throughout his tenure as prime minister, Netanyahu saw an escalated conflict with Iran and the Iranian nuclear program, and his strong opposition to any Iranian nuclear weapon has allowed Israel to gain support from the West. Thus, with Iran becoming a larger threat to Israel, it may be important for Netanyahu and his party to stay in office, for a transition in power could lead to a security weakness that could be exploited by other nations.

In a just short period of time, Israel’s future leaders will be decided, and with these leaders, Israel will get a preview of what the next four years will look like. C

“[W]ith Iran becoming a larger threat to Israel, it may be important for Netanyahu and his party to stay in office, for a transition in power could lead to a security weakness that could be exploited by other nations.”

Francois Zimeray and Benjamin Netanyahu, source: < ·9·

The Consul

World Affairs

Guatemala: To Arms or to Legalization

By Wing Cheung On January 14, 2013, gunmen murdered the mayor of the Guatemalan city Jutiapa, Carlos Castillo Medrano, in a barbershop. The violent death of Mayor Medrano has cast doubt on the accomplishments proclaimed by President Otto Perez Molina regarding the reduction of violence across the country. Last winter, President Molina assumed office and declared his intention to crack down on violence spawned by the illicit drug trade in Latin America. However, a year later, reports of abuse at the hands of Guatemalan military personnel and drugrelated violence continue to surface. President Molina has attributed the ongoing violence in Guatemala to not only issues within the military, but also to the demand created by a high level of drug use in the U.S. and the alleged spillover of violence from the activities of the drug trafficking organizations (DTOs) in Mexico. DTOs are networks of individuals involved in the creation and trade of illicit drugs. These organizations often operate at the transnational scale and

involve advanced technological innovations ranging from airplanes to submarines.

Above: Photograph of cocaine discovered in a submarine found by the Coast Guard. President Molina has called for a stronger domestic military response as well as better containment of the influence of the Mexican DTOs and the reduction of the demand for illicit drugs in the U.S. In addition, President Molina has also proposed the legalization of illicit drugs as a way to thwart the growth of the illicit drug trade. The murder of Mayor Medrano is an enormous setback to the counter-narcotics initiatives proposed by President Molina. The continuation 路 10 路

of violence in Guatemala has suggested to the U.S. that the government is still overwhelmed by criminal activity and that rule of law remains weak. The U.S. has also been reluctant to provide military aid to the Guatemalan military because of the many reports of abuses committed by Guatemalan military personnel. Instead, in August of 2012, the U.S. led a joint

DTOs are networks of individuals involved in the creation and trade of illicit drugs. These organizations often operate at the transnational scale and involve advanced technological innovations ranging from airplanes to submarines. military operation consisting of 200 U.S. Marines, and military and law enforcement personnel from 13 other countries. The deployment of U.S.-led forces in Guatemala has been deemed the largest in the past few decades, which reveals how concerned the U.S. government is with the development of illicit drug activities in the region.

More importantly, the operation indicates that the U.S. government has deemed the national response initiated by the Guatemalan government to be insufficient and a multilateral intervention necessary to stop the violence in the country. It is unlikely that the Guatemalan military will re-

President Molina has called for a stronger domestic military response as well as better containment of the influence of the Mexican DTOs and the reduction of the demand for illicit drugs in the U.S. ceive any logistical support from the U.S. until its international reputation improves. The dismissal of the law enforcement response to the drug violence in Guatemala could also deter the U.S. from fully supporting President Molina. The U.S. has historically advocated the use of law enforcement agencies to respond to domestic illicit drug activity. President Molina, however, has been a strong supporter of more ag-

Above: A photograph of drugs seized from a frigate.

gressive military operations led by the Guatemalan military. The proposal of the legalization of illicit drugs is also equally unlikely to be realized. Even though the legalization of marijuana has been a growing movement, even in some states in the U.S., the legalization of substances like cocaine and heroin remains highly unlikely due to the high degree of health Above: Photograph of illicit drugs discovered in a frigate. risks posed by the use of such dangerous narcotics. In addition, as a result of the in-

Above: An illustration of drug trafficking routes by air and by sea.

creasingly sophisticated means of technological and tactical innovations and the continuation of the vibrancy of the illicit drug trade, Mexican DTOs will most definitely continue to expand their operations. The reduction of the violence committed by the Mexican DTOs would require not only effective August of 2012, the U.S. led a joint military operation consisting of 200 U.S. Marines, and military and law enforcement personnel from 13 other countries. The deployment of U.S.-led forces in Guatemala has been deemed the largest in the past few decades, which reveals how concerned the U.S. is with the development of illicit activities. regulation of the drug trade but also 路 11 路

fundamental social change, especially in the way that people perceive illicit drugs and problems of the illicit drug trade. In fact, the requests made by President Molina all reflect the complexity of the multifaceted nature of the illicit drug trade. Political, social and economic differences within the international community have thwarted President Molina and his administration in their efforts to combat the drug-related violence in Guatemala in the fashion that they see fit. At the same time, President Molina and the rest of Guatemala cannot escape the impact of such differences as a result of the increasingly globalized international community. As the role of non-state actors become more influential in international relations and the old geopolitical order breaks down as the world becomes increasingly multipolar, Guatemala must act quickly to contain and reduce the drug-related violence within its borders without further reliance on U.S. support for Guatemalan military personnel. C

The Consul

Social Reforms

An End to Censorship?

By Christine Du “Dream for China, dream for freedom, dream for constitutionalism.” These were the words that were supposed appear on the new year’s issue of Southern Weekly, Canton based Chinese newspaper well known for its bold outspokenness. These would have been the words to appear in the newspaper, had its editor in chief been the one to decide. This was not the case for Southern Weekly. On December 23, 2012, Southern Weekly writer Can Huang submitted the new year’s special edition front page editorial titled “Dream for China, Dream for Constitutionalism.” The text was then passed on to the provincial Propaganda Department for review. The bureau sent back edits two days later. The paper’s editing team spent the following week editing the article, cutting out most parts addressing constitutionalism. A final version was sent to the Propaganda Department on January 1, 2013, after which the paper’s editorial staff returned home for the holiday. On January 3, the day the paper was published, keen readers noted

rookie mistakes in the paper’s frontpage editorial, now titled “Chasing the Dream.” These included mistaken dates as well as ill use of grammar and poor syntax. People posted their observations on Weibo, China’s leading social networking website (equivalent to Twitter). The news quickly circulated among readers

“The incident caught on like wildfire, and soon developed into a widespread outcry on the social media platform for freedom of speech.”

and internet-users, whose initial reaction was to mock the paper for its unprofessionalism making such basic mistakes. The editors of the paper, understandably infuriated by these allegations, revealed also via Weibo that these mistakes are actually accountable to the provincial Propaganda Department leader’s personal alterations. The editors also took the opportunity to voice their discontent with China’s censorship policies. The · 12 ·

incident caught on like wildfire, and soon developed into a widespread outcry on the social media platform calling for freedom of speech in the media industry. Hundreds upon thousands of people “tweeted” about the incident within the first day after the paper was published. Events escalated quickly, and on January 7 a group of activists gathered outside Southern Weekly’s Canton headquarters to voice their support for the paper’s editors, who had gone on strike, and to protest government censorship. The Southern Weekly is long known to be relatively outspoken and liberal compared to other Chinese newspapers. Though hailed by liberal intellectuals both domestic and abroad as China’s most influential liberal newspaper, Southern Weekly has long suffered a rocky relationship with its unyielding patron, the Chinese government. As early as 2001, three of the newspaper’s editorial board members were reportedly sacked for publishing a discussion with LiaoYiwu, author of The Corpse Walker: Real Life Stories: China From the Bottom Up, which was and still is banned in China. In the following year, Southern Weekly reporter Fang Jingyu was fired for writing an expose

on a Project Hope (a charity organization with operations in China) leader who embezzled substantial public funds. The government continued to press down hard on the newspaper, including its 2009 interview of President Obama, which was allegedly censored for supposedly controversial discussion of topics such as human rights and freedom of speech. It would come to no surprise then that Southern Weekly’s new year’s editorial “Dream for China, Dream for Constitutionalism,” did not pass the government’s screening. The protest posed a test for Xi Jinping, the newly installed Communist Party chief and represents a serious dilemma for the Communist Party during a new age of social media and micro-blogging. Western news sources have reported that this incident is indicative of growing dissent among the Chinese regarding government censorship. The London-based Economist even went so far as to saying that without reforms, public dissatisfaction would reach a “critical point”

“It remains unlikely that these voices will gather enough momentum to become a full-fledged revolution.’”

and the country would “fall into the turmoil and chaos of violent revolution.” This notion that these protests will lead to a wide scale movement for free speech is unfounded and rather farfetched. Frankly, media censorship of newspaper is not news to the China media industry, which is ostensibly entirely government-controlled and regulated. The dissent from Southern Weekly’s editors was sparked not by the fact that their news article was subject to censorship (it has been from its very first issue), but by the fact that the censored version of the text was of poor quality and tainted the paper’s reputation amongst readers. In fact, the content of the article was changed already during the first round of review, a process that did not raise any discontent. This lack of outward dissent reflects the vast majority Chinese media personnel, who are accustomed to government censorship. None of the main activists behind

the protests online petitions for free speech represent actual news agencies. Even though there has been numerous petitions and talk circulating on the Internet, mainly via Weibo (China’s largest social media network), it remains unlikely that these voices will gather enough momentum to become a fullyfledged revolution. In fact, one of the main factors inhibiting the escalation of these anti-censorship demonstrations is the fact that much of it is contained within a social media platform, which is in itself subject to government censorship. Days after Southern Weekly posted a letter criticizing the government official who

“The social environment of the country makes it difficult for this cause against censorship to gather enough momentum. ”

allegedly edited the article, the paper’s official Weibo account was frozen. The search terms for Southern Weekly were also blocked for a few days after the incident. Clearly, a fight against censorship taking place on the Internet is doomed for failure, since the Internet · 13 ·

as a communication medium is itself often censored. Furthermore, the social environment of the country makes it difficult for this cause against censorship to gather enough momentum. Most of the protesters against government censorship had been intellectuals and university students, which do not in fact represent the majority of the Chinese population. Immediately following the initial protests, counter-protests took place, protesting the protesters. This is indicative of the discrepancy among the people of China that prevents collective action. Coupled with the obstacles to unity through social media, the scattered nature of free-speech advocates prevents substantive action. Nevertheless, the Chinese government has taken swift action in resolving this conflict, sending a leading official to negotiate a settlement with the striking editors. It seems that the incident will come to a peaceful end. However, it does suggest a need for the Chinese government to make reforms to satisfy its emerging young generation of aware, educated people. The Southern Weekly protests may be suppressible, but the issues contingent to the event cannot be ignored. For the sake of stability and progress, Chinese leaders will need to start making changes. C

The Consul

Social Reforms

Yes Scotland: A Fighting Chance or Doomed to Fail?

By Julia Rossi After more than three centuries of debate, the movement for an independent Scotland is on the rise. Scotland’s current first minister, Alex Salmond, recently negotiated a referendum on the question of independence with the UK government, marking the commencement of an intense campaign to convince the Scottish people to vote for national independence. At the moment, the referendum is projected to take place in fall of 2014. But will the people of Scotland follow Salmond’s lead and support independence? And if they do, what does independence mean for the future of Scotland and its place in the European Union? History of the Movement The Scottish independence movement can arguably be traced back to the signing of the Act of Union in 1707, which officially tied Scotland to England. Though many believed unification was necessary to prevent Scotland’s impending financial ruin, opposition to the Act of Union was strong at the time. Still, for the next two hundred years, in which the British Empire was at its peak, notions of Scottish independence were not seriously considered. All of this changed with the found-

ing of the Scottish National Party in 1934. The formation of the SNP— which, notably, coincides with the decline of the British Empire—is a formal reflection of the shift toward nationalist attitudes that has been building ever since. In 2007, the SNP gained a minority presence, and in 2011 it became Scotland’s majority party. But does Scottish support for the SNP necessarily equate support for independence? After all, although Salmond has always been a vocal nationalist, the Scottish people were highly aware that he could not declare Scottish independence without the peoples’ support when they elected him. Indeed, despite Salmond’s popularity, recent polls suggest that if the referendum were held tomorrow, only about one-third of the population would vote “yes” for Scotland’s separation from the UK. The Yes Scotland Campaign Salmond’s Yes Scotland campaign officially began in May 2012. The goal of the campaign is to garner one million signatures for an independent Scotland prior to the 2014 referendum, which would effectively ensure its success. Numerous celebrities have since endorsed Yes Scotland, including actor Sean Connery and novelist Irvine Welsh. But many disparage Salmond’s goals as implausible; after all, when the Yes Scotland campaign began, · 14 ·

polls pointed to the consistent unpopularity of independence. Still, although support for independence hovers around a mere 30% of the population, deeper analysis of this number reveals just how flexible the Scottish people are regarding their nationalism. A YouGov poll found that 45% of people said they would vote “yes” if they believed it would benefit them financially, and 65% said they

“Despite Salmond’s popularity, recent polls suggest that if the referrendum were held tomorrow, onl about one-third of the population would vote ‘yes’ for Scotland’s separation from the UK.”

would vote for independence if it guaranteed them an additional £500 per year. This data exposes just how closely the Scottish people’s perception of independence is tied to its economic concerns; clearly, in order to run a successful campaign, Salmond must appeal to the people’s wallets. This may prove a difficult case to make, for in separating from the UK, Scotland also relinquishes its claim to the already fragile economic security that UK membership offers. These

concerns have been compounded by Salmond’s intimations that he would prefer to break away from the pound as Scotland’s currency and convert to the precarious Euro. Perhaps in an attempt to draw attention away from economic concerns and toward patriotic impulses, Salmond’s political rhetoric has grown increasingly aggressive in recent months. His comments in October took on their most brazen tone yet: “Why on earth do we allow this incompetent bunch of Lord Snooties to be in positions of authority over our country?” Salmond challenged. “Westminster would put this first-class nation in the second-class carriages.” The Referendum Although the SNP currently occupies a majority in Scotland, its leaders agree that independence requires a direct vote from the Scottish people, and will therefore not declare independence without holding the referendum. Moreover, all negotiations on the referendum have been and will continue to be arranged through the UK government, in accordance with Scotland’s current status as a part of the UK. The Edinburgh Agreement—a formal document negotiated by the UK and Scottish governments that outlines the parameters of the referendum—was signed on October 15, 2012. The signatories were Prime Minister David Cameron, First Minister of Scotland Alex Salmond, Secretary of State for Scotland Michael Moore, and Deputy First Minister of Scotland Nicola Sturgeon. The agreement declares that the Scottish government will legislate the referendum, and that it will adhere to “the highest standards of fairness, transparency, and propriety, informed by consultation and independent expert advice.” With the “highest standard of fairness” in mind, Salmond has pushed to include Scottish 16 and 17-year-olds in the vote, considering the enormous

Pipes and Drums corps of the 1st Battalion Scots Guard impact that the referendum could hold for their futures. The rest of the voters will include Scottish-born people who reside in Scotland, as well as citizens of other parts of the UK who now live in Scotland. Voters will be asked a simple question along the lines of “Do you think Scotland should be an independent nation?” There has been talk of a “second question” that asks voters if they would support increased autonomy for Scotland, rather than total separation from the UK. However, it is unlikely that the second question will be asked; Salmond

“Why on earth do we allow this incompetent bunch of Lord Snooties to be in positions of authority over our country? Westminster would put this first-class nation in the second-class carriages” -Alex Salmond believes that it would dilute the re-

sults of referendum, while Westminster worries that the Scots are more likely to pass a referendum for increased autonomy than one for full independence. What’s Next? At this point, it is too early to predict the outcome of the referendum with certainty. If Yes Scotland fails to persuade voters that independence will benefit them financially, the campaign will likely fail, resulting in a continuation of the status quo. But what if the independence movement succeeds? In this case, Scotland would be required to re-apply for membership in the European Union—a complicated process that could deter residents from voting for independence. Moreover, the original members of the EU retain the power of veto for admission into the union, and some speculate that Scotland’s application would meet a surprising force of opposition—Spain. Because Spain is currently trying to suppress the stirrings for independence in Catalonia, it is very possible that the Spanish would reject Scotland’s application to signify the consequences of independence. C Ibid Ibid


Industry & Industry

market. In 2011, 487.7 million smartphones being sold, more By Jing Ran than the number of PCs and tablets combined . With distin The story began in guished operating system, the 1998, the year in which Micompetition over market share crosoft first released its can be divided among iPhone, Windows98 system, Apple Android and Windows phone, first introduced its iMac, and becoming the battle front of Google was founded by two the three companies. Simple Stanford students. Since then, and consistent since 2007, along with the world-changing iPhone’s seamless integration development of the internet with other Apple devices in and high technology, the three transferring data makes it easy companies have entered into a for customers to understand. series of battles, struggling for The abundance of iPhone apps control over different digital market also provides users areas. Though the mastery of with more choices. Microsoft, light sabers is not required, the on the other hand, is catching wars in the tech industry today up with its advantage of ownare featuring equal intensity ing both the smartphone operand uncertainty as those a ating system and the dominant long time ago in a galaxy far, PC operating system. Meanfar away, with technology and while for Google, its Android business strategy as their system has found its strength weapons. as an open-source operating system that any manufacturer The Phone Menace can use, dominating smart As smartphones change phone market share. the way people find informaAttacks of tion, consume content and Patent Owners purchase apps, they have While busy with innobecome the most coveted devation, the companies are also vices and the fastest growing · 16 ·

at each other’s throat over intellectual property protection. According to a Stanford University analysis, $20 billion has been spent on patent litigation and patent purchases in the past two years, with Apple and Google spending more on patent lawsuits and purchases than on research and development of new products last year . Because patents on software often grant ownership of concepts, vague algorithms or business methods, some patents are so broad that they allow for ownership of unrelated products to be claimed. Supporters of the suits usually consider them another strategy to defeat and profit from their competitors, at least keeping them from winning.

Revenge of the Old Friend

Though collaboration is common among tech companies, such business relationships usually prove to be fickle and tumultuous. When the iPhone was launched, Google integrated their map data and default search option as parts

of the iPhone experience. This success in the bidding war with Microsoft for being the default iPhone search engine over Bing also helped Google to assert its dominance as revealed in a Senate Antitrust Hearing in 2011 . Between Apple and Google was a win-win relationship, however, when Google stepped into the mobile handset arena, the stakes changed. Apple’s former CEO Steve Jobs felt that Android was too similar to the iPhone, inciting him to declare that he would go to “thermonuclear war” with Google over it . In the recent iOS6, Apple replaced Google Maps with their own Maps app, causing a lot of frustration to the users, as Apple’s replacement does not meet expectations. In addition, Apple’s new voice-activated personal assistant, Siri, poses another threat to exclude Google from Apple products, serving up answers to people on the go, allowing it to deliver query results directly to those asking for it . While divorcing from Google, Apple contributed the lion’s share ($2.6 billion) to the consortium comprised of Microsoft, Apple, Ericsson, EMC, Sony and RIM, for purchasing about 6,000 patents from the bankrupt Nortel, once a strategic partner of Microsoft. This Apple-Microsoft collaboration was called anti-competitive by Google .

A New Hope

Last fall, Apple launched iPhone

5 with its iOS6 system, and later the iPad Mini, new iPad4, and new desktops and laptops. In October, Microsoft launched Windows 8, its next-generation desktop platform and a departure from its legacy platforms, and new Surface tablet computer. Three days later, it launched Windows Phone 8, aiming at aligning its desktop and mobile platforms. Later in November, Google also released its new Android 4.2, Jelly Bean, after the unveiling of its Nexus 7 tablet in October. The tech industry’s biggest players have shown off their newest software and hardware, all aiming to make big moves before the end of the year. Each company has invested in a new hope for its new products in the new year, hoping to win the battle in the next round.

Global Strategy Strikes Back

While most analysis is based predominantly in the U.S., strategies in the global market do make a big difference. Though only the third in smartphone race with iPhones and Android, Windows Phone inherits Microsoft’s success in global coverage – its App Marketplace covers over 90% of the world’s population, higher than the other two. Though Google’s Play Store is available in 138 countries and 70% of the world’s population, Microsoft is available in only 115 countries yet 90% of world’s population . This is because Microsoft’s marketplace is avail-

able in China while Google’s is not. If Google could have support for China, they would edge past Apple and get closer to Microsoft’s potential population reach. Apple also showed its increasing emphasis on global strategy, as CEO Tim Cook said he expects China to overtake the U.S. as Apple’s biggest market in two weeks ago .

Return of the Monopoly?

The word monopoly has been thrown around a lot recently. Microsoft, Apple, and Google – all have been called in that way by media or by each other during lawsuits. However, this term has been used more as an exaggeration of the company’s dominant position in one area than a strict economic characterization. Particularly, in recent situations, intense competition has led to the absence of a real monopoly. As Google owns Internet search, Microsoft owns operating systems and applications, and Apple owns high-end hardware and entertainment and media devices, each company has its own advantage. In 2012 we’ve seen significant developments begin to unfold from Microsoft, Google and Apple, and 2013 will be another pivotal year for all the major tech companies, with make-or-break decisions to be made by all. Will there be a return of the monopoly? That depends on whether the Force is strong with these companies’ future moves. C

1. 2. 3. 4. 5. 6. 7. 8.

· 17 ·

The Consul

Industry & Technology

A Story of Diamond

By Minsoo Kim Diamonds may be a girl’s best friend, but they are certainly not a wallet’s best friend. An average cost of a diamond engagement ring is $3500, which is nearly 10% of the average US household disposal income according to OECD. Sorry Beyoncé, even if you like it you can’t just put a ring on it. However, diamonds were not always this expensive. In fact, a quick examination of the international diamond supply chain reveals that American consumers are spending far more than they should for a small piece of carbon. How does a diamond ring find itself at the showrooms of Cartier, Tiffany & Co., and other retail jewelry stores? The coveted gemstone’s journey first begins in a diamond mine typically located in Africa. The diamond mined here is rough and contains high percentages of impurities. If the particular diamond has the potential to be cut into a gem quality diamond, then a gem-cutting firm will make preparations to cut and mount it on a ring. Otherwise, the diamond is doomed for industrial use by taking

advantage of its intrinsic value due to its one of the hardest materials on earth. What is surprising here is the

“So when a consumer purchases a diamond ring, the gemstone mounted on the ring is worth up to ten times more than the original price”

huge jump in price of the diamond as it moves down the supply chain. According to G. Ariovich, a 0.5 carat diamond is worth $50 when it’s mined, $100 when it’s sold to rough gem dealers, $125 when sold to gem-cutting firms, $250 when sold to wholesale dealers, and $550 when sold at retail. So when a consumer purchases a diamond ring, the gemstone mounted on the ring is worth up to ten times more than the original price. Granted, transporting by dealers and cutting diamonds are necessary processes to produce fine pieces of jewelry, but

Cut and polished diamonds · 18 ·

movement to boycott the purchase of diamonds altogether. This movement has the potential to drive down the demand of the product just as the antifur campaign dramatically reduced demand for fur. The result of this decrease in demand would thus be a decrease in the cost of the diamond. Another variable that can lower diamond costs is the global expansion of diamond min-

“Sorry Beyoncé, even if you like it you can’t just put a ring on it” De Beers Retail Store in Hong Kong consumers end up paying at least two times as much on average by choosing to purchase from retail as opposed to wholesale. Moreover, there is an artificial price inflation at each step of the value chain because of the monopolistic market control of the South African diamond distribution company, De Beers. According to Columbia Business School, De Beers controls anywhere between 67 to 80 percent of the diamonds sold in international markets. As such, De Beers purposely restricts the supply of diamonds in order to keep the diamond costs high, thereby increasing its profit margin. Finally, there is the prevalent consumer psychology that the more expensive a product is, the better quality it is, as demonstrated by Kent Monroe and R. Krishnan’s price-perceived

“Consumers end up paying at least two times as much on average by choosing to purchase from retail as opposed to wholesale”

quality conceptualization research. As such, consumers collectively have no real desire to push for a lower priced diamond. Despite the seemingly solid supply chain and price model, a few variables have the potential to exert a downward pressure on diamond costs. The first variable is the issue of

conflict diamonds. Conflict diamonds, also known as blood diamonds, are diamonds that have been mined from war-prone regions such as Angola and Sierra Leone. These mining operations have funded violent militant groups for years, with some factions raising over $4 billion dollars throughout the last decade. Although conflict diamonds

“A 0.5 carat diamond is worth $50 when it’s mined, $100 when it’s sold to rough gem dealers, $125 when sold to gem-cutting firms, $250 when sold to wholesale dealers, and $550 when sold at retail”

only account for ten to fifteen percent of the diamond supply, increasing public awareness has actually catalyzed a

· 19 ·

ing operations, especially in Canada and Russia. The new diamond mines can pose a significant threat to the price model of De Beers, forcing price based competition due to the transition into a more competitive market. The next time you pass a jewelry store in the mall or walk into a retail boutique to purchase a piece of jewelry for your loved ones, consider the complex international trade elements involved in defaulting your bank account. You can also choose to take note of the inefficiencies in the market and save a significant amount of money by quitting retail and moving up the supply chain to wholesale. Besides, designing your own jewelry adds a personal touch to your gift. Who knew that a foray into international trade had practical applications? C

Dear Readers of The Consul, Welcome back from the winter break to our January issue of The Consul. Though we do not have a main regional focus in this issue, our talented team of writers have brought you stories brewing in the background far from the usual conflict-torn centers of attention, including an article on the Scottish independence referendum and India’s infrastructure development. As the release of this issue coincides with ILMUNC XXIX, I would like to take this opportunity to directly address our readers among the thousands of delegates from across the globe attending the conference this weekend. An awareness and interest in international affairs is becoming increasingly crucial in today’s interconnected world – whether it be in business, culture, politics, or simply the responsibilities of being a good global citizen. It is highly encouraging to see international affairs alive in well in so many students, and I sincerely hope that you all will continue to carry that enthusiasm as you go on to college and into your careers. Perhaps I will see some of you here at Penn writing for this very publication next year. But no matter where you decide to go to school – keep your passion for the world alive – it is what sets you apart from a lot of other members of our generation. Editor-in-Chief Michael Luo

The International Affairs Association University of Pennsylvania

the Consul ILMUNC issue  

the Consul Jan 2013

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