Beyond Dollar

It's time for Asia to look beyond the dollar

Interview of Joseph Stiglitz by Siddharth Varadarajan

Both Thomas Friedman and you start your books in Bangalore but he discovers the world is flat while you discover the path to globalisation is full of potholes.

The amusing thing is that Friedman went to Bangalore and visited Infosys a month after I did. I heard exactly the same stories and we were both struck in some of the same ways. But I say that not only is the world not flat but in many ways it's getting less flat. Some countries are doing much better — India and China are growing at historically unprecedented rates, and this has a lot to do with globalisation — but Africa doesn't have either the education or resources to take advantage of these new technologies. As a result, disparities are actually increasing. The Uruguay trade agreement was so unfair it made the poorest countries in the world worse off.

In your book, you also argue that the rules of the game — the financial architecture, corporate domination, IPR regimes — are all making the world less flat, more unequal. Can you give us an example?

One manifestation is that for the first time we have a global monopoly in an industry that is the pivotal industry, IT — Microsoft, Intel. This may not be a permanent monopoly but clearly we have a dominant firm that is dominant for a considerable number of years and gained its dominance through anti-competitive practices. Judges in the U.S. and Europe have ruled it engaged in anti-competitive practices. In the case of Standard Oil, there was a monopoly, so they broke it up. Here, they don't know what to do, so they've allowed it to continue, and it has continued to engage in anti-competitive practices.

You mentioned India as a success. How sustainable is its current growth?

If you look at the sector where India has grown, it's been IT. And the success of IT is largely based on heavy government investments in the past on education, the IITs, science. These are investments made over 50-100 years that have started to pay fruit.

Course corrections


What about public investments in heavy industry — the fact that India was able to reach a critical level in manufacturing?

I haven't studied the Indian economy that thoroughly but my impression is that the real engine has been the IT sector and that's related to education and to the good fortune of the world changing in ways that suddenly gave new opportunities India was able to seize. There are many things which facilitated that — over-investment in fibre optics in the U.S., for example, brought down telecommunication costs. Some telecom policies of liberalisation meant the cost of communications were lower. And there were things the government could have done that would have messed things up. For example, in Mexico, the cost of telecommunications is very high because they have a monopoly provider and monopoly providers raise the price. They privatised, but not in the right way. So India did a number of things in the right way, some over a long period, some in the short run, and the world changed in a way that was just right for India.

There is a debate on the sustainability of India's growth rate without the manufacturing sector also playing a larger role. Economists are talking about the need for a course correction.

I think the view that you need to have a particular sectoral composition is wrong. The U.S., for example, is now two-thirds services, and manufacturing is down to 11 per cent.

But the share has come down after 100 years of growth. Recent research on employment elasticities suggests India's over-dependence on IT and services may not be the best strategy. Can a country of India's size develop without manufacturing being a major contributor?

The view that everybody has to go through the same historical sequence is wrong. The world today is different from what it was 50 years ago, there was no IT then, and there is no particular reason you have to go through the same sequence. It may be that for India it is appropriate to skip the manufacturing stage, that China may have a comparative advantage in manufacturing. I'm not saying that's true, but there is no a priori reason to stress manufacturing. We should ask what the comparative advantages are, and, from a global perspective, whether one can have sustained growth based on a service sector economy. The answer is clearly yes. Can you have heavy exports related to services? Again, the answer is yes. Creating jobs is an important issue, but it may be that, for instance, part of the strategy for creating jobs will involve expanding tourism, which is a very labour intensive service sector. The problem in manufacturing is that modern technology doesn't use much labour. Most modern technologies in manufacturing are very capital intensive.

India now has an employment guarantee scheme to provide income support for the poor. How do you rate such welfare schemes against the objection that they boost fiscal deficits?

I think they're absolutely necessary for long-term sustainable growth. Latin America has shown what happens with high degrees of inequality. You get political and social instability. You have high crime rates and an environment that's not good for investment. What's also very clear is that trickle-down economics doesn't work. It hasn't worked anywhere. It hasn't worked in the United States. Even though GDP is going up, most Americans are worse off today than they were six years ago.

In fact, a survey just came out here — the Focus report on the status of children under six — which shows that despite six per cent growth for nearly a decade, the nutritional status of Indian children hasn't improved.

Yes, I just saw that and these are very, very disturbing numbers. Nutrition is a more reliable indicator than income because it is a physically observed characteristic. Growth is not trickling down so doing something about this exclusion is absolutely necessary. Even if there was just a transfer of income, this would be a benefit. But if these schemes are well-designed, they can be used to create infrastructure in the rural sector as well.

Manmohan Singh has once again started talking about capital account convertibility for India. What would your advice to him be?

I share the sentiments of those who have very strong reservations. The overwhelming evidence is that convertibility doesn't bring faster economic growth. It brings more instability. You can't build factories with money that's going to come in and out overnight but this money can wreak havoc on an economy. You have to look at the balance of benefits and costs. The costs are clear and the evidence is strong, the benefits are weak and the evidence in favour of these benefits is very weak.

Privatisation & land acquisition


In India today, there is no political support for privatisation but many reform-oriented economists consider this a bad thing. How do you see this issue?

It depends very critically on what is being privatised and how things are being privatised. When you privatise a natural monopoly before you put in a regulatory structure, the firm is more interested in raising prices. Second, based on Latin American evidence, privatisations do not, in general, lead to greater efficiency. It is true that if you artificially tie the hands of an industry by restricting investment — and IMF accounting often makes it difficult to engage in investment because it treats borrowing by the government for a public enterprise in the same manner as borrowing for social services or anything else — and then you privatise and release the artificially imposed investment constraint, privatisation can then sometimes increase efficiency. But the answer to that is to get rid of the artificial investment constraint. The benefits come from release of that constraint, not privatisation. Third, privatisation is very problematic in oil, mining sectors, etc., where the resources of a country have been turned over at bargain-basement prices.

In India, most of our privatisations involved serious valuation problems.

Revenue is an issue. One of the countries market fundamentalists often cite is Chile. I once asked the President of Chile his opinion and he said, "We were successful because we didn't follow the Washington Consensus." He went on to point out they only privatised half the copper mines. The government mines are just as efficient as the private ones but bring in 10 times more revenue for the government. So in terms of generating revenue that can be used for public purposes, privatisation was a big mistake. A lot depends on the pace and manner of privatisation but the evidence is that it is extraordinarily difficult to do it well. And there are some theoretical problems why this is so.

Agency problems?

Broadly speaking, yes. You talk about corruption and one of the arguments for privatisation is often that governments run things inefficiently and corruptly. But when you privatise, the incentives for corruption are even greater. The incentive is to try and get it at bargain-basement prices. Because you capitalise all future returns.

The rent seeking associated with the life of the asset being privatised is compressed at one moment in time.

Yes, and because it is compressed at one moment, the incentive to cheat becomes all the greater. The willingness to go beyond bounds of normal behaviour becomes all the greater. So privatisation doesn't solve the agency problem, and by compressing it, it may exacerbate it.

One of the paradoxes of market `reform' in India is that if you are a big company and are planning to set up a factory, you want a free market to buy equipment and hire workers but expect government intervention to acquire land. Can this be justified on the basis of first principles?

There is a general view that where there are large externalities — urban renewal programmes, for instance — there may be grounds for government to try and buy land and help renew a city or part of a city. But the dangers of doing this when there is a single firm without externalities are enormous. This is because the government often uses the right of eminent domain with compensation below market price.

So future rents are shared between the firm for whom land is acquired and the original land owners in a very unequal way...

That's right, exactly, and that's why these firms turn to the government. In general, there is a price at which people would sell their land. The reason these firms ask the government to do it is because they don't want to pay that market price. So once you get into that mindset, it becomes a very dangerous precedent.

The argument made in India is that land holdings are fragmented, that there is no land market. Is this valid?

You have a problem when land is fragmented, or there are land market inefficiencies, and difficulties in getting clear title. Markets might be so poorly developed that businesses can't acquire land and that becomes an impediment to development. But, of course, the right answer is to solve the problem of the land market and not to solve it for this particular person by taking over that particular piece of property!

Asia and the dollar's decline


One of the most interesting arguments in your book is where you talk about a new global reserve system. Given Washington's resistance to such ideas in the past, including to Japan's proposal for an Asian Monetary Fund, how feasible is this, especially since there's a link between the role of the dollar and the global power, the seigniorage, the U.S. derives from this?

The system of seigniorage to the U.S. is inequitable. The foreign aid from developing countries to the U.S. is greater than the foreign aid the U.S. gives and the system has a downward bias in aggregate demand. This is a very peculiar and unstable system where the only thing keeping global demand strong is if the richest country in the world consumes beyond its means. As the U.S. gets more and indebted, confidence in the dollar erodes, and it no longer is a good store of value.

Rather than holding dollars as reserves, countries should hold an internationally created `bancor' or global greenback — a `money' that's used in reserves and is convertible into ordinary currency. The idea is similar to special drawing rights but the SDR system is periodical and subject to veto by the U.S., which mistakenly thinks it gains from the system. I argue it doesn't. It gains seigniorage, but it loses stability. My proposal is for a regular rather than periodic system and one that is automatic and rule based.

And is this feasible, politically?

The current dollar system is fraying. We might go to a two-currency reserve system, which simply maintains the problem and divides it between the U.S. and Europe. This would be better than the current system but is not a good solution. As countries recognise the problem, there will be demand for change. There are two reasons why I think it is politically feasible, besides the fact that the current system is crumbling. First, the major source of savings in the world today is Asia and a lot of Asian countries are asking, "Why are we subsidising the U.S.?" This is a weird system! The Chiang Mai initiative was a framework of exchanging reserves, which is really basically the same idea. Rather than using the U.S. dollar as a reserve, we use each other, and all you have to say is that if we're using each other, we'll create a currency. One of the proposals I talk about in my book is to make this an open architecture. We'll have a cooperative agreement, and anybody who wants to join can do so, and there will be a rule that over time you have to put more and more of your reserves in the members of the club. That will put a strong incentive for countries outside the club to join, namely the U.S.

For this to work, Asia will have to take the lead.

Very much. That is the core thing. A new reserve system is not going to happen overnight but it's getting discussed.

Can Asian countries push the debate by pricing trade, especially natural resources like oil, in currencies other than dollars? Would that provide the critical mass for us to move in the direction of a new system?

It's already happening. The U.S. would like to keep the dollar as the reserve currency, and all the seigniorage. But as it realises it is fighting a losing battle — that people are moving out of the dollar — it will not be able to keep the dollar as the sole reserve currency. So the U.S. may realise that it would benefit from the greater stability that a new system would bring.

Resources

US Data

* Kaiser US State Health Facts: Menlo Park based non-profit, non-partisan foundation devoted to providing facts, and analysis about public health.
* FedStats: A comprehensive searchable gateway to Federal Statistics
* StateMaster: Comprehensive state by state statistics and comparisons.
* Government Printing Office: From text of congressional bills to budget related documents.
* Congressional Budget Office A repository of of budget related analyses and data
* Government Accountability Office Superb reports on how government spends money.
* Energy Information Agency
* Census Bureau The largest repository of county, city, state, level data relating to sociodemographics among other things.

International Data

* UN Statistics: A UN division devoted to providing basic economic, environmental, development, and demographic data on the member states. The data are not always presented well, but still a reliable source.
* World Bank Country Data: A larger more comprehensive initiative to bring you a host of data on countries around the world.
* BBC Country Profiles: Provides 500-1000 word snapshots of countries along with basic ‘facts’. A great way to learn about countries quick.
* Library of Congress - Country Profiles These are comprehensive profiles with reasonably well done historical section.
* CIA - World Factbook
* EU Statistics

Pak Media Outraged with Indo-US conspiracy

Indignation with India’s alleged “belligerence” marks Pakistan’s English language press on Wednesday. Newspaper editorials reject the evidence
that the 26/11 terrorists came from Pakistan. Instead, they find India and US ganging up on Pakistan, which they say is the real “victim” of terror.

Dawn’s editorial titled “A go-ahead for India?” says US president-elect Obama is stoking India-Pakistan hostilities. “American presidents have worked for peace, especially after the two countries acquired nuclear status. However, last Monday, president-elect Barack Obama seemed to have ditched this time-honoured American policy. There are concerns (in Pakistan) that India has benefited from the war on terror and has managed to advance its national interests. Overreaction to New Delhi’s demands would mean disastrous consequences for the region.”

The theme finds resonance in the popular daily from Peshawar and Quetta, the Frontier Post. Its editorial says, “Their (India’s) perceivable intent to link up the Mumbai holocaust’s perpetrators to Pakistan and then to al-Qaida is clearly intended to cash in — diplomatically, politically and militarily — on the current American assertions that it is now not Iraq or Afghanistan but Pakistan which is turning into al-Qaida’s haven.”

The pointing finger swings to India. The editorial adds, “With its demarche served on Islamabad, New Delhi has ratcheted up tensions to a perilous pitch which, if it doesn’t pull back, could go out of hand and boil over into an eventuality...It (India) cannot expect Pakistan to pay up the price for its own security and intelligence apparatus’s collapse. Nor can Pakistan become the guinea pig of its political compulsions or electoral necessities. It indeed is with a pinch of salt that one can take even its evidence.”

Strategic Motivations for the Mumbai Attack

Last Wednesday evening, a group of Islamist operatives carried out a
complex terror operation in the Indian city of Mumbai. The attack was not complex because of the weapons used or its size, but in the apparent training, multiple methods of approaching the city and excellent operational security and discipline in the final phases of the operation, when the last remaining attackers held out in the Taj Mahal hotel for several days. The operational goal of the attack clearly was to cause as many casualties as possible, particularly among Jews and well-to-do guests of five-star hotels. But attacks on various other targets, from railroad stations to hospitals, indicate that the more general purpose was to spread terror in a major Indian city.
While it is not clear precisely who carried out the Mumbai attack, two separate units apparently were involved. One group, possibly consisting of Indian Muslims, was established in Mumbai ahead of the attacks. The second group appears to have just arrived. It traveled via ship from Karachi, Pakistan, later hijacked a small Indian vessel to get past Indian coastal patrols, and ultimately landed near Mumbai.
Extensive preparations apparently had been made, including surveillance of the targets. So while the precise number of attackers remains unclear, the attack clearly was well-planned and well-executed.
Evidence and logic suggest that radical Pakistani Islamists carried out the attack. These groups have a highly complex and deliberately amorphous structure. Rather than being centrally controlled, ad hoc teams are created with links to one or more groups. Conceivably, they might have lacked links to any group, but this is hard to believe. Too much planning and training were involved in this attack for it to have been conceived by a bunch of guys in a garage. While precisely which radical Pakistani Islamist group or groups were involved is unknown,
the Mumbai attack appears to have originated in Pakistan. It could have been linked to al Qaeda prime or its various franchises and/or to Kashmiri insurgents.
More important than the question of the exact group that carried out the attack, however, is the attackers’ strategic end. There is a tendency to regard terror attacks as ends in themselves, carried out simply for the sake of spreading terror. In the highly politicized atmosphere of Pakistan’s radical Islamist factions, however, terror frequently has a more sophisticated and strategic purpose. Whoever invested the time and took the risk in organizing this attack had a reason to do so. Let’s work backward to that reason by examining the logical outcomes following this attack.
An End to New Delhi’s Restraint
The most striking aspect of the Mumbai attack is the challenge it presents to the Indian government — a challenge almost impossible for New Delhi to ignore. A December 2001 Islamist attack on the Indian parliament triggered an intense confrontation between India and Pakistan. Since then, New Delhi has not responded in a dramatic fashion to numerous Islamist attacks against India that were traceable to Pakistan. The Mumbai attack, by contrast, aimed to force a response from New Delhi by being so grievous that any Indian government showing only a muted reaction to it would fall.

India’s restrained response to Islamist attacks (even those originating in Pakistan) in recent years has come about because New Delhi has understood that, for a host of reasons, Islamabad has been unable to control radical Pakistani Islamist groups. India did not want war with Pakistan; it felt it had more important issues to deal with. New Delhi therefore accepted Islamabad’s assurances that Pakistan would do its best to curb terror attacks, and after suitable posturing, allowed tensions originating from Islamist attacks to pass.
This time, however, the attackers struck in such a way that New Delhi couldn’t allow the incident to pass. As one might expect, public opinion in India is shifting from stunned to furious. India’s Congress party-led government is politically weak and nearing the end of its life span. It lacks the political power to ignore the attack, even if it were inclined to do so. If it ignored the attack, it would fall, and a more intensely nationalist government would take its place. It is therefore very difficult to imagine circumstances under which the Indians could respond to this attack in the same manner they have to recent Islamist attacks.
What the Indians actually will do is not clear. In 2001-2002, New Delhi responded to the attack on the Indian parliament by moving forces close to the Pakistani border and the Line of Control that separates Indian- and Pakistani-controlled Kashmir, engaging in artillery duels along the front, and bringing its nuclear forces to a high level of alert. The Pakistanis made a similar response. Whether India ever actually intended to attack Pakistan remains unclear, but either way, New Delhi created an intense crisis in Pakistan.
The U.S. and the Indo-Pakistani Crisis

The United States used this crisis for its own ends. Having just completed the first phase of its campaign in Afghanistan, Washington was intensely pressuring Pakistan’s then-Musharraf government to expand cooperation with the United States; purge its intelligence organization, the Inter-Services Intelligence (ISI), of radical Islamists; and crack down on al Qaeda and the Taliban in the Afghan-Pakistani border region. Former Pakistani President Pervez Musharraf had been reluctant to cooperate with Washington, as doing so inevitably would spark a massive domestic backlash against his government.
The crisis with India produced an opening for the United States. Eager to get India to stand down from the crisis, the Pakistanis looked to the Americans to mediate. And the price for U.S. mediation was increased cooperation from Pakistan with the United States. The Indians, not eager for war, backed down from the crisis after guarantees that Islamabad would impose stronger controls on Islamist groups in Kashmir.
In 2001-2002, the Indo-Pakistani crisis played into American hands. In 2008, the new Indo-Pakistani crisis might play differently. The United States recently has demanded increased Pakistani cooperation along the Afghan border. Meanwhile, President-elect Barack Obama has stated his intention to focus on Afghanistan and pressure the Pakistanis.
Therefore, one of Islamabad’s first responses to the new Indo-Pakistani crisis was to announce that if the Indians increased their forces along Pakistan’s eastern border, Pakistan would be forced to withdraw 100,000 troops from its western border with Afghanistan. In other words, threats from India would cause Pakistan to dramatically reduce its cooperation with the United States in the Afghan war. The Indian foreign minister is flying to the United States to meet with Obama; obviously, this matter will be discussed among others.

We expect the United States to pressure India not to create a crisis, in order to avoid this outcome. As we have said, the problem is that it is unclear whether politically the Indians can afford restraint. At the very least, New Delhi must demand that the Pakistani government take steps to make the ISI and Pakistan’s other internal security apparatus more effective. Even if the Indians concede that there was no ISI involvement in the attack, they will argue that the ISI is incapable of stopping such attacks. They will demand a purge and reform of the ISI as a sign of Pakistani commitment. Barring that, New Delhi will move troops to the Indo-Pakistani frontier to intimidate Pakistan and placate Indian public opinion.
Dilemmas for Islamabad, New Delhi and Washington
At that point, Islamabad will have a serious problem. The Pakistani government is even weaker than the Indian government. Pakistan’s civilian regime does not control the Pakistani military, and therefore does not control the ISI. The civilians can’t decide to transform Pakistani security, and the military is not inclined to make this transformation. (Pakistan’s military has had ample opportunity to do so if it wished.)
Pakistan faces the challenge, just one among many, that its civilian and even military leadership lack the ability to reach deep into the ISI and security services to transform them. In some ways, these agencies operate under their own rules. Add to this the reality that the ISI and security forces — even if they are acting more assertively, as Islamabad claims — are demonstrably incapable of controlling radical Islamists in Pakistan. If they were capable, the attack on Mumbai would have been thwarted in Pakistan. The simple reality is that in Pakistan’s case, the will to make this transformation does not seem to be present, and even if it were, the ability to suppress terror attacks isn’t there.

The United States might well want to limit New Delhi’s response. U.S. Secretary of State Condoleezza Rice is on her way to India to discuss just this. But the politics of India’s situation make it unlikely that the Indians can do anything more than listen. It is more than simply a political issue for New Delhi; the Indians have no reason to believe that the Mumbai operation was one of a kind. Further operations like the Mumbai attack might well be planned. Unless the Pakistanis shift their posture inside Pakistan, India has no way of knowing whether other such attacks can be stymied. The Indians will be sympathetic to Washington’s plight in Afghanistan and the need to keep Pakistani troops at the Afghan border. But New Delhi will need something that the Americans — and in fact the Pakistanis — can’t deliver: a guarantee that there will be no more attacks like this one.
The Indian government cannot chance inaction. It probably would fall if it did. Moreover, in the event of inactivity and another attack, Indian public opinion probably will swing to an uncontrollable extreme. If an attack takes place but India has moved toward crisis posture with Pakistan, at least no one can argue that the Indian government remained passive in the face of threats to national security. Therefore, India is likely to refuse American requests for restraint.
It is possible that New Delhi will make a radical proposal to Rice, however. Given that the Pakistani government is incapable of exercising control in its own country, and given that Pakistan now represents a threat to both U.S. and Indian national security, the Indians might suggest a joint operation with the Americans against Pakistan.
What that joint operation might entail is uncertain, but regardless, this is something that Rice would reject out of hand and that Obama would reject in January 2009. Pakistan has a huge population and nuclear weapons, and the last thing Bush or Obama wants is to practice nation-building in Pakistan. The Indians, of course, will anticipate this response. The truth is that New Delhi itself does not want to engage deep in Pakistan to strike at militant training camps and other Islamist sites. That would be a nightmare. But if Rice shows up with a request for Indian restraint and no concrete proposal — or willingness to entertain a proposal — for solving the Pakistani problem, India will be able to refuse on the grounds that the Americans are asking India to absorb a risk (more Mumbai-style attacks) without the United States’ willingness to share in the risk.

Setting the Stage for a New Indo-Pakistani Confrontation
That will set the stage for another Indo-Pakistani confrontation. India will push forces forward all along the Indo-Pakistani frontier, move its nuclear forces to an alert level, begin shelling Pakistan, and perhaps — given the seriousness of the situation — attack short distances into Pakistan and even carry out airstrikes deep in Pakistan. India will demand greater transparency for New Delhi in Pakistani intelligence operations. The Indians will not want to occupy Pakistan; they will want to occupy Pakistan’s security apparatus.
Naturally, the Pakistanis will refuse that. There is no way they can give India, their main adversary, insight into Pakistani intelligence operations. But without that access, India has no reason to trust Pakistan. This will leave the Indians in an odd position: They will be in a near-war posture, but will have made no demands of Pakistan that Islamabad can reasonably deliver and that would benefit India. In one sense, India will be gesturing. In another sense, India will be trapped by making a gesture on which Pakistan cannot deliver. The situation thus could get out of hand.
In the meantime, the Pakistanis certainly will withdraw forces from western Pakistan and deploy them in eastern Pakistan. That will mean that one leg of the Petraeus and Obama plans would collapse. Washington’s expectation of greater Pakistani cooperation along the Afghan border will disappear along with the troops. This will free the Taliban from whatever limits the Pakistani army had placed on it. The Taliban’s ability to fight would increase, while the motivation for any of the Taliban to enter talks — as Afghan President Hamid Karzai has suggested — would decline. U.S. forces, already stretched to the limit, would face an increasingly difficult situation, while pressure on al Qaeda in the tribal areas would decrease.

Now, step back and consider the situation the Mumbai attackers have created. First, the Indian government faces an internal political crisis driving it toward a confrontation it didn’t plan on. Second, the minimum Pakistani response to a renewed Indo-Pakistani crisis will be withdrawing forces from western Pakistan, thereby strengthening the Taliban and securing al Qaeda. Third, sufficient pressure on Pakistan’s civilian government could cause it to collapse, opening the door to a military-Islamist government — or it could see Pakistan collapse into chaos, giving Islamists security in various regions and an opportunity to reshape Pakistan. Finally, the United States’ situation in Afghanistan has now become enormously more complex.
By staging an attack the Indian government can’t ignore, the Mumbai attackers have set in motion an existential crisis for Pakistan. The reality of Pakistan cannot be transformed, trapped as the country is between the United States and India. Almost every evolution from this point forward benefits Islamists. Strategically, the attack on Mumbai was a precise blow struck to achieve uncertain but favorable political outcomes for the Islamists.
Rice’s trip to India now becomes the crucial next step. She wants Indian restraint. She does not want the western Pakistani border to collapse. But she cannot guarantee what India must have: assurance of no further terror attacks on India originating in Pakistan. Without that, India must do something. No Indian government could survive without some kind of action. So it is up to Rice, in one of her last acts as secretary of state, to come up with a miraculous solution to head off a final, catastrophic crisis for the Bush administration — and a defining first crisis for the new Obama administration. Former U.S. Defense Secretary Donald Rumsfeld once said that the enemy gets a vote. The Islamists cast their ballot in Mumbai.