Somali State Failure: Players, Incentives and Institutions

In Somalia the central government collapsed in 1991 and since then state failure became a widespread phenomenon and one of the greatest political and humanitarian problems facing the world in this century. Thus, the main objective of this research is to answer the following question: What went wrong? Most of the existing literature on the political economy of conflict starts from the assumption that state in Africa is predatory by nature. Unlike these studies, the present research, although it uses predation theory, starts from the social contract approach of state definition. Therefore, rather than contemplating actions and policies of the rulers alone, this approach allows us to deliberately bring the role of the society – as citizens – and other players into the analyses. In Chapter 1, after introducing the study, a simple principal-agent model will be developed to check the logical consistence of the argument and to make the identification of causal mechanism easier. I also identify three main actors in the process of state failure in Somalia: the Somali state, Somali society and the superpowers. In Chapter 2, so as to understand the incentives, preferences and constraints of each player in the state failure game, I in some depth analyse the evolution and structure of three central informal institutions: identity based patronage system of leadership, political tribalism, and the Cold War. These three institutions are considered as the rules of the game in the Somali state failure. Chapter 3 summarises the successive civilian governments’ achievements and failures (1960-69) concerning the main national goals, national unification and socio-economic development. Chapter 4 shows that the military regime, although it assumed power through extralegal means, served to some extent the developmental interest of the citizens in the first five years of its rule. Chapter 5 shows the process, and the factors involved, of the military regime’s self-transformation from being an agent for the developmental interests of the society to a predatory state that not only undermines the interests of the society but that also destroys the state itself. Chapter 6 addresses the process of disintegration of the post-colonial state of Somalia. The chapter shows how the regime’s merciless reactions to political ventures by power-seeking opposition leaders shattered the entire country and wrecked the state institutions. Chapter 7 concludes the study by summarising the main findings: due to the incentive structures generated by the informal institutions, the formal state institutions fell apart.

Cryptographic Software Export Controls in the EU

Certain software products employing digital techniques for encryption of data are subject to export controls in the EU Member States pursuant to Community law and relevant laws in the Member States. These controls are agreed globally in the framework of the so-called Wassenaar Arrangement. Wassenaar is an informal non-proliferation regime aimed at promoting international stability and responsibility in transfers of strategic (dual-use) products and technology. This thesis covers provisions of Wassenaar, Community export control laws and export control laws of Finland, Sweden, Germany, France and United Kingdom. This thesis consists of five chapters. The first chapter discusses the ratio of export control laws and the impact they have on global trade. The ratio is originally defence-related - in general to prevent potential adversaries of participating States from having the same tools, and in particular in the case of cryptographic software to enable signals intelligence efforts. Increasingly as the use of cryptography in a civilian context has mushroomed, export restrictions can have negative effects on civilian trade. Information security solutions may also be took weak because of export restrictions on cryptography. The second chapter covers the OECD's Cryptography Policy, which had a significant effect on its member nations' national cryptography policies and legislation. The OECD is a significant organization,because it acts as a meeting forum for most important industrialized nations. The third chapter covers the Wassenaar Arrangement. The Arrangement is covered from the viewpoint of international law and politics. The Wassenaar control list provisions affecting cryptographic software transfers are also covered in detail. Control lists in the EU and in Member States are usually directly copied from Wassenaar control lists. Controls agreed in its framework set only a minimum level for participating States. However, Wassenaar countries can adopt stricter controls. The fourth chapter covers Community export control law. Export controls are viewed in Community law as falling within the domain of Common Commercial Policy pursuant to Article 133 of the EC Treaty. Therefore the Community has exclusive competence in export matters, save where a national measure is authorized by the Community or falls under foreign or security policy derogations established in Community law. The Member States still have a considerable amount of power in the domain of Common Foreign and Security Policy. They are able to maintain national export controls because export control laws are not fully harmonized. This can also have possible detrimental effects on the functioning of internal market and common export policies. In 1995 the EU adopted Dual-Use Regulation 3381/94/EC, which sets common rules for exports in Member States. Provisions of this regulation receive detailed coverage in this chapter. The fifth chapter covers national legislation and export authorization practices in five different Member States - in Finland, Sweden, Germany, France and in United Kingdom. Export control laws of those Member States are covered when the national laws differ from the uniform approach of the Community's acquis communautaire. Keywords: export control, encryption, software, dual-use, license, foreign trade, e-commerce, Internet

From Francovich to Köbler and beyond : The evolution of a State liability regime for the EC

The aim of this paper is to present the evolution of the Francovich doctrine within the European legal order. The first part deals with the gradual development of the ECJ's case law on State liability in damages for breach of EC law. Starting from the seminal Francovich and Brasserie du Pêcheur, the clarification of the criteria set by the Court is attempted with reference to subsequent case law, whereas issues concerning the extent and form of the compensation owned are also mentioned. The second part concerns one of the more recent developments in the field, namely State liability for breaches of Community law attributed to national judiciary. The Court's ruling in Köbler is examined in connection with two other recent judgments, namely Commission v. Italy of 2003 and Kühne & Heitz, as an attempt of the ECJ to reframe its relationships with national supreme courts and appropriate for itself the position of the Supreme Court in the European legal order. The implications on State liability claims by the ruling in Commission v. France of 1997 constitute the theme of the third part, where it is submitted that Member States can also be held liable for disregard of Community law by private individuals within their respected territories. To this extent, Schmidberger is viewed as a manifestation of this opinion, with fundamental rights acquiring a new dimension, being invoked by the States, contra the individuals as a shield to liability claims. Finally, the third part examines the relationship between the Francovich doctrine and the principle of legal certainty and concludes that the solutions employed by the ECJ have been both predictable and acceptable by the national legal orders. Keywords: State liability, damages, Francovich, Köbler, Schmidberger

The Macroeconomic Effects of Fiscal Policy in a Small Open Economy under a Flexible Exchange Rate Regime

This licentiate's thesis analyzes the macroeconomic effects of fiscal policy in a small open economy under a flexible exchange rate regime, assuming that the government spends exclusively on domestically produced goods. The motivation for this research comes from the observation that the literature on the new open economy macroeconomics (NOEM) has focused almost exclusively on two-country global models and the analyses of the effects of fiscal policy on small economies are almost completely ignored. This thesis aims at filling in the gap in the NOEM literature and illustrates how the macroeconomic effects of fiscal policy in a small open economy depend on the specification of preferences. The research method is to present two theoretical model that are extensions to the model contained in the Appendix to Obstfeld and Rogoff (1995). The first model analyzes the macroeconomic effects of fiscal policy, making use of a model that exploits the idea of modelling private and government consumption as substitutes in private utility. The model offers intuitive predictions on how the effects of fiscal policy depend on the marginal rate of substitution between private and government consumption. The findings illustrate that the higher the substitutability between private and government consumption, (i) the bigger is the crowding out effect on private consumption (ii) and the smaller is the positive effect on output. The welfare analysis shows that the less fiscal policy decreases welfare the higher is the marginal rate of substitution between private and government consumption. The second model of this thesis studies how the macroeconomic effects of fiscal policy depend on the elasticity of substitution between traded and nontraded goods. This model reveals that this elasticity a key variable to explain the exchange rate, current account and output response to a permanent rise in government spending. Finally, the model demonstrates that temporary changes in government spending are an effective stabilization tool when used wisely and timely in response to undesired fluctuations in output. Undesired fluctuations in output can be perfectly offset by an opposite change in government spending without causing any side-effects.

Oligarchs, political regime changes, and firm valuation

This paper examines the impact of a regime shift on the valuation of politically powerful oligarch firms. Focusing on the Yeltsin-Putin regime shift in Russia, we find that the valuations of outside shareholders claims are significantly higher under the Putin regime than under the Yeltsin regime after controlling for industry and time effects. The findings suggest that the increasing cost of extracting private benefits outweigh the reduction in the value of political connections following the political regime change. The results are also consistent with changes in the risk of state expropriation. Our results show that effects driven by the political regime change complement the traditional view stating that increased ownership concentration improved the performance of Russian oligarch firms.