At first sight, political turmoil in Thailand and the Philippines—repeated violent protests, impeachment battles, and military coups—gives the impression that democracy in Southeast Asia is on a downward spiral. One country in the region, however, has sustained a stable pluralistic democracy: the Republic of Indonesia.

In 1999, after thirty years of Suharto’s centralistic, authoritarian rule, Indonesia embraced far-reaching decentralization and election reforms. Within a brief period of two years, the Indonesian government reshaped its administrative architecture, including the devolution of local tax and service responsibilities to more than 400 district governments. In view of its deep-seated authoritarian traditions, beginning with Javanese kingdoms and sultanates, moving through Dutch colonialism (1619–1942), and ending with Suharto’s New Order (1965–98), Indonesia’s rapid shift toward democratic decentralization stands out as one of the most remarkable political transitions in recent history.

Particularly notable is the peaceful and competitive conduct of Indonesian elections. Over the last decade, local citizens have elected more than 30,000 local councilors and over 400 mayors, regents, and governors, with little violence or intimidation. High voter turnouts (around 70 percent) and high replacement rates of incumbent executives (roughly 40 percent) bear witness to rising electoral competition in local polities. While subnational elections display considerable flux, the upcoming presidential elections in July 2009 suggest continuity. The latest national polls, for example, predict a comfortable lead for President Susilo Bambang Yudhoyono (49 percent) over his main competitor, Megawati Soekarnoputri (36 percent).

The institutionalization of democracy and decentralization, however, has yet to translate into substantive public sector reforms. Indonesia continues to score low in global governance assessments. According to Transparency International and the World Bank, Indonesia’s government ranks 126th (out of 180) in terms of corruption, and 129th (out of 181) in terms of administrative efficiency for business start-ups. With the introduction of regional autonomy, these governance problems have, to a considerable extent, been decentralized to hundreds of districts. Yet, despite formally uniform institutional settings, local governments exhibit vast differences in regulatory quality, administrative efficiency, and anticorruption measures.

What motivates some local governments to perform better than others? Implicit in this question, which stands at the center of my research, is the idea that local democracy is not only an end in itself, but also a means for improving government outcomes. The pronounced policy differences that arise in Indonesia’s district polities provide a good opportunity to examine the workings of Indonesian local democracy or, to use a different terminology, the political economy of local decision-making.

The findings from controlled case comparisons and subnational datasets suggest that policy variations are best explained by differences in government leadership. Good policy environments emerge primarily in cases where local regents and mayors, whose career aspirations are tested by direct elections, skillfully use their office powers to forge reform coalitions and supervise bureaucratic practices. Societal reform pressures that arise from local parliaments, business chambers, and nongovernmental organizations, in comparison, tend to be less significant drivers of good governance. While broad-based interest groups continue to struggle with collective-action problems, district council members seem more concerned with provincial/national party elites (and their party list positions) than with representing local constituencies. Thus, in Indonesia’s early stage of democratic transition, where societal pressures are yet to fully unfold, much seems to depend on leadership efforts to initiate, facilitate, and oversee government improvements.

Under what conditions, then, are local leaders likely to act in the public interest, rather for private gain? While direct elections provide basic incentives, the direction and strength of these incentives also hinge upon existing socioeconomic structures. Government leaders need to accommodate interests of powerful economic groups in order to secure support for campaign funding and co-investments in public goods. Whether these interest alignments result in unproductive rent-seeking and corruption, or in constructive government reforms, depends on the constellation and transparency of economic powers.  The more economic powers become concentrated in specific sectors, groups, and firms, and the less public-private interactions are monitored by local media, the greater the likelihood that leaders will pursue self-preferential and collusive strategies.

As a result, it is plausible to assume that a moderate economic concentration and strong media presence are conducive to better governance. At this point, only some districts fall into this category. But as globalization and communication technologies progress, local polities are bound to become more economically diverse and politically informed. With growing political awareness and increased incentives for better leadership, it is likely that Indonesia, over time, will see more public-private symbioses for reform and, thus, bridge the gap between well-functioning elections on the one hand and poor governance
on the other.

Among conservatives in Korea and other American allied countries, there seems to be some anxiety about the election of a relatively unknown, young African-American liberal as the next American president. Typically, when a new U.S. president is elected, American diplomats seek to reassure allies by telling them that the incoming president will pursue fundamentally the same policies as the outgoing president. However, President Obama clearly will adopt a significantly different foreign policy than President Bush, including toward North Korea.

Obama’s soaring rhetoric has led to a widespread (and correct) impression of him as idealistic, but the long presidential campaign also revealed him to be a disciplined politician and a skillful manager. His foreign policy will be much closer to the prudent realpolitik of President Bush’s father than it will be to the “neo-con” approach of President Bush himself.
And while it is true that Obama does not have deep experience in foreign affairs, his youthful years spent in Indonesia and Hawaii, taken together with his successful navigation of American society as a young African-American man, have given him a genuine empathy for different peoples and cultures. He has the self-confidence and intelligence to listen with an open mind to others and then carefully to make his own decisions.

President Obama’s policy toward North Korea will defy stereotypes of the past. In some ways he will be “softer” on North Korea than President Bush; in other ways, he will be “tougher.”  Like President Bush and his predecessors, President Obama will take the position that he can never accept a North Korea with nuclear weapons. On the other hand, Obama will not engage in bluster such as “all options are on the table,” which most South Koreans reject and which only plays into the DPRK’s hands.

Instead, Obama will finally give diplomacy a fighting chance. Even during the past couple of years, President Bush remained very reluctant to engage fully in negotiations with North Korea. President Obama will order that a policy review be conducted expeditiously, and he will probably appoint a very senior special envoy to take charge of negotiations with North Korea. While maintaining the framework of the Six-Party Talks and consulting very closely with the Republic of Korea and Japan, he will also authorize meaningful bilateral negotiations with North Korea. If those negotiations bear real fruit, he may even visit Pyongyang himself if he is confident that he will be able to strike a deal completely ending North Korea’s nuclear ambitions.

President Obama will probably offer North Korea a “more for more” deal. In other words, compared to President Bush he will propose a much more detailed and concrete series of steps to be taken by North Korea, the United States, and other members of the Six-Party Talks. The aim will be agreement on an early end to North Korea’s nuclear weapons programs.

The North Koreans should not think that President Obama will be “easier” than President Bush. If, as may well be the case, the North Koreans reject President Obama’s approach or drag their feet in responding to it, he, unlike President Bush, will have the international credibility to work more effectively with other members of the Six-Party Talks and the international community to limit North Korea’s options.

Moreover, as a hardheaded domestic politician, President Obama will be careful to avoid situations in which the Republican opposition could credibly criticize him as being naïve about North Korea. Indeed, Obama’s team recognizes clearly that, having declared itself a nuclear weapons state and tested a nuclear device, North Korea may not be prepared to verifiably give up its nuclear weapons ambitions.

In formulating and conducting his policy toward North Korea, President Obama will have access to many trusted experts on North Korea, beginning with Vice President Biden and his staff. Obama is also advised by a number of experienced officials from the Clinton administration, from former Defense Secretary Bill Perry to former career diplomat Jeffrey Bader.

U.S. relations with the Republic of Korea are key to any successful American policy toward North Korea. Obama and his team fully appreciate the importance of U.S.-ROK relations and the security alliance. They will coordinate very closely with the Lee Myung-bak administration and never sacrifice the interests of the Republic of Korea, which is immeasurably more important to the United States than the DPRK is or ever will be.
 
President Obama will support the implementation of the agreements President Bush reached with the Republic of Korea on the realignment of U.S. Forces of Korea and the transfer of wartime operational control, as befits the ROK’s military and economic might.
 
Under President Obama, the United States will also aim to approve, with some adjustments, the U.S.-ROK Free Trade Agreement, although it may take a year or so to do so as he perforce deals first with the global financial and economic crises and wars in Iraq and Afghanistan.  President Obama must be cognizant of the viewpoint of leading congressional Democrats and the constituencies they represent. It may be counterproductive if the ROK pushes too hard, too fast for U.S. approval of the FTA.
 
Obama’s inauguration will also open up new possibilities for U.S.-ROK coordination and cooperation on global issues. Unlike President Bush, whose early unilateralist mindset and specific policies caused dismay among international friends and foes alike, President Obama begins with a vast reservoir of sympathy and respect throughout the world. That will make it easier, and more useful, for the Republic of Korea to cooperate globally more with the United States.
 
In short, South Koreans should be reassured, not that President Obama’s foreign policy will be like that of President Bush, but that it will be different. Perhaps South Koreans will even begin to feel that their alliance with the United States is not just one that they feel they must have for their country’s long-term interests – but also one of which they can feel proud.

Major international crises often produce tectonic shifts in international relations. Under pressure from key European counterparts, President Bush has agreed to a "new Bretton Woods" summit on Nov. 15.

It would be hard to overstate the potential significance of this meeting. The first Bretton Woods, in 1944, set the rules for monetary relations among nations, and it created the International Monetary Fund (IMF) and the World Bank.

While European leaders are pushing for greater regulation and a major overhaul of the international financial order, US policymakers have been lukewarm, emphasizing the preservation of free-market capitalism. This transatlantic drama has obscured the more fundamental problem—how to accommodate the historic shift of economic power away from the West toward Asia.

Including India, broader East Asia encompasses more than half of the world's population. The region already accounts for about one-third of global economic output, oil consumption, and CO2 emissions, and this is only likely to grow in the future. Over the course of the 21st century, Asia's economic and geopolitical weight in the world will, in all likelihood, come to rival that of Europe in the 19th century. Asian problems will become increasingly indistinguishable from global problems.

In the face of such dramatic change, the IMF and World Bank are becoming relics of a bygone era. At the time of their creation, by US and European negotiators, the major challenge was to get capital flowing from the US to war-ravaged Europe. The days of the US as creditor state are long gone—our massive current account deficit is financed by importing nearly $1 trillion in foreign capital every year. Major US banks are being rescued by sovereign wealth funds and financial institutions from the Middle East and East Asia. China and Japan alone held over $600 billion of securities issued by Fannie Mae and Freddie Mac, making the bailout of those institutions a major foreign policy issue.

Despite these changed realities, both Bretton Woods institutions remain dominated by the West. By convention, the IMF is led by a European, the World Bank by a US national. The US is the only country with veto power over important decisions in either body.

My analysis of voting shares in the IMF indicates that the Allied powers of World War II have been consistently overrepresented compared to Axis powers despite the passing of more than 60 years since the end of that war. Studies show that IMF lending is biased in favor of recipients with strong economic and diplomatic ties to the US and key European states at the expense of other members.

This unbalanced representation had real consequences during the Asian Financial Crisis of 1997-98, when the IMF, as part of its rescue operation, implemented policies widely viewed as contrary to Asian interests. During the crisis, Japanese financial authorities proposed an Asian Monetary Fund as a potential alternative source of liquidity. This proposal was rejected by US officials, who feared dilution of IMF authority. However, over the past decade, East Asian states have stockpiled foreign currency reserves and developed regional cooperation that may eventually develop into a credible alternative to the IMF.

The IMF and World Bank should be reformed to better reflect the interests and concerns of rising economic powers. Voting shares need to be further redistributed to reflect underlying economic realities. Decisionmaking rules should be modified to give greater weight or agenda-setting authority to regional actors—the US may have a strong interest in loans to Mexico, but Japan may have a greater stake in Indonesia. Assignment of the top positions should be made truly competitive. Core functions should be decentralized—both institutions are headquartered in Washington, impeding employment of top talent from Asia and limiting intellectual exchange.

An international financial architecture that fragments or remains centered on the West as Asia rises will probably prove grossly ineffective. Europe attempted much the same during the turbulent period between the two World Wars, resurrecting a system based on British hegemony even as Britain was in relative decline. Those were scary times, with free riding and beggar-thy-neighbor policies feeding mutual distrust and economic catastrophe.

This will not be the last financial crisis we face. Next time, ad hoc cooperation by the US and Europe may prove insufficient. Franklin Roosevelt had the foresight to include China on the United Nations Security Council long before that nation became a geopolitical heavyweight. Similar foresight should be brought to bear as world leaders debate the future of the international financial architecture.