Obama & McCain: Economics & Foreign Policy
William Pfaff
Paris, October 30, 2008 -- The real issues of the American presidential election are the future of the economy and the future of American foreign policy. The one seems already settled. The second seems to unite John McCain and Barack Obama in support of a program doomed to fail.
The first is a matter of economic ideology. McCain, who admits that the subject doesn't really interest him, has made the traditional Republican argument that cutting taxes, particularly for the rich, causes economic growth. It says markets are the best available mechanism for making economic choices, and should not be regulated, since in the end individuals acting in their selfish interest always collectively make the best economic judgements.
This inherently implausible doctrine now is all but impossible to defend, since Alan Greenspan himself has confessed that his lifelong convictions have been disproven. These ultimately rested on the teaching of the cult writer Ayn Rand, that individual selfishness is the highest public virtue. American finance and business have now conclusively demonstrated that this is not true.
Obama believes that markets should be regulated and that government has an indispensable role to play in the direction of the national economy. McCain attacks him as a "socialist," a meaningless term of abuse. The only socialists currently active in the modern industrial world are members of major European parties who alternate with conservatives and centrists in the direction of successful and competitive national economies, such as those of the European Union.
On this count, the vote has to go to Obama, who clearly is in touch with the realities, while McCain's economic convictions are now part of the ruins that stretch from Wall Street to the family with the foreclosed mortgage.
The second big issue is foreign and security policy, where the two candidates have disputed how and when the United States should withdraw from Iraq, and whether priority should be placed on the struggle in Afghanistan.
Current circumstances are likely to prove the argument about Iraq pointless since the current reality is of political and sectarian rivalry over Kurdistan and who controls Mosul and its oil revenues; and over a status of forces agreement for U.S. troops, the timetable for their departure from Iraq, and whether they really will all go.
In the end, the matter is out of American hands and in those of the Iraqis. They will settle who gets Mosul; the U.S. is not going to stay around to police a partition of Iraq. It's the Iraqis who have the possibility (at even more cost to themselves, admittedly) of making continued American occupation of the country militarily and politically unsustainable, no matter who is president in Washington. Iran will also have an enormous influence on the decision because of its proximity, military threat to American forces in Iraq, and influence over the Shia political and religious groups in that country.
Afghanistan by January is likely to bear little resemblance to today's situation, and there is even a remote possibility that the talks that have been going on (and off) among Afghan and Pakistani governments, the American command, tribal leaders and certain Taliban leaders, may stop the fighting before then -- or change it into something worse.
Obama's exceedingly ill-advised promise to make Afghanistan the "real" war, and "go in and get" Osama bin Ladin if the Pakistanis won't produce him, may sound very hollow by then, as may McCain's demands for "victory" over terrorism (victory over just whom, where, how decided, and to what actual political result?).
Civil war could be going on in Pakistan by January, American troops in the middle of it, (even fighting the Pakistani army to seize control of Pakistan's nuclear weapons). Pakistan today, as the analysts say, provides a "scenario-rich" situation, fraught with unpleasant possibilities, and far better left to the peoples involved, while Americans and NATO leave as discreetly as possible. But this last is unlikely to happen unless they are forced out.
The fundamental question that should be put to the candidates is whether they are committed to a program of continuing American unilateral military and political interventions in the Muslim world intended to make despotic and "failed" states into democracies on good terms with the United States. They undoubtedly would both say yes.
That's too bad for the rest of us, who will be among those paying the price. Such a policy is the conventional wisdom in Washington, and certainly that of the array of former Clinton advisers so far reported as associated with Obama. The people publicly connected with McCain are all or nearly all survivors of the neo-conservative wing of the Bush administration (and not the brightest lights among the neo-cons either).
They all seem determined to press forward with the democracy offensive of the discredited Bush administration. Naturally they intend to make a better job of it, having noticed that under Bush the record thus far consists exclusively of failures.
Since the candidates currently seem agreed on this policy, the final question is not who would do it better, but which of them would be quickest to realize that it is impossible. Intelligence isn't everything; but Obama is seriously smart and seems to have common sense as well.
© Copyright by Tribune Media Services International. All Rights Reserved.
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http://www.williampfaff.com
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Friday, October 31, 2008
How to stop an Iranian bomb
How to stop an Iranian bomb
By Trita Parsi and Andreas Persbo
October 31, 2008
The Guardian
http://www.guardian.co.uk/commentisfree/2008/oct/31/iran-weaponstechnology
Ever since Iran publicised its nuclear fuel cycle plans in 2003, western experts have tried to downplay its rate of progress in nuclear engineering. The Iranian scientific community is often viewed as technologically inept. Relatively minor obstacles have been portrayed as next to insurmountable. These arguments are now growing increasingly false – Tehran is adding centrifuges faster than the UN security council can step up the pressure. Time is not working in the favour of the west.
Iran is making good progress in many key areas of nuclear engineering. Presently, it has some 4,000 operational centrifuges at its facility in Natanz. This means that it is learning about the intricate art of connecting a large number of centrifuges with a vast amount of pipework while maintaining everything under vacuum. Getting centrifuges to run is not difficult; getting them to run as a single entity is the challenge.
Iran's increasing capabilities also mean that it can produce some 3.2 metric tons of low-enriched uranium (LEU) per year. This is about a tenth of the annual fuel load of a typical light water reactor. However, the technology can have other uses too. If Iran decides to re-enrich this product, it can theoretically produce some 115kg of weapons-grade uranium per year. It can have a bomb's worth of material in less than three months.
This does not mean, however, that Iran is producing weapons-grade material. Neither does it mean that it intends to. Indeed, capabilities and intentions are two different things. The IAEA is still insisting it has no evidence of any ongoing Iranian weapons programme. Some states therefore worry about what Iran could do if it builds enough capacity to go down the weapons route. In particular, many worry about what Iran could do with its LEU stockpile.
Many things need to happen before Iran can convert its low-enriched uranium stockpile to weapons-usable material. It would first need to get enough LEU in its warehouses. The international community would know when this happened, as long as all Iranian enrichment capacity is safeguarded by the IAEA.
Furthermore, the Natanz facility is set up to produce LEU only. Iran must therefore disconnect many miles of pipework and reconnect them to make it suitable for weapons-grade enrichment. Unless the Iranian floor managers are notorious gamblers, they would want at least a month to do this. Getting the centrifuges back on stream without testing the new configuration could cause severe damage to the sensitive rotors.
This provides the international community with a clear trigger to take decisive action against any Iranian weaponisation: once the inspectors are ejected, the clock is ticking. Current divisions within the security council on how to deal with Iran would probably be overcome. In fact, an agreement can be reached beforehand on how to deal with any Iranian move towards re-enrichment.
The bottom line is that inspections are instrumental in preventing Iranian weaponisation and much can be done to prevent Iranian enrichment from equating with an Iranian bomb.
Instead of investing further in a security council track focused on the losing proposition of stopping Iranian enrichment altogether, resources should be diverted towards making it as unattractive as possible for Iran to make the choice of re-enriching the LEU. This would require boosting inspections of Iranian facilities while defining the steps the security council will take in case Iran seeks to re-enrich. This could be spelled out in a security council resolution.
According to former weapons inspector David Kay, the west must also take measures now in regard to regional security to make any potential failure to stop an Iranian bomb an irrelevant development.
Nuclear weapons have little military utility, and their deterrent value has never been proven. In the Middle East, however, wihout a new security architecture, the spread of nuclear weapons is likely to be a game changer.
Unless the west redefines the game and makes the nuclear stand-off with Iran about bomb-making and not enrichment, and devotes resources to create disincentives for Iran to weaponise, time will continue to be on the side of Iran.
Trita Parsi is the author of Treacherous Alliance – The Secret Dealings of Israel, Iran and the US, a silver medal recipient of the Council on Foreign Relations' Arthur Ross Book Award. Andreas Persbo is a senior researcher at the Verification Research, Training and Information Centre.
By Trita Parsi and Andreas Persbo
October 31, 2008
The Guardian
http://www.guardian.co.uk/commentisfree/2008/oct/31/iran-weaponstechnology
Ever since Iran publicised its nuclear fuel cycle plans in 2003, western experts have tried to downplay its rate of progress in nuclear engineering. The Iranian scientific community is often viewed as technologically inept. Relatively minor obstacles have been portrayed as next to insurmountable. These arguments are now growing increasingly false – Tehran is adding centrifuges faster than the UN security council can step up the pressure. Time is not working in the favour of the west.
Iran is making good progress in many key areas of nuclear engineering. Presently, it has some 4,000 operational centrifuges at its facility in Natanz. This means that it is learning about the intricate art of connecting a large number of centrifuges with a vast amount of pipework while maintaining everything under vacuum. Getting centrifuges to run is not difficult; getting them to run as a single entity is the challenge.
Iran's increasing capabilities also mean that it can produce some 3.2 metric tons of low-enriched uranium (LEU) per year. This is about a tenth of the annual fuel load of a typical light water reactor. However, the technology can have other uses too. If Iran decides to re-enrich this product, it can theoretically produce some 115kg of weapons-grade uranium per year. It can have a bomb's worth of material in less than three months.
This does not mean, however, that Iran is producing weapons-grade material. Neither does it mean that it intends to. Indeed, capabilities and intentions are two different things. The IAEA is still insisting it has no evidence of any ongoing Iranian weapons programme. Some states therefore worry about what Iran could do if it builds enough capacity to go down the weapons route. In particular, many worry about what Iran could do with its LEU stockpile.
Many things need to happen before Iran can convert its low-enriched uranium stockpile to weapons-usable material. It would first need to get enough LEU in its warehouses. The international community would know when this happened, as long as all Iranian enrichment capacity is safeguarded by the IAEA.
Furthermore, the Natanz facility is set up to produce LEU only. Iran must therefore disconnect many miles of pipework and reconnect them to make it suitable for weapons-grade enrichment. Unless the Iranian floor managers are notorious gamblers, they would want at least a month to do this. Getting the centrifuges back on stream without testing the new configuration could cause severe damage to the sensitive rotors.
This provides the international community with a clear trigger to take decisive action against any Iranian weaponisation: once the inspectors are ejected, the clock is ticking. Current divisions within the security council on how to deal with Iran would probably be overcome. In fact, an agreement can be reached beforehand on how to deal with any Iranian move towards re-enrichment.
The bottom line is that inspections are instrumental in preventing Iranian weaponisation and much can be done to prevent Iranian enrichment from equating with an Iranian bomb.
Instead of investing further in a security council track focused on the losing proposition of stopping Iranian enrichment altogether, resources should be diverted towards making it as unattractive as possible for Iran to make the choice of re-enriching the LEU. This would require boosting inspections of Iranian facilities while defining the steps the security council will take in case Iran seeks to re-enrich. This could be spelled out in a security council resolution.
According to former weapons inspector David Kay, the west must also take measures now in regard to regional security to make any potential failure to stop an Iranian bomb an irrelevant development.
Nuclear weapons have little military utility, and their deterrent value has never been proven. In the Middle East, however, wihout a new security architecture, the spread of nuclear weapons is likely to be a game changer.
Unless the west redefines the game and makes the nuclear stand-off with Iran about bomb-making and not enrichment, and devotes resources to create disincentives for Iran to weaponise, time will continue to be on the side of Iran.
Trita Parsi is the author of Treacherous Alliance – The Secret Dealings of Israel, Iran and the US, a silver medal recipient of the Council on Foreign Relations' Arthur Ross Book Award. Andreas Persbo is a senior researcher at the Verification Research, Training and Information Centre.
How to stop an Iranian bomb
How to stop an Iranian bomb
By Trita Parsi and Andreas Persbo
October 31, 2008
The Guardian
http://www.guardian.co.uk/commentisfree/2008/oct/31/iran-weaponstechnology
Ever since Iran publicised its nuclear fuel cycle plans in 2003, western experts have tried to downplay its rate of progress in nuclear engineering. The Iranian scientific community is often viewed as technologically inept. Relatively minor obstacles have been portrayed as next to insurmountable. These arguments are now growing increasingly false – Tehran is adding centrifuges faster than the UN security council can step up the pressure. Time is not working in the favour of the west.
Iran is making good progress in many key areas of nuclear engineering. Presently, it has some 4,000 operational centrifuges at its facility in Natanz. This means that it is learning about the intricate art of connecting a large number of centrifuges with a vast amount of pipework while maintaining everything under vacuum. Getting centrifuges to run is not difficult; getting them to run as a single entity is the challenge.
Iran's increasing capabilities also mean that it can produce some 3.2 metric tons of low-enriched uranium (LEU) per year. This is about a tenth of the annual fuel load of a typical light water reactor. However, the technology can have other uses too. If Iran decides to re-enrich this product, it can theoretically produce some 115kg of weapons-grade uranium per year. It can have a bomb's worth of material in less than three months.
This does not mean, however, that Iran is producing weapons-grade material. Neither does it mean that it intends to. Indeed, capabilities and intentions are two different things. The IAEA is still insisting it has no evidence of any ongoing Iranian weapons programme. Some states therefore worry about what Iran could do if it builds enough capacity to go down the weapons route. In particular, many worry about what Iran could do with its LEU stockpile.
Many things need to happen before Iran can convert its low-enriched uranium stockpile to weapons-usable material. It would first need to get enough LEU in its warehouses. The international community would know when this happened, as long as all Iranian enrichment capacity is safeguarded by the IAEA.
Furthermore, the Natanz facility is set up to produce LEU only. Iran must therefore disconnect many miles of pipework and reconnect them to make it suitable for weapons-grade enrichment. Unless the Iranian floor managers are notorious gamblers, they would want at least a month to do this. Getting the centrifuges back on stream without testing the new configuration could cause severe damage to the sensitive rotors.
This provides the international community with a clear trigger to take decisive action against any Iranian weaponisation: once the inspectors are ejected, the clock is ticking. Current divisions within the security council on how to deal with Iran would probably be overcome. In fact, an agreement can be reached beforehand on how to deal with any Iranian move towards re-enrichment.
The bottom line is that inspections are instrumental in preventing Iranian weaponisation and much can be done to prevent Iranian enrichment from equating with an Iranian bomb.
Instead of investing further in a security council track focused on the losing proposition of stopping Iranian enrichment altogether, resources should be diverted towards making it as unattractive as possible for Iran to make the choice of re-enriching the LEU. This would require boosting inspections of Iranian facilities while defining the steps the security council will take in case Iran seeks to re-enrich. This could be spelled out in a security council resolution.
According to former weapons inspector David Kay, the west must also take measures now in regard to regional security to make any potential failure to stop an Iranian bomb an irrelevant development.
Nuclear weapons have little military utility, and their deterrent value has never been proven. In the Middle East, however, wihout a new security architecture, the spread of nuclear weapons is likely to be a game changer.
Unless the west redefines the game and makes the nuclear stand-off with Iran about bomb-making and not enrichment, and devotes resources to create disincentives for Iran to weaponise, time will continue to be on the side of Iran.
Trita Parsi is the author of Treacherous Alliance – The Secret Dealings of Israel, Iran and the US, a silver medal recipient of the Council on Foreign Relations' Arthur Ross Book Award. Andreas Persbo is a senior researcher at the Verification Research, Training and Information Centre.
By Trita Parsi and Andreas Persbo
October 31, 2008
The Guardian
http://www.guardian.co.uk/commentisfree/2008/oct/31/iran-weaponstechnology
Ever since Iran publicised its nuclear fuel cycle plans in 2003, western experts have tried to downplay its rate of progress in nuclear engineering. The Iranian scientific community is often viewed as technologically inept. Relatively minor obstacles have been portrayed as next to insurmountable. These arguments are now growing increasingly false – Tehran is adding centrifuges faster than the UN security council can step up the pressure. Time is not working in the favour of the west.
Iran is making good progress in many key areas of nuclear engineering. Presently, it has some 4,000 operational centrifuges at its facility in Natanz. This means that it is learning about the intricate art of connecting a large number of centrifuges with a vast amount of pipework while maintaining everything under vacuum. Getting centrifuges to run is not difficult; getting them to run as a single entity is the challenge.
Iran's increasing capabilities also mean that it can produce some 3.2 metric tons of low-enriched uranium (LEU) per year. This is about a tenth of the annual fuel load of a typical light water reactor. However, the technology can have other uses too. If Iran decides to re-enrich this product, it can theoretically produce some 115kg of weapons-grade uranium per year. It can have a bomb's worth of material in less than three months.
This does not mean, however, that Iran is producing weapons-grade material. Neither does it mean that it intends to. Indeed, capabilities and intentions are two different things. The IAEA is still insisting it has no evidence of any ongoing Iranian weapons programme. Some states therefore worry about what Iran could do if it builds enough capacity to go down the weapons route. In particular, many worry about what Iran could do with its LEU stockpile.
Many things need to happen before Iran can convert its low-enriched uranium stockpile to weapons-usable material. It would first need to get enough LEU in its warehouses. The international community would know when this happened, as long as all Iranian enrichment capacity is safeguarded by the IAEA.
Furthermore, the Natanz facility is set up to produce LEU only. Iran must therefore disconnect many miles of pipework and reconnect them to make it suitable for weapons-grade enrichment. Unless the Iranian floor managers are notorious gamblers, they would want at least a month to do this. Getting the centrifuges back on stream without testing the new configuration could cause severe damage to the sensitive rotors.
This provides the international community with a clear trigger to take decisive action against any Iranian weaponisation: once the inspectors are ejected, the clock is ticking. Current divisions within the security council on how to deal with Iran would probably be overcome. In fact, an agreement can be reached beforehand on how to deal with any Iranian move towards re-enrichment.
The bottom line is that inspections are instrumental in preventing Iranian weaponisation and much can be done to prevent Iranian enrichment from equating with an Iranian bomb.
Instead of investing further in a security council track focused on the losing proposition of stopping Iranian enrichment altogether, resources should be diverted towards making it as unattractive as possible for Iran to make the choice of re-enriching the LEU. This would require boosting inspections of Iranian facilities while defining the steps the security council will take in case Iran seeks to re-enrich. This could be spelled out in a security council resolution.
According to former weapons inspector David Kay, the west must also take measures now in regard to regional security to make any potential failure to stop an Iranian bomb an irrelevant development.
Nuclear weapons have little military utility, and their deterrent value has never been proven. In the Middle East, however, wihout a new security architecture, the spread of nuclear weapons is likely to be a game changer.
Unless the west redefines the game and makes the nuclear stand-off with Iran about bomb-making and not enrichment, and devotes resources to create disincentives for Iran to weaponise, time will continue to be on the side of Iran.
Trita Parsi is the author of Treacherous Alliance – The Secret Dealings of Israel, Iran and the US, a silver medal recipient of the Council on Foreign Relations' Arthur Ross Book Award. Andreas Persbo is a senior researcher at the Verification Research, Training and Information Centre.
Thursday, October 30, 2008
Expanding War, Contracting Meaning:The Next President and the Global War on Terror by Andrew Bacevich
From TomDispatch
Expanding War, Contracting Meaning
The Next President and the Global War on Terror
By Andrew J. Bacevich
A week ago, I had a long conversation with a four-star U.S. military officer who, until his recent retirement, had played a central role in directing the global war on terror. I asked him: what exactly is the strategy that guides the Bush administration's conduct of this war? His dismaying, if not exactly surprising, answer: there is none.
President Bush will bequeath to his successor the ultimate self-licking ice cream cone. To defense contractors, lobbyists, think-tankers, ambitious military officers, the hosts of Sunday morning talk shows, and the Douglas Feith-like creatures who maneuver to become players in the ultimate power game, the Global War on Terror is a boon, an enterprise redolent with opportunity and promising to extend decades into the future.
Yet, to a considerable extent, that very enterprise has become a fiction, a gimmicky phrase employed to lend an appearance of cohesion to a panoply of activities that, in reality, are contradictory, counterproductive, or at the very least beside the point. In this sense, the global war on terror relates to terrorism precisely as the war on drugs relates to drug abuse and dependence: declaring a state of permanent "war" sustains the pretense of actually dealing with a serious problem, even as policymakers pay lip-service to the problem's actual sources. The war on drugs is a very expensive fraud. So, too, is the Global War on Terror.
Anyone intent on identifying some unifying idea that explains U.S. actions, military and otherwise, across the Greater Middle East is in for a disappointment. During World War II, President Franklin D. Roosevelt laid down "Germany first" and then "unconditional surrender" as core principles. Early in the Cold War, the Truman administration devised the concept of containment, which for decades thereafter provided a conceptual framework to which policymakers adhered. Yet seven years into its Global War on Terror, the Bush administration is without a compass, wandering in the arid wilderness. To the extent that any inkling of a strategy once existed -- the preposterous neoconservative vision of employing American power to "transform" the Islamic world -- events have long since demolished the assumptions on which it was based.
Rather than one single war, the United States is presently engaged in several.
Ranking first in importance is the war for Bush's legacy, better known as Iraq. The President himself will never back away from his insistence that here lies the "central front" of the conflict he initiated after 9/11. Hunkered down in their bunker, Bush and his few remaining supporters would have us believe that the "surge" has, at long last, brought victory in sight and with it some prospect of redeeming this otherwise misbegotten and mismanaged endeavor. If the President can leave office spouting assurances that light is finally visible somewhere at the far end of a very long, very dark Mesopotamian tunnel, he will claim at least partial vindication. And if actual developments subsequent to January 20 don't turn out well, he can always blame the outcome on his successor.
Next comes the orphan war. This is Afghanistan, a conflict now in its eighth year with no signs of ending anytime soon. Given the attention lavished on Iraq, developments in Afghanistan have until recently attracted only intermittent notice. Lately, however, U.S. officials have awakened to the fact that things are going poorly, both politically and militarily. Al Qaeda persists. The Taliban is reasserting itself. Expectations that NATO might ride to the rescue have proven illusory. Apart from enabling Afghanistan to reclaim its status as the world's number one producer of opium, U.S. efforts to pacify that nation and nudge it toward modernity have produced little.
The Pentagon calls its intervention in Afghanistan Operation Enduring Freedom. The emphasis was supposed to be on the noun. Unfortunately, the adjective conveys the campaign's defining characteristic: enduring as in endless. Barring a radical re-definition of purpose, this is an enterprise which promises to continue, consuming lives and treasure, for a long, long time.
In neighboring Pakistan, meanwhile, there is the war-hidden-in-plain-sight. Reports of U.S. military action in Pakistan have now become everyday fare. Air strikes, typically launched from missile-carrying drones, are commonplace, and U.S. ground forces have also conducted at least one cross-border raid from inside Afghanistan. Although the White House doesn't call this a war, it is -- a gradually escalating war of attrition in which we are killing both terrorists and noncombatants. Unfortunately, we are killing too few of the former to make a difference and more than enough of the latter to facilitate the recruitment of new terrorists to replace those we eliminate.
Finally -- skipping past the wars-in-waiting, which are Syria and Iran -- there is Condi's war. This clash, which does not directly involve U.S. forces, may actually be the most important of all. The war that Secretary of State Condoleezza Rice has made her own is the ongoing conflict between Israel and the Palestinians. Having for years dismissed the insistence of Muslims, Arabs and non-Arabs alike, that the plight of the Palestinians constitutes a problem of paramount importance, Rice now embraces that view. With the fervor of a convert, she has vowed to broker an end to that conflict prior to leaving office in January 2009.
Given that Rice brings little -- perhaps nothing -- to the effort in the way of fresh ideas, her prospects of making good as a peacemaker appear slight. Yet, as with Bush and Iraq, so too with Rice and the Palestinian problem: she has a lot riding on the effort. If she flops, history will remember her as America's least effective secretary of state since Cordell Hull spent World War II being ignored, bypassed, and humiliated by Franklin Roosevelt. She will depart Foggy Bottom having accomplished nothing.
There's nothing inherently wrong in fighting simultaneously on several fronts, as long as actions on front A are compatible with those on front B, and together contribute to overall success. Unfortunately, that is not the case with the Global War on Terror. We have instead an illustration of what Winston Churchill once referred to as a pudding without a theme: a war devoid of strategic purpose.
This absence of cohesion -- by now a hallmark of the Bush administration -- is both a disaster and an opportunity. It is a disaster in the sense that we have, over the past seven years, expended enormous resources, while gaining precious little in return.
Bush's supporters beg to differ, of course. They credit the president with having averted a recurrence of 9/11, doubtless a commendable achievement but one primarily attributable to the fact that the United States no longer neglects airport security. To argue that, say, the invasion and occupation of Iraq have prevented terrorist attacks against the United States is the equivalent of contending that Israel's occupation of the West Bank since in 1967 has prevented terrorist attacks against the state of Israel.
Yet the existing strategic vacuum is also an opportunity. When it comes to national security at least, the agenda of the next administration all but sets itself. There is no need to waste time arguing about which issues demand priority action.
First-order questions are begging for attention. How should we gauge the threat? What are the principles that should inform our response? What forms of power are most relevant to implementing that response? Are the means at hand adequate to the task? If not, how should national priorities be adjusted to provide the means required? Given the challenges ahead, how should the government organize itself? Who -- both agencies and individuals -- will lead?
To each and every one of these questions, the Bush administration devised answers that turned out to be dead wrong. The next administration needs to do better. The place to begin is with the candid recognition that the Global War on Terror has effectively ceased to exist. When it comes to national security strategy, we need to start over from scratch.
Andrew J. Bacevich is professor of history and international relations at Boston University. His bestselling new book is The Limits of Power: The End of American Exceptionalism (The American Empire Project, Metropolitan Books). To listen to a podcast in which he discusses issues relevant to this article, click here.
Copyright 2008 Andrew Bacevich
Expanding War, Contracting Meaning
The Next President and the Global War on Terror
By Andrew J. Bacevich
A week ago, I had a long conversation with a four-star U.S. military officer who, until his recent retirement, had played a central role in directing the global war on terror. I asked him: what exactly is the strategy that guides the Bush administration's conduct of this war? His dismaying, if not exactly surprising, answer: there is none.
President Bush will bequeath to his successor the ultimate self-licking ice cream cone. To defense contractors, lobbyists, think-tankers, ambitious military officers, the hosts of Sunday morning talk shows, and the Douglas Feith-like creatures who maneuver to become players in the ultimate power game, the Global War on Terror is a boon, an enterprise redolent with opportunity and promising to extend decades into the future.
Yet, to a considerable extent, that very enterprise has become a fiction, a gimmicky phrase employed to lend an appearance of cohesion to a panoply of activities that, in reality, are contradictory, counterproductive, or at the very least beside the point. In this sense, the global war on terror relates to terrorism precisely as the war on drugs relates to drug abuse and dependence: declaring a state of permanent "war" sustains the pretense of actually dealing with a serious problem, even as policymakers pay lip-service to the problem's actual sources. The war on drugs is a very expensive fraud. So, too, is the Global War on Terror.
Anyone intent on identifying some unifying idea that explains U.S. actions, military and otherwise, across the Greater Middle East is in for a disappointment. During World War II, President Franklin D. Roosevelt laid down "Germany first" and then "unconditional surrender" as core principles. Early in the Cold War, the Truman administration devised the concept of containment, which for decades thereafter provided a conceptual framework to which policymakers adhered. Yet seven years into its Global War on Terror, the Bush administration is without a compass, wandering in the arid wilderness. To the extent that any inkling of a strategy once existed -- the preposterous neoconservative vision of employing American power to "transform" the Islamic world -- events have long since demolished the assumptions on which it was based.
Rather than one single war, the United States is presently engaged in several.
Ranking first in importance is the war for Bush's legacy, better known as Iraq. The President himself will never back away from his insistence that here lies the "central front" of the conflict he initiated after 9/11. Hunkered down in their bunker, Bush and his few remaining supporters would have us believe that the "surge" has, at long last, brought victory in sight and with it some prospect of redeeming this otherwise misbegotten and mismanaged endeavor. If the President can leave office spouting assurances that light is finally visible somewhere at the far end of a very long, very dark Mesopotamian tunnel, he will claim at least partial vindication. And if actual developments subsequent to January 20 don't turn out well, he can always blame the outcome on his successor.
Next comes the orphan war. This is Afghanistan, a conflict now in its eighth year with no signs of ending anytime soon. Given the attention lavished on Iraq, developments in Afghanistan have until recently attracted only intermittent notice. Lately, however, U.S. officials have awakened to the fact that things are going poorly, both politically and militarily. Al Qaeda persists. The Taliban is reasserting itself. Expectations that NATO might ride to the rescue have proven illusory. Apart from enabling Afghanistan to reclaim its status as the world's number one producer of opium, U.S. efforts to pacify that nation and nudge it toward modernity have produced little.
The Pentagon calls its intervention in Afghanistan Operation Enduring Freedom. The emphasis was supposed to be on the noun. Unfortunately, the adjective conveys the campaign's defining characteristic: enduring as in endless. Barring a radical re-definition of purpose, this is an enterprise which promises to continue, consuming lives and treasure, for a long, long time.
In neighboring Pakistan, meanwhile, there is the war-hidden-in-plain-sight. Reports of U.S. military action in Pakistan have now become everyday fare. Air strikes, typically launched from missile-carrying drones, are commonplace, and U.S. ground forces have also conducted at least one cross-border raid from inside Afghanistan. Although the White House doesn't call this a war, it is -- a gradually escalating war of attrition in which we are killing both terrorists and noncombatants. Unfortunately, we are killing too few of the former to make a difference and more than enough of the latter to facilitate the recruitment of new terrorists to replace those we eliminate.
Finally -- skipping past the wars-in-waiting, which are Syria and Iran -- there is Condi's war. This clash, which does not directly involve U.S. forces, may actually be the most important of all. The war that Secretary of State Condoleezza Rice has made her own is the ongoing conflict between Israel and the Palestinians. Having for years dismissed the insistence of Muslims, Arabs and non-Arabs alike, that the plight of the Palestinians constitutes a problem of paramount importance, Rice now embraces that view. With the fervor of a convert, she has vowed to broker an end to that conflict prior to leaving office in January 2009.
Given that Rice brings little -- perhaps nothing -- to the effort in the way of fresh ideas, her prospects of making good as a peacemaker appear slight. Yet, as with Bush and Iraq, so too with Rice and the Palestinian problem: she has a lot riding on the effort. If she flops, history will remember her as America's least effective secretary of state since Cordell Hull spent World War II being ignored, bypassed, and humiliated by Franklin Roosevelt. She will depart Foggy Bottom having accomplished nothing.
There's nothing inherently wrong in fighting simultaneously on several fronts, as long as actions on front A are compatible with those on front B, and together contribute to overall success. Unfortunately, that is not the case with the Global War on Terror. We have instead an illustration of what Winston Churchill once referred to as a pudding without a theme: a war devoid of strategic purpose.
This absence of cohesion -- by now a hallmark of the Bush administration -- is both a disaster and an opportunity. It is a disaster in the sense that we have, over the past seven years, expended enormous resources, while gaining precious little in return.
Bush's supporters beg to differ, of course. They credit the president with having averted a recurrence of 9/11, doubtless a commendable achievement but one primarily attributable to the fact that the United States no longer neglects airport security. To argue that, say, the invasion and occupation of Iraq have prevented terrorist attacks against the United States is the equivalent of contending that Israel's occupation of the West Bank since in 1967 has prevented terrorist attacks against the state of Israel.
Yet the existing strategic vacuum is also an opportunity. When it comes to national security at least, the agenda of the next administration all but sets itself. There is no need to waste time arguing about which issues demand priority action.
First-order questions are begging for attention. How should we gauge the threat? What are the principles that should inform our response? What forms of power are most relevant to implementing that response? Are the means at hand adequate to the task? If not, how should national priorities be adjusted to provide the means required? Given the challenges ahead, how should the government organize itself? Who -- both agencies and individuals -- will lead?
To each and every one of these questions, the Bush administration devised answers that turned out to be dead wrong. The next administration needs to do better. The place to begin is with the candid recognition that the Global War on Terror has effectively ceased to exist. When it comes to national security strategy, we need to start over from scratch.
Andrew J. Bacevich is professor of history and international relations at Boston University. His bestselling new book is The Limits of Power: The End of American Exceptionalism (The American Empire Project, Metropolitan Books). To listen to a podcast in which he discusses issues relevant to this article, click here.
Copyright 2008 Andrew Bacevich
Unipolar Power: Not any more by Leon Hadar
To those interested:
Unipolar Power: Not any more
Posted on October 30th, 2008 by Leon Hadar
Robert Kagan in his monthly [thank the editor for small favors] column in The Washington Post today slams all those pundits who disagree with his central thesis that the U.S. is “Still No. 1″ (the title of his op-ed) and subscribe to the notion that America is in decline.
In fact, none of the writers that he quotes in his piece, including Francis Fukuyama and Fareed Zakaria disagree with him that “American military power is unmatched.” What they do argue is that as a result of the policies advocated by Kagan and pursued by Bush, American military and economic power is overstretched, as the mess in the Broader Middle East and the financial crisis have demonstrated. In fact, it’s China, America’s future geo-strategic and geo-economic competitor that is financing (together with the Arab oil states) America’s current-account deficit.
But what is remarkable is the way Kagan has tried to change the subject of the post-Cold War debate. He begins with misleading historical examples:
Sober analysts such as Richard Haass acknowledge that the United States remains “the single most powerful entity in the world.” But he warns, “The United States cannot dominate, much less dictate, and expect that others will follow.” That is true. But when was it not? Was there ever a time when the United States could dominate, dictate and always have its way?
Many declinists imagine a mythical past when the world danced to America’s tune. Nostalgia swells for the wondrous American-dominated era after World War II, but between 1945 and 1965 the United States actually suffered one calamity after another. The “loss” of China to communism; the North Korean invasion of South Korea; the Soviet testing of a hydrogen bomb; the stirrings of postcolonial nationalism in Indochina — each proved a strategic setback of the first order. And each was beyond America’s power to control or even to manage successfully.
But there was never a “wondrous American-dominated era after World War II.” There was a bi-polar system in which the U.S. and the USSR were the two dominant powers. The debate after the collapse of the Soviet Union was not whether America was no. 1 based on its military power, but whether the U.S. has become the global hegemon, the Unipolar Power that would remain unchallenged and could impose its will on the rest of the world.
American Unipolarism was the neoconservative axiom that has been advanced by Kagan and Company since 1991. It was tested in Iraq. And now in the aftermath (?) of that war, the eroding influence of America in the Middle East, the confrontation with North Korea, and the financial crisis, no one is seriously arguing that the U.S. is “Still a Unipolar Power.” Not even Kagan.
http://www.amconmag.com/blog/2008/10/30/unipolar-power-not-any-more/
Unipolar Power: Not any more
Posted on October 30th, 2008 by Leon Hadar
Robert Kagan in his monthly [thank the editor for small favors] column in The Washington Post today slams all those pundits who disagree with his central thesis that the U.S. is “Still No. 1″ (the title of his op-ed) and subscribe to the notion that America is in decline.
In fact, none of the writers that he quotes in his piece, including Francis Fukuyama and Fareed Zakaria disagree with him that “American military power is unmatched.” What they do argue is that as a result of the policies advocated by Kagan and pursued by Bush, American military and economic power is overstretched, as the mess in the Broader Middle East and the financial crisis have demonstrated. In fact, it’s China, America’s future geo-strategic and geo-economic competitor that is financing (together with the Arab oil states) America’s current-account deficit.
But what is remarkable is the way Kagan has tried to change the subject of the post-Cold War debate. He begins with misleading historical examples:
Sober analysts such as Richard Haass acknowledge that the United States remains “the single most powerful entity in the world.” But he warns, “The United States cannot dominate, much less dictate, and expect that others will follow.” That is true. But when was it not? Was there ever a time when the United States could dominate, dictate and always have its way?
Many declinists imagine a mythical past when the world danced to America’s tune. Nostalgia swells for the wondrous American-dominated era after World War II, but between 1945 and 1965 the United States actually suffered one calamity after another. The “loss” of China to communism; the North Korean invasion of South Korea; the Soviet testing of a hydrogen bomb; the stirrings of postcolonial nationalism in Indochina — each proved a strategic setback of the first order. And each was beyond America’s power to control or even to manage successfully.
But there was never a “wondrous American-dominated era after World War II.” There was a bi-polar system in which the U.S. and the USSR were the two dominant powers. The debate after the collapse of the Soviet Union was not whether America was no. 1 based on its military power, but whether the U.S. has become the global hegemon, the Unipolar Power that would remain unchallenged and could impose its will on the rest of the world.
American Unipolarism was the neoconservative axiom that has been advanced by Kagan and Company since 1991. It was tested in Iraq. And now in the aftermath (?) of that war, the eroding influence of America in the Middle East, the confrontation with North Korea, and the financial crisis, no one is seriously arguing that the U.S. is “Still a Unipolar Power.” Not even Kagan.
Analysis: Taliban talks strategy attracts backers
10/28/08
Analysis: Taliban talks strategy attracts backers
Nic Robertson
(CNN) -- Since Afghan officials met with former Taliban leaders in Mecca, Saudi Arabia a month ago the drum beat of hammering out a political deal with the Taliban rather than smashing them militarily has been growing steadily.
Two days of talks in Pakistan's capital Islamabad between Afghan and Pakistani officials and tribal leaders have just concluded with an appeal to the Taliban command, come forward and discuss the war.
In the United States leaks from closed door debate both political and military are hinting ever more strongly that talks with some Taliban are on the cards.
Why now, why at all? Like all conflicts the Afghan/Pakistan regional war must end. The question is how? Both sides seem to accept a military victory is not around the corner and that means talks move higher up the agenda.
This doesn't mean everyone is on the same page. The U.S. still has a $10 million dollar bounty on Mullah Omar, the Taliban leader's head. They want him for giving sanctuary to Osama bin Laden.
The Afghan government seems to think Omar is the lesser of several evils, not as radical as some young wilder al Qaeda inspired Taliban leaders, and are offering him a way back home.
And the Saudis, who brokered the Mecca meeting, want a commitment from Omar to end his association with bin Laden before he can participate in peace talks.
According to sources close to the talks in Mecca, the Taliban representatives recognize they can't defeat U.S. military might.
Not so long ago U.S. Joint Chief of Staff Admiral Mike Mullen raised concerns the war in Afghanistan is not going well.
The U.S. is fighting a counterinsurgency in Afghanistan and additional troops, while useful as Afghan security forces are built up, can also be counterproductive.
Afghan tolerance for an international force is finite -- they know they need help with security but collateral civilian casualties from errant NATO and U.S. missiles don't just inflame passions, they are political liability for the Afghan leadership.
Afghan President Hamid Karzai is up for reelection next year. To win, he must look independent of the U.S. Paradoxically, ask any Afghan who they think will win and they'll tell you "whoever the U.S. wants."
The bottom line right now, there is a lot at stake for all the players to begin winding the war down.
No one expects quick results. The reality is 30 years of conflict won't be wrapped up overnight but the change in debate over the past month about the way forward is still a seismic shift.
Omar, who is in exile in Pakistan, has told his fighters to avoid civilian casualties -- a clear delineation with al Qaeda's suicide, kill all bombing tactics.
Nevertheless it's very hard to see how you get him to reconcile his differences with a U.S.-backed government in Kabul. His demand is for foreign forces, which essentially keep the Karzai government in power, to leave Afghanistan.
But as the U.S. and Afghan governments are fighting the war side by side, if the Afghan government is talking to the Taliban, inviting leaders like Omar to enter a peace process, the U.S. military must develop options that can keep pace with that political direction.
Lessons learned in Iraq now appear to offer solutions to U.S. military commanders.
Work with tribes and insurgents. In this case the Taliban, to isolate and defeat the hardcore radicals like al Qaeda. Although Iraq and Afghanistan are vastly different, the scale, complexity and history of the problems are far worse in Afghanistan. The U.S. does now seem to be considering this direction.
The other lessons of Iraq like surging troops seem to hold less attraction. Afghanistan is just so big, so rural, so under developed there just aren't the number of troops available to make it work.
Standing up Afghan national security forces will take far longer than in Iraq too. Literacy is low and the centrally run forces were last effective, if ever, over a generation ago.
Standing up local security forces similar to Iraq's awakening councils is being discussed but its detractors say it risks regressing to warlord regional rather than national mentality.
In Iraq the solutions were all about need and expediency. The same forces are at work in Afghanistan, need and expediency.
To win militarily is a generational fight no one can afford. To talk may yet offer something to everyone.
Analysis: Taliban talks strategy attracts backers
Nic Robertson
(CNN) -- Since Afghan officials met with former Taliban leaders in Mecca, Saudi Arabia a month ago the drum beat of hammering out a political deal with the Taliban rather than smashing them militarily has been growing steadily.
Two days of talks in Pakistan's capital Islamabad between Afghan and Pakistani officials and tribal leaders have just concluded with an appeal to the Taliban command, come forward and discuss the war.
In the United States leaks from closed door debate both political and military are hinting ever more strongly that talks with some Taliban are on the cards.
Why now, why at all? Like all conflicts the Afghan/Pakistan regional war must end. The question is how? Both sides seem to accept a military victory is not around the corner and that means talks move higher up the agenda.
This doesn't mean everyone is on the same page. The U.S. still has a $10 million dollar bounty on Mullah Omar, the Taliban leader's head. They want him for giving sanctuary to Osama bin Laden.
The Afghan government seems to think Omar is the lesser of several evils, not as radical as some young wilder al Qaeda inspired Taliban leaders, and are offering him a way back home.
And the Saudis, who brokered the Mecca meeting, want a commitment from Omar to end his association with bin Laden before he can participate in peace talks.
According to sources close to the talks in Mecca, the Taliban representatives recognize they can't defeat U.S. military might.
Not so long ago U.S. Joint Chief of Staff Admiral Mike Mullen raised concerns the war in Afghanistan is not going well.
The U.S. is fighting a counterinsurgency in Afghanistan and additional troops, while useful as Afghan security forces are built up, can also be counterproductive.
Afghan tolerance for an international force is finite -- they know they need help with security but collateral civilian casualties from errant NATO and U.S. missiles don't just inflame passions, they are political liability for the Afghan leadership.
Afghan President Hamid Karzai is up for reelection next year. To win, he must look independent of the U.S. Paradoxically, ask any Afghan who they think will win and they'll tell you "whoever the U.S. wants."
The bottom line right now, there is a lot at stake for all the players to begin winding the war down.
No one expects quick results. The reality is 30 years of conflict won't be wrapped up overnight but the change in debate over the past month about the way forward is still a seismic shift.
Omar, who is in exile in Pakistan, has told his fighters to avoid civilian casualties -- a clear delineation with al Qaeda's suicide, kill all bombing tactics.
Nevertheless it's very hard to see how you get him to reconcile his differences with a U.S.-backed government in Kabul. His demand is for foreign forces, which essentially keep the Karzai government in power, to leave Afghanistan.
But as the U.S. and Afghan governments are fighting the war side by side, if the Afghan government is talking to the Taliban, inviting leaders like Omar to enter a peace process, the U.S. military must develop options that can keep pace with that political direction.
Lessons learned in Iraq now appear to offer solutions to U.S. military commanders.
Work with tribes and insurgents. In this case the Taliban, to isolate and defeat the hardcore radicals like al Qaeda. Although Iraq and Afghanistan are vastly different, the scale, complexity and history of the problems are far worse in Afghanistan. The U.S. does now seem to be considering this direction.
The other lessons of Iraq like surging troops seem to hold less attraction. Afghanistan is just so big, so rural, so under developed there just aren't the number of troops available to make it work.
Standing up Afghan national security forces will take far longer than in Iraq too. Literacy is low and the centrally run forces were last effective, if ever, over a generation ago.
Standing up local security forces similar to Iraq's awakening councils is being discussed but its detractors say it risks regressing to warlord regional rather than national mentality.
In Iraq the solutions were all about need and expediency. The same forces are at work in Afghanistan, need and expediency.
To win militarily is a generational fight no one can afford. To talk may yet offer something to everyone.
America: The Lost Leader by Michael Elliott
Thursday, Oct. 23, 2008
America: The Lost Leader
By MICHAEL ELLIOTT
In the U.S. presidential election campaign, the speeches of the candidates on foreign policy have often turned on a single word, and a shared analysis. The word is "leadership," and the analysis is this. After World War II, the U.S. built an international system that protected those who signed up to its values, and that provided the means for contesting Soviet communism. Now, with the end of the Cold War, and in the messy world that has taken shape in its aftermath, it is time for America to show leadership again. In his set-piece speech on foreign policy in Chicago in April 2007, for example, Barack Obama identified no less than five ways in which the U.S. should lead the world. But John McCain made the point with greatest clarity in his speech to the Los Angeles World Affairs Council in March.
McCain said this: "President Harry Truman once said of America, 'God has created us and brought us to our present position of power and strength for some great purpose.' In his time, that purpose was to contain communism and build the structures of peace and prosperity that could provide a safe passage through the Cold War. Now it is our turn. We face a new set of opportunities and also new dangers ... The United States must lead in the 21st century, just as it did in Truman's day."
Beyond the assumption that the world today needs to see U.S. leadership just as it did after 1945, there has also been a second item of implicit agreement between the candidates: that the performance of the U.S. in its leadership role has been less impressive of late than it was following World War II.
It's hard to argue with that. During and after World War II, the U.S. encouraged the formation of multilateral institutions which spread a sense of collective political, military and economic security around much of the world. The Bush Administration, by contrast, has not been good at multilateralism or institution-building. Let's take some examples. It invaded Iraq without formal support from a United Nations Security Council resolution authorizing the use of force. While the U.S. has welcomed a host of post-communist nations into NATO, it has been unable to rally its allies, new or old, around a clear vision of what NATO's role is or what its future might be. And though, in the wake of the financial crash, President Bush has endorsed the French suggestion of holding a conference that might lead to new arrangements to govern the international financial system, it was the British government, not that of the U.S., that first understood that recapitalization of financial institutions was the key to short-term amelioration of the crisis.
This record of unilateral action and standoffishness has borne bitter fruit in terms of America's reputation overseas. The polls don't lie; even among its staunch allies, the U.S is seen as untrustworthy and dangerous. In his speech in Chicago last year, Obama said "I still believe that America is the last, best hope on earth. We just have to show the world why this is so." But in March, in an interview with the International Herald Tribune, Bernard Kouchner, France's Foreign Minister — and a true lover of America — took a different view. When the rest of world now looks at the U.S., Kouchner said, "the magic is over." Asked if the U.S. could repair the damage done to its reputation over the last few years, Kouchner replied sadly, "It will never be as it was before."
So why has American leadership been so disappointing in the post-Cold War years compared to the period after 1945? What has changed?
Leadership, we should note, is a word and a concept that is used much more often in and about the U.S. than it is anywhere else. The French have so much trouble with the idea of a leader that they often revert to using the English word. The Germans — for understandable reasons — do not boast of their own nation's führerschaft. But American politicians, of all stripes, have no problem in claiming a leadership role for the U.S. — in fact, they regard it as axiomatic that the U.S. should "lead" the world. As David Rieff argued recently in World Affairs, "President Bush has argued that the war in Iraq was a demonstration of America's moral leadership, whereas his liberal opponents claim that Iraq was where the U.S. forfeited its moral leadership. What no one questions is the certainty that we are capable of, indeed accustomed to, exercising such leadership, and, more basically still, that our ideals as a nation entitle us to do so."
The factors that once underpinned this claim, however, do not seem as strong now as they once were. Why not?
The difference between the end of World War II and the end of the Cold War cannot simply be one of personality. Those who put together the international settlement after 1945 — Harry Truman, George Marshall, Dean Acheson and the like — were indeed, in the title of a marvelous book by Walter Isaacson and Evan Thomas, The Wise Men. They were aware of their responsibilities and understood that American power would best be protected if it was shared in a network of institutions that made up a new liberal international order. Granted, George Bush is no Truman, nor Condoleezza Rice a Marshall. But to pin everything on personality ignores social and economic forces that have reshaped the shores of our world and our imagination. And in any case, it misses a significant change between the first term of President Bush and his second, during which the U.S. has relied much more on diplomacy, and much less on the use of force, to advance its objectives.
Underpinning much of that diplomacy has been the idea that democracy is a long-term cure for the instability that spills across national borders, as happened on 9/11. That intuitively makes sense. Democracies, because they institutionalize and internalize bargaining and the representation of different interests, tend to be peaceable. And democratic rights are popular. If the question is simply: Do people all over the world want the same trappings of liberal democracy that we enjoy — the right to choose our leaders, to think and say what we like, to worship how we choose? Then the answer is: Well, of course they do.
But liberal democracy is not all that people want. They want security — that is, quite simply to know that they and their families are safe. And they want justice.
That should not be surprising. Justice, after all, is an older concept than democracy; societies which had no conception of democracy as we know it nonetheless had sophisticated systems of justice. But it is important to distinguish two ways in which justice is relevant to claims of American leadership. First, there is a search for equity between the competing claims of individuals — the sort that might be made by a Palestinian farmer, for example, who has seen water from the local aquifer appropriated by an Israeli settlement. We ignore such claims, and the sullen outrage that accompanies them, at our peril. But there is a second sense in which people make a claim of justice, and this is as a collective — asking that a group to which they belong should receive their just deserts of respect, dignity and influence.
This gets us to the heart of the matter. When the wise men looked at their world in 1945, it was one of ruins. Germany and Japan had been destroyed. Britain was tired out; France shamed; Russia bled white. In China war would continue for another four years. Of the industrial democracies, only the U.S., Canada and Australia had been spared misery in their homeland. The U.S. economy accounted for nearly a half of total world output in 1945, a proportion that it has never approached since. Crucially, the U.S. defined what it was to be modern. The U.S. was big shouldered and handsome, the U.S. wore nylons and lipstick, the U.S. enjoyed a level of prosperity of which others could only dream. In Manhattan '45, her love letter to New York, Jan Morris writes "The old brag biggest and finest in the nation more and more evolved into biggest and finest in the world. Battered and impoverished London, humiliated Paris, shattered Berlin, discredited Rome — the old capitals towards which, before the war, Americans had so often looked with sensations of diffident inferiority now seemed flaccid beside this prodigy of the west."
In this context, it made sense to think, and speak, of "American leadership." If you were an American policymaker in 1945, you did not actually need to make a moral claim to leadership. You did not need to argue that because America was an idea, a city on a hill, the last, best hope of mankind, it had a right and responsibility to remake the world. It was much simpler than that. American leadership in the post-1945 world was not a moral aspiration, or a policy goal, at all. It was, as the Marxists would say, an objective reality, a fact that needed neither justification nor proof.
But that does not even come close to describing the world today. The American domination — economic, social, cultural, political — that was such a feature of the post-1945 world is missing now. Plainly, there are material aspects of modern American life that still inspire admiration from overseas, and features of American innovation that nobody else can match. But I spend about half my time outside the U.S., and I have to say that in many ways, like Bernard Kouchner, I think that the magic is gone. You want modern transportation systems? Try France or Japan. New airports? Half the cities of Asia. The old assumption that American culture would sweep the planet no longer holds good. In Africa and Asia, they don't cluster round TVs to watch baseball's World Series, but they do hang on every minute of every football game in the European Champions League.
Beyond anything else, though, it is the shift of the world's economic center of gravity from the Atlantic to the Pacific that has changed the environment. In 1945, Asia was typified by the rubble of war and the languidly racist torpor of colonial rule. Today, even making all appropriate allowances for a downturn in economies after the financial crisis, Asia remains the most dynamic part of the planet. Both India and China are growing at annual rates of more than 8%, and modernizing at a ferocious clip. China Mobile, the world's biggest mobile-phone company, adds more than 7 million new subscribers to its network every month. Companies like India's Tata and China's Lenovo — to say nothing of the sovereign wealth funds of Asia and the Gulf — routinely snap up icons of Western industry and commerce.
It is not really Asia's economic dynamism that is so important, however. It is the psychological consequences of economic success. The world, I often say to myself when I come home to New York from Asia, just looks better from over there. In Asia today, millions of people have a clear sense that their life is improving — that each year they will have some more creature comforts, maybe a car, maybe air-conditioning, and be better able to look after their aging parents or support their childrens' ambitions.
This economics made flesh is not just terribly moving — though it certainly is that. It also produces a sense of intense pride in those who are living it. It is that sense of pride — quite palpable throughout Asia today — that provides the demand for respect, for influence, for the nations that have achieved such economic success to receive their just deserts.
Nowhere is this more keenly marked than in China. I spend enough time in China to be able to say without equivocation that many of its cities are dystopian, that much of its natural environment is a poisoned wasteland, and that its government can be arbitrary and cruel. At the same time, never in human history are so many people improving their life chances so rapidly as in China today. Understandably, that is a source of immense pride to ordinary Chinese (not just in China, incidentally) and to their leaders. Sometimes this pride manifests itself as old-fashioned nationalism. But more usually it shows itself as a demand for recognition, for — to use that phrase again — just deserts. To be sure, Chinese leaders will often tell you that in some ways, great power status has come too soon to them, that they do not yet have the skills or expertise to handle difficult diplomatic challenges. But though modern Chinese will often ask for understanding, they will always ask for respect. They think they've earned it. And they're right.
This self-confidence of modern China, and other Asian societies, too, has had profound implications. At the most basic level, it has encouraged a wide-eyed admiration. In 2004, the World Bank held a global conference on poverty reduction in Shanghai, and I remember press reports describing the scene each evening. African delegates would gather on the Bund and look over the brown waters of the Whampoa to Pudong, gazing in wonder on an unearthly tableau of neon and skyscrapers built on marshes and paddyfields in not much more than 10 years.
What those Africans were seeing, of course, was not just a collection of extraordinary buildings — the world's highest hotel or a funky reworking of the Eiffel Tower — they were seeing a way of being modern. And that goes directly to the problem with claims of American leadership today. In the post-1945 world, the U.S. had a monopoly on modernity. Now it does not. There are, we have learned, many ways of being modern, and they do not all follow the path blazed by the U.S. This isn't just because in China — or in Russia, for that matter — the social and economic attributes of modernity have taken shape without the trappings of democracy, American style, though that is important. The same phenomenon is also evident in countries that are recognizably democracies. I have written before in TIME about a village in Crete that I have been visiting for more than 30 years. In the mid-1970s, there was just one paved street, the priest was the most important local figure, and there was a crisis among the local families when a girl student returned from college in Athens one summer wearing cut-off jeans. Now the streets are all paved and village children sunbathe in thong bikinis. The village is part of modern Europe. And I do mean Europe. Its sports and cultural heroes are not American, the political issues it cares about are not American, and its sense of the good life is not measured by 500 TV channels and huge McMansions. It has become modern, but its sense of modernity is largely unshaped by anything that the U.S. has done or has been.
This matters, because you cannot be a leader without followers. The end of America's monopoly on modernity, coupled with the pride that other nations and cultures take in their own versions of modernity, has changed the game. What the U.S. faces in the world now is not a crisis of leadership so much as one of followership. To be sure, the fiasco of Iraq has meant that there is no new generation of people and nations keen to follow America's lead. But the fundamental point transcends Iraq. It is that the conditions which created leadership and followership in the post-1945 world are gone, and they're not coming back.
None of this means that the U.S. is not the strongest power on earth; plainly, by any combination of measures it is. Often, other powers will want the U.S. to play a role far from its borders because that is the only way of getting things done. And I am certainly not arguing that the rest of the world should be anything but grateful for the leadership that the U.S. took on in the period after World War II. But the world has changed; the language and the concepts that made sense 50 years ago do not make sense now. The U.S. cannot expect an old debt of gratitude to be paid in the coin of perpetual deference. Nations outside the U.S. have no special need or want to hear claims for American leadership today. If those claims are made, they are likely — in American eyes — to be met with nothing more than a sullen ingratitude. Better for all if we just dispense with the whole idea and come up with something better.
It would be too much to ask those seeking the Presidency to embrace this reasoning. The leadership gene is too firmly lodged in the DNA of American politicians. But both McCain and Obama have stressed the need for a new and heartening approach to international relations. Even as he was calling for American leadership on everything from nuclear proliferation to global warming, Obama in Chicago spoke of the need for the U.S. to adopt "the spirit of a partner — a partner that is mindful of its own imperfections." And in his Los Angeles speech, McCain redefined leadership in a sophisticated way. "Leadership today," he said, "means something different than it did in the years after World War II, when ... the United States was the only democratic superpower. Today we are not alone. There is the powerful collective voice of the European Union, and there are the great [democracies] of India and Japan, Australia and Brazil. There are also the increasingly powerful nations of China and Russia. In such a world, where power of all kinds is more widely and evenly distributed, the United States cannot lead by virtue of its power alone ... We need to listen to the views and respect the collective will of our democratic allies. When we believe international action is necessary ... we will try to persuade our friends that we are right. But we in return must be willing to be persuaded by them."
The America that is sketched in passages such as that — one that does not claim a monopoly of wisdom; one that recognizes that the world has changed; one that does not argue that simply because America was founded on a great idea 232 years ago, it has a moral superiority over everyone else today — is an America to which others would listen. We will soon know if such an America is taking shape.
An earlier version of this article was given as the Howard Higman Memorial Lecture at the University of Colorado at Boulder in April, 2008.
America: The Lost Leader
By MICHAEL ELLIOTT
In the U.S. presidential election campaign, the speeches of the candidates on foreign policy have often turned on a single word, and a shared analysis. The word is "leadership," and the analysis is this. After World War II, the U.S. built an international system that protected those who signed up to its values, and that provided the means for contesting Soviet communism. Now, with the end of the Cold War, and in the messy world that has taken shape in its aftermath, it is time for America to show leadership again. In his set-piece speech on foreign policy in Chicago in April 2007, for example, Barack Obama identified no less than five ways in which the U.S. should lead the world. But John McCain made the point with greatest clarity in his speech to the Los Angeles World Affairs Council in March.
McCain said this: "President Harry Truman once said of America, 'God has created us and brought us to our present position of power and strength for some great purpose.' In his time, that purpose was to contain communism and build the structures of peace and prosperity that could provide a safe passage through the Cold War. Now it is our turn. We face a new set of opportunities and also new dangers ... The United States must lead in the 21st century, just as it did in Truman's day."
Beyond the assumption that the world today needs to see U.S. leadership just as it did after 1945, there has also been a second item of implicit agreement between the candidates: that the performance of the U.S. in its leadership role has been less impressive of late than it was following World War II.
It's hard to argue with that. During and after World War II, the U.S. encouraged the formation of multilateral institutions which spread a sense of collective political, military and economic security around much of the world. The Bush Administration, by contrast, has not been good at multilateralism or institution-building. Let's take some examples. It invaded Iraq without formal support from a United Nations Security Council resolution authorizing the use of force. While the U.S. has welcomed a host of post-communist nations into NATO, it has been unable to rally its allies, new or old, around a clear vision of what NATO's role is or what its future might be. And though, in the wake of the financial crash, President Bush has endorsed the French suggestion of holding a conference that might lead to new arrangements to govern the international financial system, it was the British government, not that of the U.S., that first understood that recapitalization of financial institutions was the key to short-term amelioration of the crisis.
This record of unilateral action and standoffishness has borne bitter fruit in terms of America's reputation overseas. The polls don't lie; even among its staunch allies, the U.S is seen as untrustworthy and dangerous. In his speech in Chicago last year, Obama said "I still believe that America is the last, best hope on earth. We just have to show the world why this is so." But in March, in an interview with the International Herald Tribune, Bernard Kouchner, France's Foreign Minister — and a true lover of America — took a different view. When the rest of world now looks at the U.S., Kouchner said, "the magic is over." Asked if the U.S. could repair the damage done to its reputation over the last few years, Kouchner replied sadly, "It will never be as it was before."
So why has American leadership been so disappointing in the post-Cold War years compared to the period after 1945? What has changed?
Leadership, we should note, is a word and a concept that is used much more often in and about the U.S. than it is anywhere else. The French have so much trouble with the idea of a leader that they often revert to using the English word. The Germans — for understandable reasons — do not boast of their own nation's führerschaft. But American politicians, of all stripes, have no problem in claiming a leadership role for the U.S. — in fact, they regard it as axiomatic that the U.S. should "lead" the world. As David Rieff argued recently in World Affairs, "President Bush has argued that the war in Iraq was a demonstration of America's moral leadership, whereas his liberal opponents claim that Iraq was where the U.S. forfeited its moral leadership. What no one questions is the certainty that we are capable of, indeed accustomed to, exercising such leadership, and, more basically still, that our ideals as a nation entitle us to do so."
The factors that once underpinned this claim, however, do not seem as strong now as they once were. Why not?
The difference between the end of World War II and the end of the Cold War cannot simply be one of personality. Those who put together the international settlement after 1945 — Harry Truman, George Marshall, Dean Acheson and the like — were indeed, in the title of a marvelous book by Walter Isaacson and Evan Thomas, The Wise Men. They were aware of their responsibilities and understood that American power would best be protected if it was shared in a network of institutions that made up a new liberal international order. Granted, George Bush is no Truman, nor Condoleezza Rice a Marshall. But to pin everything on personality ignores social and economic forces that have reshaped the shores of our world and our imagination. And in any case, it misses a significant change between the first term of President Bush and his second, during which the U.S. has relied much more on diplomacy, and much less on the use of force, to advance its objectives.
Underpinning much of that diplomacy has been the idea that democracy is a long-term cure for the instability that spills across national borders, as happened on 9/11. That intuitively makes sense. Democracies, because they institutionalize and internalize bargaining and the representation of different interests, tend to be peaceable. And democratic rights are popular. If the question is simply: Do people all over the world want the same trappings of liberal democracy that we enjoy — the right to choose our leaders, to think and say what we like, to worship how we choose? Then the answer is: Well, of course they do.
But liberal democracy is not all that people want. They want security — that is, quite simply to know that they and their families are safe. And they want justice.
That should not be surprising. Justice, after all, is an older concept than democracy; societies which had no conception of democracy as we know it nonetheless had sophisticated systems of justice. But it is important to distinguish two ways in which justice is relevant to claims of American leadership. First, there is a search for equity between the competing claims of individuals — the sort that might be made by a Palestinian farmer, for example, who has seen water from the local aquifer appropriated by an Israeli settlement. We ignore such claims, and the sullen outrage that accompanies them, at our peril. But there is a second sense in which people make a claim of justice, and this is as a collective — asking that a group to which they belong should receive their just deserts of respect, dignity and influence.
This gets us to the heart of the matter. When the wise men looked at their world in 1945, it was one of ruins. Germany and Japan had been destroyed. Britain was tired out; France shamed; Russia bled white. In China war would continue for another four years. Of the industrial democracies, only the U.S., Canada and Australia had been spared misery in their homeland. The U.S. economy accounted for nearly a half of total world output in 1945, a proportion that it has never approached since. Crucially, the U.S. defined what it was to be modern. The U.S. was big shouldered and handsome, the U.S. wore nylons and lipstick, the U.S. enjoyed a level of prosperity of which others could only dream. In Manhattan '45, her love letter to New York, Jan Morris writes "The old brag biggest and finest in the nation more and more evolved into biggest and finest in the world. Battered and impoverished London, humiliated Paris, shattered Berlin, discredited Rome — the old capitals towards which, before the war, Americans had so often looked with sensations of diffident inferiority now seemed flaccid beside this prodigy of the west."
In this context, it made sense to think, and speak, of "American leadership." If you were an American policymaker in 1945, you did not actually need to make a moral claim to leadership. You did not need to argue that because America was an idea, a city on a hill, the last, best hope of mankind, it had a right and responsibility to remake the world. It was much simpler than that. American leadership in the post-1945 world was not a moral aspiration, or a policy goal, at all. It was, as the Marxists would say, an objective reality, a fact that needed neither justification nor proof.
But that does not even come close to describing the world today. The American domination — economic, social, cultural, political — that was such a feature of the post-1945 world is missing now. Plainly, there are material aspects of modern American life that still inspire admiration from overseas, and features of American innovation that nobody else can match. But I spend about half my time outside the U.S., and I have to say that in many ways, like Bernard Kouchner, I think that the magic is gone. You want modern transportation systems? Try France or Japan. New airports? Half the cities of Asia. The old assumption that American culture would sweep the planet no longer holds good. In Africa and Asia, they don't cluster round TVs to watch baseball's World Series, but they do hang on every minute of every football game in the European Champions League.
Beyond anything else, though, it is the shift of the world's economic center of gravity from the Atlantic to the Pacific that has changed the environment. In 1945, Asia was typified by the rubble of war and the languidly racist torpor of colonial rule. Today, even making all appropriate allowances for a downturn in economies after the financial crisis, Asia remains the most dynamic part of the planet. Both India and China are growing at annual rates of more than 8%, and modernizing at a ferocious clip. China Mobile, the world's biggest mobile-phone company, adds more than 7 million new subscribers to its network every month. Companies like India's Tata and China's Lenovo — to say nothing of the sovereign wealth funds of Asia and the Gulf — routinely snap up icons of Western industry and commerce.
It is not really Asia's economic dynamism that is so important, however. It is the psychological consequences of economic success. The world, I often say to myself when I come home to New York from Asia, just looks better from over there. In Asia today, millions of people have a clear sense that their life is improving — that each year they will have some more creature comforts, maybe a car, maybe air-conditioning, and be better able to look after their aging parents or support their childrens' ambitions.
This economics made flesh is not just terribly moving — though it certainly is that. It also produces a sense of intense pride in those who are living it. It is that sense of pride — quite palpable throughout Asia today — that provides the demand for respect, for influence, for the nations that have achieved such economic success to receive their just deserts.
Nowhere is this more keenly marked than in China. I spend enough time in China to be able to say without equivocation that many of its cities are dystopian, that much of its natural environment is a poisoned wasteland, and that its government can be arbitrary and cruel. At the same time, never in human history are so many people improving their life chances so rapidly as in China today. Understandably, that is a source of immense pride to ordinary Chinese (not just in China, incidentally) and to their leaders. Sometimes this pride manifests itself as old-fashioned nationalism. But more usually it shows itself as a demand for recognition, for — to use that phrase again — just deserts. To be sure, Chinese leaders will often tell you that in some ways, great power status has come too soon to them, that they do not yet have the skills or expertise to handle difficult diplomatic challenges. But though modern Chinese will often ask for understanding, they will always ask for respect. They think they've earned it. And they're right.
This self-confidence of modern China, and other Asian societies, too, has had profound implications. At the most basic level, it has encouraged a wide-eyed admiration. In 2004, the World Bank held a global conference on poverty reduction in Shanghai, and I remember press reports describing the scene each evening. African delegates would gather on the Bund and look over the brown waters of the Whampoa to Pudong, gazing in wonder on an unearthly tableau of neon and skyscrapers built on marshes and paddyfields in not much more than 10 years.
What those Africans were seeing, of course, was not just a collection of extraordinary buildings — the world's highest hotel or a funky reworking of the Eiffel Tower — they were seeing a way of being modern. And that goes directly to the problem with claims of American leadership today. In the post-1945 world, the U.S. had a monopoly on modernity. Now it does not. There are, we have learned, many ways of being modern, and they do not all follow the path blazed by the U.S. This isn't just because in China — or in Russia, for that matter — the social and economic attributes of modernity have taken shape without the trappings of democracy, American style, though that is important. The same phenomenon is also evident in countries that are recognizably democracies. I have written before in TIME about a village in Crete that I have been visiting for more than 30 years. In the mid-1970s, there was just one paved street, the priest was the most important local figure, and there was a crisis among the local families when a girl student returned from college in Athens one summer wearing cut-off jeans. Now the streets are all paved and village children sunbathe in thong bikinis. The village is part of modern Europe. And I do mean Europe. Its sports and cultural heroes are not American, the political issues it cares about are not American, and its sense of the good life is not measured by 500 TV channels and huge McMansions. It has become modern, but its sense of modernity is largely unshaped by anything that the U.S. has done or has been.
This matters, because you cannot be a leader without followers. The end of America's monopoly on modernity, coupled with the pride that other nations and cultures take in their own versions of modernity, has changed the game. What the U.S. faces in the world now is not a crisis of leadership so much as one of followership. To be sure, the fiasco of Iraq has meant that there is no new generation of people and nations keen to follow America's lead. But the fundamental point transcends Iraq. It is that the conditions which created leadership and followership in the post-1945 world are gone, and they're not coming back.
None of this means that the U.S. is not the strongest power on earth; plainly, by any combination of measures it is. Often, other powers will want the U.S. to play a role far from its borders because that is the only way of getting things done. And I am certainly not arguing that the rest of the world should be anything but grateful for the leadership that the U.S. took on in the period after World War II. But the world has changed; the language and the concepts that made sense 50 years ago do not make sense now. The U.S. cannot expect an old debt of gratitude to be paid in the coin of perpetual deference. Nations outside the U.S. have no special need or want to hear claims for American leadership today. If those claims are made, they are likely — in American eyes — to be met with nothing more than a sullen ingratitude. Better for all if we just dispense with the whole idea and come up with something better.
It would be too much to ask those seeking the Presidency to embrace this reasoning. The leadership gene is too firmly lodged in the DNA of American politicians. But both McCain and Obama have stressed the need for a new and heartening approach to international relations. Even as he was calling for American leadership on everything from nuclear proliferation to global warming, Obama in Chicago spoke of the need for the U.S. to adopt "the spirit of a partner — a partner that is mindful of its own imperfections." And in his Los Angeles speech, McCain redefined leadership in a sophisticated way. "Leadership today," he said, "means something different than it did in the years after World War II, when ... the United States was the only democratic superpower. Today we are not alone. There is the powerful collective voice of the European Union, and there are the great [democracies] of India and Japan, Australia and Brazil. There are also the increasingly powerful nations of China and Russia. In such a world, where power of all kinds is more widely and evenly distributed, the United States cannot lead by virtue of its power alone ... We need to listen to the views and respect the collective will of our democratic allies. When we believe international action is necessary ... we will try to persuade our friends that we are right. But we in return must be willing to be persuaded by them."
The America that is sketched in passages such as that — one that does not claim a monopoly of wisdom; one that recognizes that the world has changed; one that does not argue that simply because America was founded on a great idea 232 years ago, it has a moral superiority over everyone else today — is an America to which others would listen. We will soon know if such an America is taking shape.
An earlier version of this article was given as the Howard Higman Memorial Lecture at the University of Colorado at Boulder in April, 2008.
We Should Talk to Our Enemies by Nicholas Burns, Newsweek Web Exclusive
Newsweek
Sponsored By
We Should Talk to Our Enemies
Nicholas Burns
Newsweek Web Exclusive
One of the sharpest and most telling differences on foreign policy between Barack Obama and John McCain is whether the United States should talk to difficult and disreputable leaders like Iran's Mahmoud Ahmadinejad or Venezuela's Hugo Chávez. In each of the three presidential debates, McCain belittled Obama as naive for arguing that America should be willing to negotiate with such adversaries. In the vice presidential debate, Sarah Palin went even further, accusing Obama of "bad judgment … that is dangerous," an ironic charge given her own very modest foreign-policy credentials.
Are McCain and Palin correct that America should stonewall its foes? I lived this issue for 27 years as a career diplomat, serving both Republican and Democratic administrations. Maybe that's why I've been struggling to find the real wisdom and logic in this Republican assault against Obama. I'll bet that a poll of senior diplomats who have served presidents from Carter to Bush would reveal an overwhelming majority who agree with the following position: of course we should talk to difficult adversaries—when it is in our interest and at a time of our choosing.
The more challenging and pertinent question, especially for the McCain-Palin ticket, is the reverse: Is it really smart to declare we will never talk to such leaders? Is it really in our long-term national interest to shut ourselves off from one of the most important and powerful states in the Middle East—Iran—or one of our major suppliers of oil, Venezuela?
During the five decades of the cold war, when Americans had a more Manichaean view of the world, we did, from time to time, cut off relations with particularly odious leaders such as North Korea's Kim Il Sung or Albania's bloodthirsty and maniacal strongman, Enver Hoxha. But for the most part even our most ardent cold-war presidents—Dwight Eisenhower, John Kennedy, Richard Nixon and Ronald Reagan, none of whom was often accused of being weak or naive—decided that sitting down with our adversaries made good sense for America. They all talked to Soviet leaders—men vastly more threatening to America's survival than Ahmadinejad or Chávez are now. JFK negotiated a nuclear Test-Ban Treaty with his mortal adversary, Nikita Khrushchev, just one year after the two narrowly avoided a nuclear holocaust during the Cuban missile crisis. Perhaps more dramatically, Nixon, the greatest anticommunist crusader of his time, went to China in 1972 to repair a more than 20-year rupture with Mao Zedong that he believed no longer worked for America.
All of these cold-war presidents embraced a foreign-policy maxim memorialized by one of the toughest and most experienced leaders of our time, Israel's Yitzhak Rabin, who defended his discussions with Yasir Arafat by declaring, "You don't make peace with friends, you make peace with very unsavory enemies." Why should the United States approach the world any differently now? Especially now? As Americans learned all too dramatically on 9/11 and again during the financial crisis this autumn, we inhabit a rapidly integrating planet where dangers can strike at any time and from great distances. And when others—China, India, Brazil—are rising to share power in the world with us, America needs to spend more time, not less, talking and listening to friends and foes alike.
The real truth Americans need to embrace is that nearly all of the most urgent global challenges—the quaking financial markets, climate change, terrorism—cannot be resolved by America's acting alone in the world. Rather than retreat into isolationism, as we have often done in our history, or go it alone as the unilateralists advocated disastrously in the past decade, we need to commit ourselves to a national strategy of smart engagement with the rest of the world. Simply put, we need all the friends we can get. And we need to think more creatively about how to blunt the power of opponents through smart diplomacy, not just the force of arms.
Talking to our adversaries is no one's idea of fun, and it is not a sure prescription for success in every crisis. But it is crude, simplistic and wrong to charge that negotiations reflect weakness or appeasement. More often than not, they are evidence of a strong and self-confident country. One of America's greatest but often neglected strengths is, in fact, our diplomatic power. Condoleezza Rice's visit to Libya in September—the first by a U.S. secretary of state in five decades—was the culmination of years of careful, deliberate diplomacy to maneuver the Libyan leadership to give up its weapons of mass destruction and renounce terrorism. She would not have achieved that victory had she refused to talk to the Libyans.
For sure, a successful diplomacy needs to be backed up by strong military and intelligence services to fight our wars and terrorist groups like Al Qaeda. We should constantly remind our adversaries that we have other options, including the possible use of force, if talks fail. But we have put too many of the world's problems on the shoulders of our generals and intelligence officers when diplomacy—our ability to persuade, cajole or threaten an opponent—is sometimes the better and more effective way to proceed. We need to trust our ability to outmaneuver dangerous regimes at the negotiating table and in the high court of international public opinion.
Iran is a case in point. Its hard-line, theocratic government poses the greatest threat to peace in the Middle East today. It is funding and arming most of the region's terrorist groups shooting at us, Israel and our moderate Arab friends. It has complicated our efforts in Iraq and Afghanistan. Most alarming, Iran is seeking a nuclear-weapons capability that would change the balance of power in the Middle East.
Rather than default to the idea of using U.S. military force against Iran, wouldn't it make more sense for the next American president to offer to negotiate with the Iranian leadership? Here's the logic. If the talks end up succeeding, we will have prevented a third, and potentially catastrophic, war for the United States in the volatile area linking the Middle East and South Asia. If the talks fail, we will have a far better chance of persuading Russia and China to sign on to tougher sanctions against Iran. I think war with Iran would be unconscionable if we refuse even to try diplomacy first.
I'm not saying the next president should sit down immediately with Ahmadinejad. We should initiate contact at a lower level to investigate whether it's worth putting the president's prestige on the line. We should leave the threat of military action on the table to give us greater leverage as we talk to the Iranian government. And ultimately we'd want other countries with influence—like Russia and China—to sit on our side of the table in order to bring maximum pressure to bear against Tehran. But the United States hasn't had a meaningful set of talks with Iran on all the critical issues that separate us in 30 years, since the Khomeini revolution. To illustrate how far we have isolated ourselves, think about this: I served as the Bush administration's point person on Iran for three years but was never permitted to meet an Iranian. To her immense credit, Secretary Rice arranged for my successor to participate in a multilateral meeting with Iranian officials this past summer. That is a good first step, but the next American president should initiate a more sustained discussion with senior Iranians.
If we aren't willing to talk to Iran, we may leave ourselves with only one option—military action. The next U.S. president will have little chance of securing peace in the Middle East if he doesn't determine Iran's bottom line on the nuclear issue through talks. Similarly, there will be no peace treaty between Syria and Israel if we don't support the talks underway between those countries.
In Afghanistan, the new president will face a very difficult set of choices roughly similar to those in Iraq before the surge. The brilliance of Gen. David Petraeus's strategy in Iraq was, in part, to build bridges to formerly bitter foes in the Sunni militias and to cajole and entice them to switch sides. Some are now suggesting that we should deploy a similar strategy with the Taliban rank and file.
While we should have absolutely no interest in sitting down with Qaeda fanatics or the Taliban leadership, does it make sense to try to persuade lower-ranking Taliban supporters to give up the armed struggle and commit to a democratic Afghanistan? While that's a seemingly logical goal, it would be highly problematic in the short term. We would be better served if we first built up a position of much greater military and political strength, and increased security for Afghan villagers. Talking to our adversaries is not always the answer to all our problems, especially in a highly complex environment such as Afghanistan. We have a long way to go before it might be part of a long-term solution there.
America faces a complex and difficult geopolitical landscape. The next president needs to act more creatively and boldly to defend our interests by revalidating diplomacy as a key weapon in our national arsenal and rebuilding our understaffed and underfunded diplomatic corps. Of course he will need to reserve the right to use force against the most vicious and implacable of our foes. More often than not, however, he will find that dialogue and discussion, talking and listening, are the smarter ways to defend our country, end crises and sometimes even sow the seeds of an ultimate peace.
Burns was under secretary of state for political affairs, the highest-ranking American career diplomat, until his retirement in April. He is now a professor at Harvard's Kennedy School of Government.
URL: http://www.newsweek.com/id/165650
Sponsored By
We Should Talk to Our Enemies
Nicholas Burns
Newsweek Web Exclusive
One of the sharpest and most telling differences on foreign policy between Barack Obama and John McCain is whether the United States should talk to difficult and disreputable leaders like Iran's Mahmoud Ahmadinejad or Venezuela's Hugo Chávez. In each of the three presidential debates, McCain belittled Obama as naive for arguing that America should be willing to negotiate with such adversaries. In the vice presidential debate, Sarah Palin went even further, accusing Obama of "bad judgment … that is dangerous," an ironic charge given her own very modest foreign-policy credentials.
Are McCain and Palin correct that America should stonewall its foes? I lived this issue for 27 years as a career diplomat, serving both Republican and Democratic administrations. Maybe that's why I've been struggling to find the real wisdom and logic in this Republican assault against Obama. I'll bet that a poll of senior diplomats who have served presidents from Carter to Bush would reveal an overwhelming majority who agree with the following position: of course we should talk to difficult adversaries—when it is in our interest and at a time of our choosing.
The more challenging and pertinent question, especially for the McCain-Palin ticket, is the reverse: Is it really smart to declare we will never talk to such leaders? Is it really in our long-term national interest to shut ourselves off from one of the most important and powerful states in the Middle East—Iran—or one of our major suppliers of oil, Venezuela?
During the five decades of the cold war, when Americans had a more Manichaean view of the world, we did, from time to time, cut off relations with particularly odious leaders such as North Korea's Kim Il Sung or Albania's bloodthirsty and maniacal strongman, Enver Hoxha. But for the most part even our most ardent cold-war presidents—Dwight Eisenhower, John Kennedy, Richard Nixon and Ronald Reagan, none of whom was often accused of being weak or naive—decided that sitting down with our adversaries made good sense for America. They all talked to Soviet leaders—men vastly more threatening to America's survival than Ahmadinejad or Chávez are now. JFK negotiated a nuclear Test-Ban Treaty with his mortal adversary, Nikita Khrushchev, just one year after the two narrowly avoided a nuclear holocaust during the Cuban missile crisis. Perhaps more dramatically, Nixon, the greatest anticommunist crusader of his time, went to China in 1972 to repair a more than 20-year rupture with Mao Zedong that he believed no longer worked for America.
All of these cold-war presidents embraced a foreign-policy maxim memorialized by one of the toughest and most experienced leaders of our time, Israel's Yitzhak Rabin, who defended his discussions with Yasir Arafat by declaring, "You don't make peace with friends, you make peace with very unsavory enemies." Why should the United States approach the world any differently now? Especially now? As Americans learned all too dramatically on 9/11 and again during the financial crisis this autumn, we inhabit a rapidly integrating planet where dangers can strike at any time and from great distances. And when others—China, India, Brazil—are rising to share power in the world with us, America needs to spend more time, not less, talking and listening to friends and foes alike.
The real truth Americans need to embrace is that nearly all of the most urgent global challenges—the quaking financial markets, climate change, terrorism—cannot be resolved by America's acting alone in the world. Rather than retreat into isolationism, as we have often done in our history, or go it alone as the unilateralists advocated disastrously in the past decade, we need to commit ourselves to a national strategy of smart engagement with the rest of the world. Simply put, we need all the friends we can get. And we need to think more creatively about how to blunt the power of opponents through smart diplomacy, not just the force of arms.
Talking to our adversaries is no one's idea of fun, and it is not a sure prescription for success in every crisis. But it is crude, simplistic and wrong to charge that negotiations reflect weakness or appeasement. More often than not, they are evidence of a strong and self-confident country. One of America's greatest but often neglected strengths is, in fact, our diplomatic power. Condoleezza Rice's visit to Libya in September—the first by a U.S. secretary of state in five decades—was the culmination of years of careful, deliberate diplomacy to maneuver the Libyan leadership to give up its weapons of mass destruction and renounce terrorism. She would not have achieved that victory had she refused to talk to the Libyans.
For sure, a successful diplomacy needs to be backed up by strong military and intelligence services to fight our wars and terrorist groups like Al Qaeda. We should constantly remind our adversaries that we have other options, including the possible use of force, if talks fail. But we have put too many of the world's problems on the shoulders of our generals and intelligence officers when diplomacy—our ability to persuade, cajole or threaten an opponent—is sometimes the better and more effective way to proceed. We need to trust our ability to outmaneuver dangerous regimes at the negotiating table and in the high court of international public opinion.
Iran is a case in point. Its hard-line, theocratic government poses the greatest threat to peace in the Middle East today. It is funding and arming most of the region's terrorist groups shooting at us, Israel and our moderate Arab friends. It has complicated our efforts in Iraq and Afghanistan. Most alarming, Iran is seeking a nuclear-weapons capability that would change the balance of power in the Middle East.
Rather than default to the idea of using U.S. military force against Iran, wouldn't it make more sense for the next American president to offer to negotiate with the Iranian leadership? Here's the logic. If the talks end up succeeding, we will have prevented a third, and potentially catastrophic, war for the United States in the volatile area linking the Middle East and South Asia. If the talks fail, we will have a far better chance of persuading Russia and China to sign on to tougher sanctions against Iran. I think war with Iran would be unconscionable if we refuse even to try diplomacy first.
I'm not saying the next president should sit down immediately with Ahmadinejad. We should initiate contact at a lower level to investigate whether it's worth putting the president's prestige on the line. We should leave the threat of military action on the table to give us greater leverage as we talk to the Iranian government. And ultimately we'd want other countries with influence—like Russia and China—to sit on our side of the table in order to bring maximum pressure to bear against Tehran. But the United States hasn't had a meaningful set of talks with Iran on all the critical issues that separate us in 30 years, since the Khomeini revolution. To illustrate how far we have isolated ourselves, think about this: I served as the Bush administration's point person on Iran for three years but was never permitted to meet an Iranian. To her immense credit, Secretary Rice arranged for my successor to participate in a multilateral meeting with Iranian officials this past summer. That is a good first step, but the next American president should initiate a more sustained discussion with senior Iranians.
If we aren't willing to talk to Iran, we may leave ourselves with only one option—military action. The next U.S. president will have little chance of securing peace in the Middle East if he doesn't determine Iran's bottom line on the nuclear issue through talks. Similarly, there will be no peace treaty between Syria and Israel if we don't support the talks underway between those countries.
In Afghanistan, the new president will face a very difficult set of choices roughly similar to those in Iraq before the surge. The brilliance of Gen. David Petraeus's strategy in Iraq was, in part, to build bridges to formerly bitter foes in the Sunni militias and to cajole and entice them to switch sides. Some are now suggesting that we should deploy a similar strategy with the Taliban rank and file.
While we should have absolutely no interest in sitting down with Qaeda fanatics or the Taliban leadership, does it make sense to try to persuade lower-ranking Taliban supporters to give up the armed struggle and commit to a democratic Afghanistan? While that's a seemingly logical goal, it would be highly problematic in the short term. We would be better served if we first built up a position of much greater military and political strength, and increased security for Afghan villagers. Talking to our adversaries is not always the answer to all our problems, especially in a highly complex environment such as Afghanistan. We have a long way to go before it might be part of a long-term solution there.
America faces a complex and difficult geopolitical landscape. The next president needs to act more creatively and boldly to defend our interests by revalidating diplomacy as a key weapon in our national arsenal and rebuilding our understaffed and underfunded diplomatic corps. Of course he will need to reserve the right to use force against the most vicious and implacable of our foes. More often than not, however, he will find that dialogue and discussion, talking and listening, are the smarter ways to defend our country, end crises and sometimes even sow the seeds of an ultimate peace.
Burns was under secretary of state for political affairs, the highest-ranking American career diplomat, until his retirement in April. He is now a professor at Harvard's Kennedy School of Government.
URL: http://www.newsweek.com/id/165650
Twilight Struggle: In its closing days, the Bush Administration escalates the war on terror by Eli Lake
NEW REPUBLIC
10/28/08
Twilight Struggle
In its closing days, the Bush administration escalates the war on terror.
Eli Lake
On Sunday, U.S. helicopters accompanied by a special forces team struck in Sukkariyeh, Syria, just over the border from Iraq. It was a raid with enormous implications for the war in Iraq and the broader war on terror. The target of the raid was a man named Badran Turki Hishan al-Mazidih, better known in his circles as Abu Ghadiya. Since 2004, intelligence officials have been targeting Abu Ghadiya for his pernicious role in Iraq: helping fuel the Sunni insurgency by transporting foreign fighters, money, and weapons. Never before had Americans struck within Syria with such visible fingerprints. But officials believe that killing Abu Ghadiya justified that kind of action. One military official told me that the elimination of Abu Ghadiya represents a significant triumph over al Qaeda in Iraq. "The organization is pretty much finished now," he told me.
That is a big story. But it doesn't begin to capture the magnitude of the strike in Sukkariyeh. We have entered a new phase in the war on terror. In July, according to three administration sources, the Bush administration formally gave the military new power to strike terrorist safe havens outside of Iraq and Afghanistan. Before then, a military strike in a country like Syria or Pakistan would have required President Bush's personal approval. Now, those kinds of strikes in the region can occur at the discretion of the incoming commander of Central Command (Centcomm), General David Petraeus. One intelligence source described the order as institutionalizing the "Chicago Way," an allusion to Sean Connery's famous soliloquy about bringing a gun to a knife fight.
The new order could pave the way for direct action in Kenya, Mali, Pakistan, Sudan, Syria, and Yemen--all places where the American intelligence believe al Qaeda has a significant presence, but can no longer count on the indigenous security services to act. In the parlance of the Cold War, Petraeus will now have the authority to fight a regional "dirty war." When queried about the order from July, deputy spokesman for the National Security Council Ben Chang offered no comment.
Strikes within Iran could be justified by the order, since senior al Qaeda leaders such as Saif al Adel are believed to have used that country as a base for aiding the Afghan Taliban and al Qaeda affiliates in Iraqi Kurdistan. For now, however, any action inside Iranian territory will require at least sign off from the chairman of the joint chiefs of staff because of Iran's capacity to retaliate inside the western hemisphere.
Why has the administration changed policy at this late date? For starters, the administration is genuinely worried about al Qaeda's resurgence, not just in Pakistan, but across Asia and Africa. Within the administration, there is growing frustration with security services that are either unable or unwilling to root out al Qaeda within their borders. Pakistan is perhaps the best example of this. And even friendly services, like the one in Kenya, have made maddeningly little progress in their fight against terrorism.
When the administration first proposed this approach, it met with internal resistance. The National Intelligence Council produced a paper outlining the risk associated with this change in policy such as scuttling the prospect for better security cooperation in the future. And Admiral William Fallon, who preceded Petraeus at Centcomm, opposed taking direct action against al Qaeda and affiliated targets in Syria. But with the clock winding down on the administration, it has a greater appetite for racking up victories against al Qaeda--and less worries about any residual political consequences from striking. Roger Cressey, a former deputy to Richard Clarke in the Clinton and Bush administrations, says, "[W]ith the administration in the final weeks, the bar for military operations will be lowered because the downsides for the president are minimal."
The big mystery now is whether the next administration will dismantle this policy or permit Petraeus to follow it to fruition. Obama has said nothing about Sunday's strikes in Syria (a silence that has rightly earned him taunting from the McCain campaign). On one level, this new policy conflicts with Obama's stated desire for opening up diplomatic channels to places like Tehran and Damascus. On the other hand, this is precisely the type of policy that he has repeatedly promised at least for Pakistan, whose territory is believed to host Osama bin Laden: If America has actionable intelligence on al Qaeda leaders, and the country housing those terrorist sits on its hands, we will act. His campaign rhetoric has now become the official war policy he will inherit. Is this a development that pleases him?
10/28/08
Twilight Struggle
In its closing days, the Bush administration escalates the war on terror.
Eli Lake
On Sunday, U.S. helicopters accompanied by a special forces team struck in Sukkariyeh, Syria, just over the border from Iraq. It was a raid with enormous implications for the war in Iraq and the broader war on terror. The target of the raid was a man named Badran Turki Hishan al-Mazidih, better known in his circles as Abu Ghadiya. Since 2004, intelligence officials have been targeting Abu Ghadiya for his pernicious role in Iraq: helping fuel the Sunni insurgency by transporting foreign fighters, money, and weapons. Never before had Americans struck within Syria with such visible fingerprints. But officials believe that killing Abu Ghadiya justified that kind of action. One military official told me that the elimination of Abu Ghadiya represents a significant triumph over al Qaeda in Iraq. "The organization is pretty much finished now," he told me.
That is a big story. But it doesn't begin to capture the magnitude of the strike in Sukkariyeh. We have entered a new phase in the war on terror. In July, according to three administration sources, the Bush administration formally gave the military new power to strike terrorist safe havens outside of Iraq and Afghanistan. Before then, a military strike in a country like Syria or Pakistan would have required President Bush's personal approval. Now, those kinds of strikes in the region can occur at the discretion of the incoming commander of Central Command (Centcomm), General David Petraeus. One intelligence source described the order as institutionalizing the "Chicago Way," an allusion to Sean Connery's famous soliloquy about bringing a gun to a knife fight.
The new order could pave the way for direct action in Kenya, Mali, Pakistan, Sudan, Syria, and Yemen--all places where the American intelligence believe al Qaeda has a significant presence, but can no longer count on the indigenous security services to act. In the parlance of the Cold War, Petraeus will now have the authority to fight a regional "dirty war." When queried about the order from July, deputy spokesman for the National Security Council Ben Chang offered no comment.
Strikes within Iran could be justified by the order, since senior al Qaeda leaders such as Saif al Adel are believed to have used that country as a base for aiding the Afghan Taliban and al Qaeda affiliates in Iraqi Kurdistan. For now, however, any action inside Iranian territory will require at least sign off from the chairman of the joint chiefs of staff because of Iran's capacity to retaliate inside the western hemisphere.
Why has the administration changed policy at this late date? For starters, the administration is genuinely worried about al Qaeda's resurgence, not just in Pakistan, but across Asia and Africa. Within the administration, there is growing frustration with security services that are either unable or unwilling to root out al Qaeda within their borders. Pakistan is perhaps the best example of this. And even friendly services, like the one in Kenya, have made maddeningly little progress in their fight against terrorism.
When the administration first proposed this approach, it met with internal resistance. The National Intelligence Council produced a paper outlining the risk associated with this change in policy such as scuttling the prospect for better security cooperation in the future. And Admiral William Fallon, who preceded Petraeus at Centcomm, opposed taking direct action against al Qaeda and affiliated targets in Syria. But with the clock winding down on the administration, it has a greater appetite for racking up victories against al Qaeda--and less worries about any residual political consequences from striking. Roger Cressey, a former deputy to Richard Clarke in the Clinton and Bush administrations, says, "[W]ith the administration in the final weeks, the bar for military operations will be lowered because the downsides for the president are minimal."
The big mystery now is whether the next administration will dismantle this policy or permit Petraeus to follow it to fruition. Obama has said nothing about Sunday's strikes in Syria (a silence that has rightly earned him taunting from the McCain campaign). On one level, this new policy conflicts with Obama's stated desire for opening up diplomatic channels to places like Tehran and Damascus. On the other hand, this is precisely the type of policy that he has repeatedly promised at least for Pakistan, whose territory is believed to host Osama bin Laden: If America has actionable intelligence on al Qaeda leaders, and the country housing those terrorist sits on its hands, we will act. His campaign rhetoric has now become the official war policy he will inherit. Is this a development that pleases him?
The End of International Law?
THE NATION
10/29/08
The End of International Law?
Robert Dreyfus
A parallel new Bush doctrine is emerging, in the last days of the soon-to-be-ancien regime, and it needs to be strangled in its crib. Like the original Bush doctrine -- the one that Sarah Palin couldn't name, which called for preventive military action against emerging threats -- this one also casts international law aside by insisting that the United States has an inherent right to cross international borders in "hot pursuit" of anyone it doesn't like.
They're already applying it to Pakistan, and this week Syria was the target. Is Iran next?
Let's take Pakistan first. Though a nominal ally, Pakistan has been the subject of at least nineteen aerial attacks by CIA-controlled drone aircraft, killing scores of Pakistanis and some Afghans in tribal areas controlled by pro-Taliban forces. The New York Times listed, and mapped, all nineteen such attacks in a recent piece describing Predator attacks across the Afghan border, all since August. The Times notes that inside the government, the U.S.Special Operations command and other advocates are pushing for a more aggressive use of such units, including efforts to kidnap and interrogate suspected Taliban and Al Qaeda leaders. Though President Bush signed an order in July allowing U.S. commando teams to move into Pakistan itself, with or without Islamabad's permission, such raids have occurred only once, on September 3.
The U.S. raid into Syria on October 26 similarly trampled on Syria's sovereignty without so much as a fare-thee-well. Though the Pentagon initially denied that the raid involved helicopters and on-the-ground commando presence, that's exactly what happened. The attack reportedly killed Badran Turki Hishan al-Mazidih, an Iraqi facilitator who smuggled foreign fighters into Iraq through Syria. The Washington Post was ecstatic, writing in an editorial:
"If Sunday's raid, which targeted a senior al-Qaeda operative, serves only to put Mr. Assad on notice that the United States, too, is no longer prepared to respect the sovereignty of a criminal regime, it will have been worthwhile."
Is it really that easy? To say: We declare your regime criminal, and so we will attack you anytime we care to? In its news report of the attack into Syria, the Post suggests, in a report by Ann Scott Tyson and Ellen Knickmeyer, that the attack is raising cross-border hot pursuit to the level of a doctrine:
"The military's argument is that 'you can only claim sovereignty if you enforce it,' said Anthony Cordesman, a military analyst at the Center for Strategic and International Studies. 'When you are dealing with states that do not maintain their sovereignty and become a de facto sanctuary, the only way you have to deal with them is this kind of operation,' he said."
The Times broadens the possible targets from Pakistan and Syria to Iran, writing (in a page one story by Eric Schmitt and Thom Shanker):
"Administration officials declined to say whether the emerging application of self-defense could lead to strikes against camps inside Iran that have been used to train Shiite 'special groups' that have fought with the American military and Iraqi security forces."
That, of course, has been a live option, especially since the start of the surge in January, 2007, when President Bush promised to strike at Iranian supply lines in Iraq and other U.S. officials, including Vice President Cheney, pressed hard to attack sites within Iran, regardless of the consequences.
On October 24, I went to hear Mike Vickers, the assistant secretary of defense for special operations and low-intensity conflict, speaking at the Washington Institiute for Near East Policy (WINEP), a pro-Israeli thinktank in Washington. He spoke with pride about the vast and growing presence of these commando forces within the U.S. military, noting that their budget has doubled under the Bush administration and that, by the end of the decade, their will more than 60,000 U.S. forces in this shadowy effort. Here are some excerpts of Vickers' remarks:
"If you look at the operational core of our Special Operations Forces, and focus on the ground operators, there are some 15,000 or so of those -- give or take how you count them -- these range from our Army Special Forces or our Green Berets, our Rangers, our Seals, some classified units we have, and we recently added a Marine Corps Special Operations Command to this arsenal as well. In addition to adding the Marine component, each of these elements since 2006 and out to about 2012 or 2013 has been increasing their capacity as well as their capabilities, but their capacity by a third. This is the largest growth in Special Operations Force history. By the time we're done with that, there will be some things, some gaps we need to fix undoubtedly, but we will have the elements in place for what we believe is the Special Operations component of the global war on terrorism.
"Special Operations Forces, I think through this decade and into the next one, have been and will remain a decisive strategic instrument. ...
"There's been a very significant -- about a 40 or 50 percent increase in operational tempo and of course more intense in terms of the action since the 9/11 attacks. On any given day that we wake up, our Special Operations Forces are in some sixty countries around the world. But more than 80 percent or so of those right now are concentrated in the greater Middle East or the United States Central Command area of responsibility -- the bulk of those of course in Iraq and Afghanistan."
Notice what he said: operating in 60 countries.
Of course, the very invasion of Iraq was illegal in 2003, and it flouted international law. So some may say, these cross-border raids are small potatoes. But they're not. This is a big deal. If it becomes a standard part of U.S. military doctrine that any country can be declared "criminal" and thus lose its sovereignty, then there is no such thing as international law anymore.
When Defense Secretary Robert Gates was asked about this, here's what he said, as quoted in the Post article cited earlier:
"'We will do what is necessary to protect our troops,' Defense Secretary Robert M. Gates said in Senate testimony last month, when asked about the cross-border operations. Under questioning, Gates said that he was not an expert in international law but that he assumed the State Department had consulted such laws before the U.S. military was granted authority to make such strikes."
Not an expert in international law? He'll leave it to the State Department? And this is the guy that Barack Obama's advisers say ought to stay on at the Pentagon under an Obama administration?
10/29/08
The End of International Law?
Robert Dreyfus
A parallel new Bush doctrine is emerging, in the last days of the soon-to-be-ancien regime, and it needs to be strangled in its crib. Like the original Bush doctrine -- the one that Sarah Palin couldn't name, which called for preventive military action against emerging threats -- this one also casts international law aside by insisting that the United States has an inherent right to cross international borders in "hot pursuit" of anyone it doesn't like.
They're already applying it to Pakistan, and this week Syria was the target. Is Iran next?
Let's take Pakistan first. Though a nominal ally, Pakistan has been the subject of at least nineteen aerial attacks by CIA-controlled drone aircraft, killing scores of Pakistanis and some Afghans in tribal areas controlled by pro-Taliban forces. The New York Times listed, and mapped, all nineteen such attacks in a recent piece describing Predator attacks across the Afghan border, all since August. The Times notes that inside the government, the U.S.Special Operations command and other advocates are pushing for a more aggressive use of such units, including efforts to kidnap and interrogate suspected Taliban and Al Qaeda leaders. Though President Bush signed an order in July allowing U.S. commando teams to move into Pakistan itself, with or without Islamabad's permission, such raids have occurred only once, on September 3.
The U.S. raid into Syria on October 26 similarly trampled on Syria's sovereignty without so much as a fare-thee-well. Though the Pentagon initially denied that the raid involved helicopters and on-the-ground commando presence, that's exactly what happened. The attack reportedly killed Badran Turki Hishan al-Mazidih, an Iraqi facilitator who smuggled foreign fighters into Iraq through Syria. The Washington Post was ecstatic, writing in an editorial:
"If Sunday's raid, which targeted a senior al-Qaeda operative, serves only to put Mr. Assad on notice that the United States, too, is no longer prepared to respect the sovereignty of a criminal regime, it will have been worthwhile."
Is it really that easy? To say: We declare your regime criminal, and so we will attack you anytime we care to? In its news report of the attack into Syria, the Post suggests, in a report by Ann Scott Tyson and Ellen Knickmeyer, that the attack is raising cross-border hot pursuit to the level of a doctrine:
"The military's argument is that 'you can only claim sovereignty if you enforce it,' said Anthony Cordesman, a military analyst at the Center for Strategic and International Studies. 'When you are dealing with states that do not maintain their sovereignty and become a de facto sanctuary, the only way you have to deal with them is this kind of operation,' he said."
The Times broadens the possible targets from Pakistan and Syria to Iran, writing (in a page one story by Eric Schmitt and Thom Shanker):
"Administration officials declined to say whether the emerging application of self-defense could lead to strikes against camps inside Iran that have been used to train Shiite 'special groups' that have fought with the American military and Iraqi security forces."
That, of course, has been a live option, especially since the start of the surge in January, 2007, when President Bush promised to strike at Iranian supply lines in Iraq and other U.S. officials, including Vice President Cheney, pressed hard to attack sites within Iran, regardless of the consequences.
On October 24, I went to hear Mike Vickers, the assistant secretary of defense for special operations and low-intensity conflict, speaking at the Washington Institiute for Near East Policy (WINEP), a pro-Israeli thinktank in Washington. He spoke with pride about the vast and growing presence of these commando forces within the U.S. military, noting that their budget has doubled under the Bush administration and that, by the end of the decade, their will more than 60,000 U.S. forces in this shadowy effort. Here are some excerpts of Vickers' remarks:
"If you look at the operational core of our Special Operations Forces, and focus on the ground operators, there are some 15,000 or so of those -- give or take how you count them -- these range from our Army Special Forces or our Green Berets, our Rangers, our Seals, some classified units we have, and we recently added a Marine Corps Special Operations Command to this arsenal as well. In addition to adding the Marine component, each of these elements since 2006 and out to about 2012 or 2013 has been increasing their capacity as well as their capabilities, but their capacity by a third. This is the largest growth in Special Operations Force history. By the time we're done with that, there will be some things, some gaps we need to fix undoubtedly, but we will have the elements in place for what we believe is the Special Operations component of the global war on terrorism.
"Special Operations Forces, I think through this decade and into the next one, have been and will remain a decisive strategic instrument. ...
"There's been a very significant -- about a 40 or 50 percent increase in operational tempo and of course more intense in terms of the action since the 9/11 attacks. On any given day that we wake up, our Special Operations Forces are in some sixty countries around the world. But more than 80 percent or so of those right now are concentrated in the greater Middle East or the United States Central Command area of responsibility -- the bulk of those of course in Iraq and Afghanistan."
Notice what he said: operating in 60 countries.
Of course, the very invasion of Iraq was illegal in 2003, and it flouted international law. So some may say, these cross-border raids are small potatoes. But they're not. This is a big deal. If it becomes a standard part of U.S. military doctrine that any country can be declared "criminal" and thus lose its sovereignty, then there is no such thing as international law anymore.
When Defense Secretary Robert Gates was asked about this, here's what he said, as quoted in the Post article cited earlier:
"'We will do what is necessary to protect our troops,' Defense Secretary Robert M. Gates said in Senate testimony last month, when asked about the cross-border operations. Under questioning, Gates said that he was not an expert in international law but that he assumed the State Department had consulted such laws before the U.S. military was granted authority to make such strikes."
Not an expert in international law? He'll leave it to the State Department? And this is the guy that Barack Obama's advisers say ought to stay on at the Pentagon under an Obama administration?
The Debate on America's Decline
With the debate about putative American decline in full flow, partisans on either side are having their say. For example, Robert Kagan addresses the topic in today's WP while taking a few swipes at Senator Obama. ( http://www.washingtonpost.com/wp-dyn/content/article/2008/10/29/AR2008102903202.html ). For a more considered guided tour to this subject, readers may wish to consult the exceptionally interesting article "Is America Really on the Decline" written by Salon member Tom Omestad in this week's US News and World Report. This quotes Committee for the Republic Chairman Chas Freeman. The link is at:
http://www.usnews.com/articles/news/national/2008/10/29/is-america-really-on-the-decline.html
http://www.usnews.com/articles/news/national/2008/10/29/is-america-really-on-the-decline.html
Wednesday, October 29, 2008
Syria warns US of retaliation
Syria warns US of retaliation
Wednesday, October 29, 2008
ISTANBUL - TDN with wire dispatches
A U.S. military raid inside Syria was an act of "criminal and terrorist aggression," Syrian government said, and Damascus warned of retaliation if its borders were violated again. If there is a repeat of the weekend raid, "we would defend our territories," Syrian Foreign Minister Walid al-Moallem told a news conference in London, according to The Associated Press.
Syria also decided yesterday to close the U.S. cultural center and the American school in Damascus, the state news agency SANA reported. Syrian news agency said the decision came at a Cabinet meeting yesterday chaired by Prime Minister Naji Otari. The report also added that the Syrian education minister has been instructed to implement the decision.
The U.S. military said it was targeting the network of al-Qaeda-linked foreign fighters moving through Syria to help fight in Iraq. But Syria said troops in four helicopters attacked a building and killed eight civilians, including four children.
Al-Moallem said that a farmer, three children and a fisherman who was out working are among the dead.
"All of them are civilian, unarmed, and they are on Syrian territory," he said. "Killing civilians in international law means a terrorist aggression. We consider this criminal and terrorist action." He said he did not believe civilians had been killed mistakenly.
"The Americans do it in the daylight ... this means it is not a mistake - it's by blunt determination," Al-Moallem said.
Al-Moallem dismissed claims that the U.S. had been pressed to act inside Syria's borders because the country has done too little to halt the flow of fighters crossing into Iraq. Syria is working hard to seal the border, but the U.S. is "blaming us by killing our civilians," al-Moallem told reporters.
US under fire for raid:
Meanwhile, Iraqi government as well as Egypt and China condemned deadly U.S. raid into Syria at the weekend.
"The Iraqi government rejects U.S. aircraft bombarding posts inside Syria. The constitution does not allow Iraq to be used as a staging ground to attack neighboring countries," Iraqi spokesman Ali al-Dabbagh said yesterday.
Dabbagh said Iraq had opened an investigation into the incident and urged U.S. forces not to repeat it. But he also called for a halt to what he described as insurgent activity inside Syria, as reported by Agence France-Presse.
In Cairo a foreign ministry statement carried by Egypt's official MENA news agency called the U.S. strike a "serious violation of Syria's sovereignty."
It said Egypt called on all parties "to refrain from any activity or measure that could destabilize the region... and respect the principles of good neighborliness."
China also condemned the raid, with foreign ministry spokeswoman Jiang Yu telling reporters that Beijing opposes "any deed that harms other countries' sovereignty and territorial integrity."
"Relevant parties should properly handle this case to safeguard peace and stability in the Middle East."
On Monday, France, Russia and also the European Union's foreign policy chief Javier Solana voiced concern about the U.S. operation.
© 2005 Dogan Daily News Inc. www.turkishdailynews.com.tr
Wednesday, October 29, 2008
ISTANBUL - TDN with wire dispatches
A U.S. military raid inside Syria was an act of "criminal and terrorist aggression," Syrian government said, and Damascus warned of retaliation if its borders were violated again. If there is a repeat of the weekend raid, "we would defend our territories," Syrian Foreign Minister Walid al-Moallem told a news conference in London, according to The Associated Press.
Syria also decided yesterday to close the U.S. cultural center and the American school in Damascus, the state news agency SANA reported. Syrian news agency said the decision came at a Cabinet meeting yesterday chaired by Prime Minister Naji Otari. The report also added that the Syrian education minister has been instructed to implement the decision.
The U.S. military said it was targeting the network of al-Qaeda-linked foreign fighters moving through Syria to help fight in Iraq. But Syria said troops in four helicopters attacked a building and killed eight civilians, including four children.
Al-Moallem said that a farmer, three children and a fisherman who was out working are among the dead.
"All of them are civilian, unarmed, and they are on Syrian territory," he said. "Killing civilians in international law means a terrorist aggression. We consider this criminal and terrorist action." He said he did not believe civilians had been killed mistakenly.
"The Americans do it in the daylight ... this means it is not a mistake - it's by blunt determination," Al-Moallem said.
Al-Moallem dismissed claims that the U.S. had been pressed to act inside Syria's borders because the country has done too little to halt the flow of fighters crossing into Iraq. Syria is working hard to seal the border, but the U.S. is "blaming us by killing our civilians," al-Moallem told reporters.
US under fire for raid:
Meanwhile, Iraqi government as well as Egypt and China condemned deadly U.S. raid into Syria at the weekend.
"The Iraqi government rejects U.S. aircraft bombarding posts inside Syria. The constitution does not allow Iraq to be used as a staging ground to attack neighboring countries," Iraqi spokesman Ali al-Dabbagh said yesterday.
Dabbagh said Iraq had opened an investigation into the incident and urged U.S. forces not to repeat it. But he also called for a halt to what he described as insurgent activity inside Syria, as reported by Agence France-Presse.
In Cairo a foreign ministry statement carried by Egypt's official MENA news agency called the U.S. strike a "serious violation of Syria's sovereignty."
It said Egypt called on all parties "to refrain from any activity or measure that could destabilize the region... and respect the principles of good neighborliness."
China also condemned the raid, with foreign ministry spokeswoman Jiang Yu telling reporters that Beijing opposes "any deed that harms other countries' sovereignty and territorial integrity."
"Relevant parties should properly handle this case to safeguard peace and stability in the Middle East."
On Monday, France, Russia and also the European Union's foreign policy chief Javier Solana voiced concern about the U.S. operation.
© 2005 Dogan Daily News Inc. www.turkishdailynews.com.tr
The State Department, not the Pentagon, should lead America's public diplomacy efforts
The State Department, not the Pentagon, should lead America's public diplomacy efforts
Why is the Department of Defense getting so much money and personnel to carry out the mission?
By Kristin M. Lord
from the October 29, 2008 edition of the Christian Science Monitor
Washington - Today's public diplomats wear boots, not wingtips. Increasingly, the Defense Department is at the forefront of US efforts to engage public opinion overseas. While the State Department formally leads the effort, the Pentagon has more money and personnel to carry out the public diplomacy mission.
This trend is risky. The message foreign publics receive – not the message the US sends – changes when the Pentagon is the messenger. Putting our military, not civilians, at the forefront of US global communications undercuts the likelihood of success, distorts priorities, and undermines the effectiveness of US civilian agencies.
According to a Washington Post report, the Department of Defense will pay private contractors $300 million over three years to produce news and entertainment programs for the Iraqi public. These well-intentioned efforts aim to "engage and inspire" Iraqis to support the objectives of both the US and Iraqi governments.
Such outreach campaigns can be powerful if done well and as part of a broader strategy of engagement, political reconciliation, and economic development. Indeed, Secretary of Defense Robert Gates has argued eloquently that the United States must call increasingly upon "soft power" to advance national interests. Soft power can take many forms, but it is primarily the use of culture, values, and ideas to attract, instead of military or economic threats to coerce.
After the cold war, the US gutted its soft power arsenal and has yet to rebuild it fully. The Department of Defense stepped into this vacuum, and in many cases has done the job well. However, the Defense Department is not the right agency for this job.
In most circumstances, the Department of Defense (DoD) should not serve as the most visible face of the United States overseas. This is particularly true in areas where the public feels threatened by American power.
The Middle East is one area where polls show distrust of American motives and concern that America seeks to dominate the region militarily. Indeed, according to a Pew Global Attitudes Project survey taken last year, 64 percent of Turks – citizens of a NATO ally – see the United States as the greatest threat to their country in the future. Civilians, including those who do not work for government agencies, are the best conduits for building trust with wary publics.
Civilians should not just be the public face of communications. They should also set strategy and tactics that advance American foreign policy interests, in close cooperation with defense officials and military commanders. This is officially the role of the State Department, our nation's lead agency in making and implementing foreign policy. Yet, informally, resources drive outcomes, and the Pentagon has most of the money.
Consider this: The $100 million annual price tag of the initiative described above is just one element of the Pentagon's communication efforts in one country. Yet, it is equivalent to roughly one-eighth of the State Department's entire public diplomacy budget for the entire world.
Perhaps the DoD's new Iraq activities deserve this level of prominence – but it is unlikely that a government-wide discussion of priorities ever took place. Whereas $100 million per year is big money for public diplomats, it is small change for the military, which spends $434 million per day in Iraq.
The State Department, meanwhile, must meet a host of pressing concerns ranging from short-term communication needs to long-term educational exchanges with about $800 million per year.
Personally, I hope US public diplomats are now planning a major communications effort to rebuild global confidence in our financial system – a task with long-term implications for America's economic health and our country's ability to advocate effectively for deregulation and free markets in the future. Yet I doubt they will have anything approaching $100 million to devote to this purpose.
Some argue that the Pentagon has taken a leading role in public diplomacy because the State Department has not been effective. But it's hard to be effective when your hands are tied by limited resources. Other problems remain, but a realistic budget matched to the mission is an important starting point.
The next president faces a daunting global to-do list. Whether the US seeks to diminish support for terrorists, urge allies to contribute more troops to Afghanistan, or address global climate change, the cooperation of foreign publics will be paramount.
Doing public diplomacy well means putting civilians at the forefront and giving them sufficient resources.
The Pentagon should play an important role in public diplomacy, but as a partner – not the principal. For its part, the Congress should give public diplomats the tools they need to do their jobs, and then hold them accountable.
• Kristin M. Lord is a fellow at the Brookings Institution's Project on US Relations with the Islamic World and Foreign Policy Studies program.
Why is the Department of Defense getting so much money and personnel to carry out the mission?
By Kristin M. Lord
from the October 29, 2008 edition of the Christian Science Monitor
Washington - Today's public diplomats wear boots, not wingtips. Increasingly, the Defense Department is at the forefront of US efforts to engage public opinion overseas. While the State Department formally leads the effort, the Pentagon has more money and personnel to carry out the public diplomacy mission.
This trend is risky. The message foreign publics receive – not the message the US sends – changes when the Pentagon is the messenger. Putting our military, not civilians, at the forefront of US global communications undercuts the likelihood of success, distorts priorities, and undermines the effectiveness of US civilian agencies.
According to a Washington Post report, the Department of Defense will pay private contractors $300 million over three years to produce news and entertainment programs for the Iraqi public. These well-intentioned efforts aim to "engage and inspire" Iraqis to support the objectives of both the US and Iraqi governments.
Such outreach campaigns can be powerful if done well and as part of a broader strategy of engagement, political reconciliation, and economic development. Indeed, Secretary of Defense Robert Gates has argued eloquently that the United States must call increasingly upon "soft power" to advance national interests. Soft power can take many forms, but it is primarily the use of culture, values, and ideas to attract, instead of military or economic threats to coerce.
After the cold war, the US gutted its soft power arsenal and has yet to rebuild it fully. The Department of Defense stepped into this vacuum, and in many cases has done the job well. However, the Defense Department is not the right agency for this job.
In most circumstances, the Department of Defense (DoD) should not serve as the most visible face of the United States overseas. This is particularly true in areas where the public feels threatened by American power.
The Middle East is one area where polls show distrust of American motives and concern that America seeks to dominate the region militarily. Indeed, according to a Pew Global Attitudes Project survey taken last year, 64 percent of Turks – citizens of a NATO ally – see the United States as the greatest threat to their country in the future. Civilians, including those who do not work for government agencies, are the best conduits for building trust with wary publics.
Civilians should not just be the public face of communications. They should also set strategy and tactics that advance American foreign policy interests, in close cooperation with defense officials and military commanders. This is officially the role of the State Department, our nation's lead agency in making and implementing foreign policy. Yet, informally, resources drive outcomes, and the Pentagon has most of the money.
Consider this: The $100 million annual price tag of the initiative described above is just one element of the Pentagon's communication efforts in one country. Yet, it is equivalent to roughly one-eighth of the State Department's entire public diplomacy budget for the entire world.
Perhaps the DoD's new Iraq activities deserve this level of prominence – but it is unlikely that a government-wide discussion of priorities ever took place. Whereas $100 million per year is big money for public diplomats, it is small change for the military, which spends $434 million per day in Iraq.
The State Department, meanwhile, must meet a host of pressing concerns ranging from short-term communication needs to long-term educational exchanges with about $800 million per year.
Personally, I hope US public diplomats are now planning a major communications effort to rebuild global confidence in our financial system – a task with long-term implications for America's economic health and our country's ability to advocate effectively for deregulation and free markets in the future. Yet I doubt they will have anything approaching $100 million to devote to this purpose.
Some argue that the Pentagon has taken a leading role in public diplomacy because the State Department has not been effective. But it's hard to be effective when your hands are tied by limited resources. Other problems remain, but a realistic budget matched to the mission is an important starting point.
The next president faces a daunting global to-do list. Whether the US seeks to diminish support for terrorists, urge allies to contribute more troops to Afghanistan, or address global climate change, the cooperation of foreign publics will be paramount.
Doing public diplomacy well means putting civilians at the forefront and giving them sufficient resources.
The Pentagon should play an important role in public diplomacy, but as a partner – not the principal. For its part, the Congress should give public diplomats the tools they need to do their jobs, and then hold them accountable.
• Kristin M. Lord is a fellow at the Brookings Institution's Project on US Relations with the Islamic World and Foreign Policy Studies program.
The contributions of Iran
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/10/24/the_contributions_of_iran/
LAWRENCE J. KORB AND LAURA CONLEY
The contributions of Iran
By Lawrence J. Korb and Laura Conley | October 24, 2008
FEW COUNTRIES were as helpful to the United States in its early involvement in Afghanistan as Iran. Yet after the fall of the Taliban, the US failed to capitalize on the possibilities of that strategic relationship. Now coalition and Afghan troops are losing ground against the same insurgents they confronted in 2001, in a war that the United States is unlikely to win unless it rethinks its relationship with Iran.
Even before the terrorist acts on Sept. 11, 2001, Iran opposed the Taliban and strongly backed the Afghan Northern Alliance. After the attacks, Tehran stepped forward to help topple Afghanistan's extremist Sunni government and pledged $560 million for reconstruction efforts.
Furthermore, Iran demonstrated an impressive ability to work with and guide the nascent Afghan government. James Dobbins, the Bush administration's first special envoy to Afghanistan, recognized Iran's substantial contributions in training and equipping the Afghan army. He also praised their contributions at the Bonn Conference in 2001.
Unfortunately, the Bush administration bungled this successful relationship by continually isolating the Iranians, rather than drawing on their influence to create a relatively stable Afghanistan.
Worse, Bush placed Iran in the "axis of evil" in his 2002 State of the Union address. While Iranian meddling elsewhere in the Middle East should be criticized, Bush's characterization made no mention of Iran's substantial aid against the Taliban. Rather, the president allowed political calculations to override strategic realities.
The United States has little to show from its diplomatic silence with Iran. Since being inducted into the axis of evil, Iran has proceeded with its nuclear enrichment program. It has also expanded its influence in the Middle East courtesy of the US invasion of Iraq and the election of a Shi'a-dominated government there. Meanwhile, the United States has faltered in Afghanistan, with troops increasingly paying the price.
Bush has asserted that the United States will not sit down with Iran without preconditions. However, asking the Iranians to cooperate in Afghanistan would not imply a resumption of diplomatic relations or a willingness to tolerate Iran's nuclear program. It would demonstrate pragmatic recognition of the need to use regional diplomacy to create stability in Afghanistan.
Others in the Middle East are leading the way. Even though the Saudis cut off diplomatic relations with the Taliban in 2001, they have reportedly conducted peace talks between the government of Hamid Karzai and the Taliban, negotiations that even Secretary of Defense Robert Gates has said are necessary. Similarly, Syria and Israel, countries that do not have diplomatic relations with each other, are moving forward with discussions through the Turks. Although the two nations will never be friends, they may find a way to make progress on a number of issues.
Seven years ago, the United States had an opportunity to act in a comparable manner. It could have reached out to Iran in the hope of capitalizing on their long experience in the Greater Middle East and their intimate knowledge of the Northern Alliance. It could have sought a working relationship, distinct from a friendship, with Iran in order to help stabilize Afghanistan. While the US failure to do so did not undermine coalition efforts in Afghanistan so much as its thoughtless race to war in Iraq, the Bush administration's unwillingness to work with a nation it dislikes has made it much harder to achieve US goals there.
While US efforts in Afghanistan do require more troops, any success will not come without a renewed commitment to diplomacy and the engagement of Afghanistan's neighbors. Iran is the indispensable player in this process.
This is a vital time for Afghanistan. US casualties are higher than at any time since the invasion, and instability in Pakistan is fueling violence across the border. The United States may have one more chance to reach out to Iran to secure its participation in stabilization efforts, diplomatic relationship notwithstanding. This time, it should make the right decision.
Lawrence J. Korb is a former assistant secretary of defense in the Reagan administration and a senior fellow at the Center for American Progress, where Laura Conley is a special assistant. http://cache.boston.com/bonzai-fba/File-Based_Image_Resource/dingbat_story_end_icon.gif
LAWRENCE J. KORB AND LAURA CONLEY
The contributions of Iran
By Lawrence J. Korb and Laura Conley | October 24, 2008
FEW COUNTRIES were as helpful to the United States in its early involvement in Afghanistan as Iran. Yet after the fall of the Taliban, the US failed to capitalize on the possibilities of that strategic relationship. Now coalition and Afghan troops are losing ground against the same insurgents they confronted in 2001, in a war that the United States is unlikely to win unless it rethinks its relationship with Iran.
Even before the terrorist acts on Sept. 11, 2001, Iran opposed the Taliban and strongly backed the Afghan Northern Alliance. After the attacks, Tehran stepped forward to help topple Afghanistan's extremist Sunni government and pledged $560 million for reconstruction efforts.
Furthermore, Iran demonstrated an impressive ability to work with and guide the nascent Afghan government. James Dobbins, the Bush administration's first special envoy to Afghanistan, recognized Iran's substantial contributions in training and equipping the Afghan army. He also praised their contributions at the Bonn Conference in 2001.
Unfortunately, the Bush administration bungled this successful relationship by continually isolating the Iranians, rather than drawing on their influence to create a relatively stable Afghanistan.
Worse, Bush placed Iran in the "axis of evil" in his 2002 State of the Union address. While Iranian meddling elsewhere in the Middle East should be criticized, Bush's characterization made no mention of Iran's substantial aid against the Taliban. Rather, the president allowed political calculations to override strategic realities.
The United States has little to show from its diplomatic silence with Iran. Since being inducted into the axis of evil, Iran has proceeded with its nuclear enrichment program. It has also expanded its influence in the Middle East courtesy of the US invasion of Iraq and the election of a Shi'a-dominated government there. Meanwhile, the United States has faltered in Afghanistan, with troops increasingly paying the price.
Bush has asserted that the United States will not sit down with Iran without preconditions. However, asking the Iranians to cooperate in Afghanistan would not imply a resumption of diplomatic relations or a willingness to tolerate Iran's nuclear program. It would demonstrate pragmatic recognition of the need to use regional diplomacy to create stability in Afghanistan.
Others in the Middle East are leading the way. Even though the Saudis cut off diplomatic relations with the Taliban in 2001, they have reportedly conducted peace talks between the government of Hamid Karzai and the Taliban, negotiations that even Secretary of Defense Robert Gates has said are necessary. Similarly, Syria and Israel, countries that do not have diplomatic relations with each other, are moving forward with discussions through the Turks. Although the two nations will never be friends, they may find a way to make progress on a number of issues.
Seven years ago, the United States had an opportunity to act in a comparable manner. It could have reached out to Iran in the hope of capitalizing on their long experience in the Greater Middle East and their intimate knowledge of the Northern Alliance. It could have sought a working relationship, distinct from a friendship, with Iran in order to help stabilize Afghanistan. While the US failure to do so did not undermine coalition efforts in Afghanistan so much as its thoughtless race to war in Iraq, the Bush administration's unwillingness to work with a nation it dislikes has made it much harder to achieve US goals there.
While US efforts in Afghanistan do require more troops, any success will not come without a renewed commitment to diplomacy and the engagement of Afghanistan's neighbors. Iran is the indispensable player in this process.
This is a vital time for Afghanistan. US casualties are higher than at any time since the invasion, and instability in Pakistan is fueling violence across the border. The United States may have one more chance to reach out to Iran to secure its participation in stabilization efforts, diplomatic relationship notwithstanding. This time, it should make the right decision.
Lawrence J. Korb is a former assistant secretary of defense in the Reagan administration and a senior fellow at the Center for American Progress, where Laura Conley is a special assistant. http://cache.boston.com/bonzai-fba/File-Based_Image_Resource/dingbat_story_end_icon.gif
EI interview: Hamas advisor on talking to the US, Fatah and Israel
Opinion/Editorial
EI interview: Hamas advisor on talking to the US, Fatah and Israel
Rami Almeghari, The Electronic Intifada, 28 October 2008
Is the Bush administration making quiet overtures towards Hamas? What are the prospects for reconciliation between Hamas and Fatah, and what are Hamas' views on peace with Israel? Does the Islamist movement support the one-state solution and where does it look to for political role models? Dr. Ahmed Yousef, senior advisor to Prime Minister Ismail Haniya, the leader of the Hamas government in Gaza, recently spoke to The Electronic Intifada's Gaza Strip correspondent Rami Almeghari about these and other issues.
In June 2007 Hamas took full control of the Gaza Strip, ousting American-trained militias loyal to Palestinian Authority President Mahmoud Abbas. Since then, the territory, just twice the size of Washington, DC, has been under a punishing Israeli blockade forcing the vast majority of its 1.5 million residents to depend on UN food handouts. Hamas, elected to govern the West Bank and Gaza Strip with a landslide majority in January 2006, has been boycotted by Western powers and declared a "terrorist organization" by the United States. While Haniya's government is confined to the Gaza Strip, the US recognizes only the unelected Ramallah-based government appointed by Abbas in the West Bank. Since June, Hamas and Israel have observed an Egyptian-brokered ceasefire that ended months of violence in which hundreds of Palestinian civilians and several Israelis were killed.
Western overtures towards Hamas
RAMI ALMEGHARI: A Gulf-based newspaper reported recently that the US Secretary of State Condoleezza Rice made contact with Hamas via third party. Can you confirm or deny that?
AHMED YOUSEF: Actually it was more of a verbal statement passed through some of the Arab leaders in the Gulf to Hamas because the Americans feel that they are satisfied with the ceasefire and that is a credit to Hamas and for the first time they acknowledge that Hamas can control the border and make sure there is no one violating the ceasefire. So it was like a compliment from high-ranking American officials.
RA: Recently there have been reports of an opening between Hamas and some European countries like France. Can you confirm that and the extent of such contacts?
AY: To be honest with you, before the Hamas takeover in Gaza we had good ties with many countries. But unfortunately after the takeover the Palestinian Authority in Ramallah put pressure on Western delegations not to meet with Hamas. We have traveled and we have met with many European leaders and diplomats and we are still doing that behind the scenes. France sent a delegation here, and many others have.
RA: Wasn't that a parliamentary delegation?
AY: It depends. Sometimes they claim they are coming without the support of their government, but we know for sure they cannot come without permission from their governments. Even an American delegation came and met with the Hamas leaders. They said they were independent but we know from some information we had that they were really sent by the Bush administration. It was not independent. It was like a fact-finding mission. They wanted to know Hamas and what is its political vision. They came to discuss with us our vision and see if we have a plan for peacefully settling the conflict.
Palestinian reconciliation
RA: What is the status of Palestinian reconciliation talks underway in Cairo aimed at ending the division between Hamas and Fatah? Reports have said that Hamas had reservations about a proposed memorandum of understanding submitted by Egypt.
AY: The Cairo document is a good starting point. We have some reservations, but we think we will be able to solve them when we meet with the Egyptians and the rest of the Palestinian parties in Cairo on 9 November. We believe that as long as Hamas and Islamic Jihad are not part of the PLO [Palestine Liberation Organization], and the reform and restructuring of the PLO is unfulfilled, then the PLO does not have the right to sign any agreements with Israel or with the international community. Before we as Palestinians all agree that the PLO will be the sole representative of all the Palestinians then the PLO won't have that kind of authority.
RA: If division between Hamas and Fatah continues would this overshadow the Palestinian people's aspirations for statehood?
AY: I believe that in the next couple of months, we will be able to end this division and unify our people under a new government. It is shameful to have such divisions and I believe that every patriotic Palestinian wants to see an end to this saga.
RA: Palestinian Authority president Mahmoud Abbas has repeatedly called for early presidential and legislative elections. Would Hamas accept that?
AY: The Palestinians in the West Bank and Gaza Strip are not reunited yet and so I don't know how we could have elections while Hamas controls Gaza and Abbas and his security forces control the West Bank. When we restore unity it will be easier to address early elections.
Also, there would not be much time for early elections. The legislative council has only one year and three months left in its term. The moment we have reconciliation and a transitional government, it might take another six months to address the issues in the Egyptian-produced reconciliation document, and then we would still need at least six months to prepare for elections. So I think we are heading towards a timetable where we would have elections in January 2010.
Hamas and the situation in Gaza
RA: Some people have claimed that Hamas is trying to establish an Islamic emirate and is about to impose Sharia law in the territories under its control. Is this true?
AY: It's totally false, and from the time of the Hamas takeover of Gaza I don't think any Palestinian observed any change in daily life. This claim is used just for propaganda to satisfy Israel and maybe some of the American agenda. We live the same life here, and we are facing the same problems with sanctions, occupation and isolation. Nothing has changed. It is the same life. People can wear a head scarf or not wear it and nobody will force anyone to abide by Islamic law. Life here is very democratic and we hope to stay like this.
I am sure that the people who started talking about these things needed to satisfy some of the stereotypes in the minds of some western governments to discredit Hamas and keep up the pressure and sanctions in order to squeeze us into a corner. I don't think this propaganda succeeded because one thing is different from the past -- everyone who came here saw that Hamas was able to enhance the security and safety of the people of Gaza.
RA: How would you describe the experience of the Islamists in government here, particularly under continued Israeli occupation and the rejection of the Islamist movement by nearby countries?
AY: People were stunned by the majority won by the Islamists in the elections. No one was expecting that. Even in Israeli elections no party can win such a percentage. Hamas did it because people were saying this is a movement that is doing good things to help the Palestinian national cause and people trust them and think they are not corrupt. It's something amazing that we could have very free, fair and transparent elections and many people said the election held in Palestine was the best among all Arab countries.
RA: How have the Israeli blockade of Gaza and the international boycott of Hamas impacted Hamas' rule?
AY: Nobody expected that Hamas could withstand this kind of siege, sanctions and isolation. Maybe some people tried to sell the idea that in three months Hamas would fail, would collapse. Just keep putting pressure on them and they will buckle. Fortunately Hamas proved their steadfastness to the people of the world. This is because the who people who supported Hamas still give their backing to this government because people believe Hamas is not corrupt and is trying to serve the highest Palestinian national interest. This is why this government did not collapse despite the siege and the continuous Israeli incursions and aggression against us here and in the West Bank. We have proved we can stand and challenge and no one can twist our arms in a way that does not serve our national interest.
RA: Do you believe that measures taken against members of Hamas in the West Bank by the Palestinian Authority in Ramallah are intended to maintain order and security or are they aimed at undermining Hamas?
AY: Everybody knows that the crackdown against Hamas in the West Bank is aimed at undermining the movement there and breaking the will of its members. It is aimed at telling them, "You can't enjoy the same freedom you have in Gaza, and you can't challenge the government and security people in Ramallah."
RA: Do you see any relation between the Ramallah authority's vow not to allow Hamas to hold arms and the Israeli defense minister's recent approval of the deployment of five hundred Palestinian security personnel in the West Bank city of Hebron?
AY: Unfortunately the security apparatus in Ramallah is cooperating fully with the Israelis. They became like agents, like Saad Haddad [Editor: Haddad headed the South Lebanon Army, an Israeli-backed collaborator militia that operated in southern Lebanon during the period of Israeli occupation from 1982-2000]. This gives me the impression that in order to survive, those corrupt people in Ramallah are trying to do whatever they can to satisfy the Israelis. Their aim is not just to strengthen security in the West Bank -- because the West Bank is still under occupation and the Palestinian people have the right to defend themselves and have the right to resist. That's legitimate under international law. I believe that the way the people in Ramallah are handling the resistance in the West Bank will undermine their own credibility and authority.
RA: Reports by independent human rights groups point out some violations by Hamas-controlled forces. How do you respond to those reports?
AY: When you see people conspiring against you and collaborating with the occupation, you have to be harsh with it. Remember what happened in America after 11 September 2001? They launched two wars in Iraq and Afghanistan because they claimed that people from those countries were linked with those attacks. And in Britain after the 7 July 2005 bombings when they suspected some Arabs and Muslims were behind the explosions they cracked down on all Arabs and Muslims.
We are trying to enhance the state of law and prevent people taking the law into their own hands and we want people to respect our local laws. I can say we are concerned about enforcing our own local laws and we don't want to see any body violating these laws.
Hamas' views on the future
RA: Hamas has long called for a long-term truce with Israel, an offer that Palestinian Authority President Mahmoud Abbas and Israel have rejected already. Is there a possibility that Hamas would consider other options?
AY: We still stick to our political vision which is based on the truce or long-term ceasefire of five, ten or twenty years if Israel accepts to withdraw to the pre-1967 border. This remains our vision of the basis for a peaceful settlement of the conflict.
RA: Abbas argues that a long-term truce will give Israel a chance to reoccupy the Palestinian territories. How do you view this?
AY: I don't think that Abbas understands fully what we mean by a truce. The truce means that the Israelis will withdraw in a specified period, maybe six months, from all the occupied Palestinian territories, and they can get a guarantee for security for these ten or twenty years. We think this might set the stage for confidence building. After twenty years maybe the new generation of Palestinians will have different views for how to settle the conflict.
When you do not have bloodshed maybe that would be a good time to talk about peace, but now while the cycle of death continues and we have daily funerals; I do not think this is a good time to talk about a full peaceful settlement. So we need to have time to heal from the injuries and from the bad memories of bloodshed between Muslims and Jews, between Palestinians and Jews. And after that this new generation will have its own political vision about how to settle the conflict maybe through a binational state or a one-state solution. I am sure they are going to come up with different proposals. But today this is what we can offer. A hudna -- twenty years of peace with the Palestinians having their own independent and free state on the pre-1967 borders.
RA: There is a lot of talk about the death of the two-state solution and increased activism calling for a one-state solution as in South Africa. How does Hamas relate to these discussions and what are the current trends in thinking about a long-term solution?
AY: It sounds good to talk about a one-state solution but this will be considered when the two-state solution fails. However, so far we are sticking to our position about a long-term truce. South Africa is a good model for coexistence, reconciliation and atonement. Until now we are still not addressing this issue. But in the future if the world's expectation of a viable independent Palestinian state fails because of expansionist Israeli policies -- already Israel has confiscated and annexed 50 percent of the land in the West Bank -- people will come to this issue and we will address it.
RA: Who does Hamas look to as a political model from other struggles in history?
AY: Of course there is Nelson Mandela, and we do look to non-Muslim and non-Arab countries as models. For example, Michael Collins in Ireland [Editor: Collins was one of the key leaders in Ireland's independence struggle]. I do believe that Hamas also looks at Prime Minister Recep Tayyip Erdogan of Turkey as a good model as well. We are not Taliban, we are Erdogan.
Rami Almeghari is contributor to The Electronic Intifada, IMEMC.org and Free Speech Radio News. Rami is also a former senior English translator at and editor-in-chief of the international press center of the Gaza-based Palestinian Information Service. He can be contacted at rami_almeghari A T hotmail D O T com.
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EI interview: Hamas advisor on talking to the US, Fatah and Israel
Rami Almeghari, The Electronic Intifada, 28 October 2008
Is the Bush administration making quiet overtures towards Hamas? What are the prospects for reconciliation between Hamas and Fatah, and what are Hamas' views on peace with Israel? Does the Islamist movement support the one-state solution and where does it look to for political role models? Dr. Ahmed Yousef, senior advisor to Prime Minister Ismail Haniya, the leader of the Hamas government in Gaza, recently spoke to The Electronic Intifada's Gaza Strip correspondent Rami Almeghari about these and other issues.
In June 2007 Hamas took full control of the Gaza Strip, ousting American-trained militias loyal to Palestinian Authority President Mahmoud Abbas. Since then, the territory, just twice the size of Washington, DC, has been under a punishing Israeli blockade forcing the vast majority of its 1.5 million residents to depend on UN food handouts. Hamas, elected to govern the West Bank and Gaza Strip with a landslide majority in January 2006, has been boycotted by Western powers and declared a "terrorist organization" by the United States. While Haniya's government is confined to the Gaza Strip, the US recognizes only the unelected Ramallah-based government appointed by Abbas in the West Bank. Since June, Hamas and Israel have observed an Egyptian-brokered ceasefire that ended months of violence in which hundreds of Palestinian civilians and several Israelis were killed.
Western overtures towards Hamas
RAMI ALMEGHARI: A Gulf-based newspaper reported recently that the US Secretary of State Condoleezza Rice made contact with Hamas via third party. Can you confirm or deny that?
AHMED YOUSEF: Actually it was more of a verbal statement passed through some of the Arab leaders in the Gulf to Hamas because the Americans feel that they are satisfied with the ceasefire and that is a credit to Hamas and for the first time they acknowledge that Hamas can control the border and make sure there is no one violating the ceasefire. So it was like a compliment from high-ranking American officials.
RA: Recently there have been reports of an opening between Hamas and some European countries like France. Can you confirm that and the extent of such contacts?
AY: To be honest with you, before the Hamas takeover in Gaza we had good ties with many countries. But unfortunately after the takeover the Palestinian Authority in Ramallah put pressure on Western delegations not to meet with Hamas. We have traveled and we have met with many European leaders and diplomats and we are still doing that behind the scenes. France sent a delegation here, and many others have.
RA: Wasn't that a parliamentary delegation?
AY: It depends. Sometimes they claim they are coming without the support of their government, but we know for sure they cannot come without permission from their governments. Even an American delegation came and met with the Hamas leaders. They said they were independent but we know from some information we had that they were really sent by the Bush administration. It was not independent. It was like a fact-finding mission. They wanted to know Hamas and what is its political vision. They came to discuss with us our vision and see if we have a plan for peacefully settling the conflict.
Palestinian reconciliation
RA: What is the status of Palestinian reconciliation talks underway in Cairo aimed at ending the division between Hamas and Fatah? Reports have said that Hamas had reservations about a proposed memorandum of understanding submitted by Egypt.
AY: The Cairo document is a good starting point. We have some reservations, but we think we will be able to solve them when we meet with the Egyptians and the rest of the Palestinian parties in Cairo on 9 November. We believe that as long as Hamas and Islamic Jihad are not part of the PLO [Palestine Liberation Organization], and the reform and restructuring of the PLO is unfulfilled, then the PLO does not have the right to sign any agreements with Israel or with the international community. Before we as Palestinians all agree that the PLO will be the sole representative of all the Palestinians then the PLO won't have that kind of authority.
RA: If division between Hamas and Fatah continues would this overshadow the Palestinian people's aspirations for statehood?
AY: I believe that in the next couple of months, we will be able to end this division and unify our people under a new government. It is shameful to have such divisions and I believe that every patriotic Palestinian wants to see an end to this saga.
RA: Palestinian Authority president Mahmoud Abbas has repeatedly called for early presidential and legislative elections. Would Hamas accept that?
AY: The Palestinians in the West Bank and Gaza Strip are not reunited yet and so I don't know how we could have elections while Hamas controls Gaza and Abbas and his security forces control the West Bank. When we restore unity it will be easier to address early elections.
Also, there would not be much time for early elections. The legislative council has only one year and three months left in its term. The moment we have reconciliation and a transitional government, it might take another six months to address the issues in the Egyptian-produced reconciliation document, and then we would still need at least six months to prepare for elections. So I think we are heading towards a timetable where we would have elections in January 2010.
Hamas and the situation in Gaza
RA: Some people have claimed that Hamas is trying to establish an Islamic emirate and is about to impose Sharia law in the territories under its control. Is this true?
AY: It's totally false, and from the time of the Hamas takeover of Gaza I don't think any Palestinian observed any change in daily life. This claim is used just for propaganda to satisfy Israel and maybe some of the American agenda. We live the same life here, and we are facing the same problems with sanctions, occupation and isolation. Nothing has changed. It is the same life. People can wear a head scarf or not wear it and nobody will force anyone to abide by Islamic law. Life here is very democratic and we hope to stay like this.
I am sure that the people who started talking about these things needed to satisfy some of the stereotypes in the minds of some western governments to discredit Hamas and keep up the pressure and sanctions in order to squeeze us into a corner. I don't think this propaganda succeeded because one thing is different from the past -- everyone who came here saw that Hamas was able to enhance the security and safety of the people of Gaza.
RA: How would you describe the experience of the Islamists in government here, particularly under continued Israeli occupation and the rejection of the Islamist movement by nearby countries?
AY: People were stunned by the majority won by the Islamists in the elections. No one was expecting that. Even in Israeli elections no party can win such a percentage. Hamas did it because people were saying this is a movement that is doing good things to help the Palestinian national cause and people trust them and think they are not corrupt. It's something amazing that we could have very free, fair and transparent elections and many people said the election held in Palestine was the best among all Arab countries.
RA: How have the Israeli blockade of Gaza and the international boycott of Hamas impacted Hamas' rule?
AY: Nobody expected that Hamas could withstand this kind of siege, sanctions and isolation. Maybe some people tried to sell the idea that in three months Hamas would fail, would collapse. Just keep putting pressure on them and they will buckle. Fortunately Hamas proved their steadfastness to the people of the world. This is because the who people who supported Hamas still give their backing to this government because people believe Hamas is not corrupt and is trying to serve the highest Palestinian national interest. This is why this government did not collapse despite the siege and the continuous Israeli incursions and aggression against us here and in the West Bank. We have proved we can stand and challenge and no one can twist our arms in a way that does not serve our national interest.
RA: Do you believe that measures taken against members of Hamas in the West Bank by the Palestinian Authority in Ramallah are intended to maintain order and security or are they aimed at undermining Hamas?
AY: Everybody knows that the crackdown against Hamas in the West Bank is aimed at undermining the movement there and breaking the will of its members. It is aimed at telling them, "You can't enjoy the same freedom you have in Gaza, and you can't challenge the government and security people in Ramallah."
RA: Do you see any relation between the Ramallah authority's vow not to allow Hamas to hold arms and the Israeli defense minister's recent approval of the deployment of five hundred Palestinian security personnel in the West Bank city of Hebron?
AY: Unfortunately the security apparatus in Ramallah is cooperating fully with the Israelis. They became like agents, like Saad Haddad [Editor: Haddad headed the South Lebanon Army, an Israeli-backed collaborator militia that operated in southern Lebanon during the period of Israeli occupation from 1982-2000]. This gives me the impression that in order to survive, those corrupt people in Ramallah are trying to do whatever they can to satisfy the Israelis. Their aim is not just to strengthen security in the West Bank -- because the West Bank is still under occupation and the Palestinian people have the right to defend themselves and have the right to resist. That's legitimate under international law. I believe that the way the people in Ramallah are handling the resistance in the West Bank will undermine their own credibility and authority.
RA: Reports by independent human rights groups point out some violations by Hamas-controlled forces. How do you respond to those reports?
AY: When you see people conspiring against you and collaborating with the occupation, you have to be harsh with it. Remember what happened in America after 11 September 2001? They launched two wars in Iraq and Afghanistan because they claimed that people from those countries were linked with those attacks. And in Britain after the 7 July 2005 bombings when they suspected some Arabs and Muslims were behind the explosions they cracked down on all Arabs and Muslims.
We are trying to enhance the state of law and prevent people taking the law into their own hands and we want people to respect our local laws. I can say we are concerned about enforcing our own local laws and we don't want to see any body violating these laws.
Hamas' views on the future
RA: Hamas has long called for a long-term truce with Israel, an offer that Palestinian Authority President Mahmoud Abbas and Israel have rejected already. Is there a possibility that Hamas would consider other options?
AY: We still stick to our political vision which is based on the truce or long-term ceasefire of five, ten or twenty years if Israel accepts to withdraw to the pre-1967 border. This remains our vision of the basis for a peaceful settlement of the conflict.
RA: Abbas argues that a long-term truce will give Israel a chance to reoccupy the Palestinian territories. How do you view this?
AY: I don't think that Abbas understands fully what we mean by a truce. The truce means that the Israelis will withdraw in a specified period, maybe six months, from all the occupied Palestinian territories, and they can get a guarantee for security for these ten or twenty years. We think this might set the stage for confidence building. After twenty years maybe the new generation of Palestinians will have different views for how to settle the conflict.
When you do not have bloodshed maybe that would be a good time to talk about peace, but now while the cycle of death continues and we have daily funerals; I do not think this is a good time to talk about a full peaceful settlement. So we need to have time to heal from the injuries and from the bad memories of bloodshed between Muslims and Jews, between Palestinians and Jews. And after that this new generation will have its own political vision about how to settle the conflict maybe through a binational state or a one-state solution. I am sure they are going to come up with different proposals. But today this is what we can offer. A hudna -- twenty years of peace with the Palestinians having their own independent and free state on the pre-1967 borders.
RA: There is a lot of talk about the death of the two-state solution and increased activism calling for a one-state solution as in South Africa. How does Hamas relate to these discussions and what are the current trends in thinking about a long-term solution?
AY: It sounds good to talk about a one-state solution but this will be considered when the two-state solution fails. However, so far we are sticking to our position about a long-term truce. South Africa is a good model for coexistence, reconciliation and atonement. Until now we are still not addressing this issue. But in the future if the world's expectation of a viable independent Palestinian state fails because of expansionist Israeli policies -- already Israel has confiscated and annexed 50 percent of the land in the West Bank -- people will come to this issue and we will address it.
RA: Who does Hamas look to as a political model from other struggles in history?
AY: Of course there is Nelson Mandela, and we do look to non-Muslim and non-Arab countries as models. For example, Michael Collins in Ireland [Editor: Collins was one of the key leaders in Ireland's independence struggle]. I do believe that Hamas also looks at Prime Minister Recep Tayyip Erdogan of Turkey as a good model as well. We are not Taliban, we are Erdogan.
Rami Almeghari is contributor to The Electronic Intifada, IMEMC.org and Free Speech Radio News. Rami is also a former senior English translator at and editor-in-chief of the international press center of the Gaza-based Palestinian Information Service. He can be contacted at rami_almeghari A T hotmail D O T com.
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Tuesday, October 28, 2008
War or Peace?: The World After the 2008 U.S. Presidential Election
http://www.dissidentvoice.org/2008/10/war-or-peace-the-world-after-the-2008-us-presidential-election/
War or Peace?: The World After the 2008 U.S. Presidential Election
by Richard C. Cook / October 27th, 2008
With the presidential election only a week away, the financial crisis has been dominating the news, but behind it is an even larger question of war vs. peace. This article will appear in a forthcoming issue of Eurasia Critic magazine.
INTRODUCTION
World war or world peace is the blunt choice that will face either Barack Obama or John McCain when one of them is elected president of the United States on Tuesday, November 4, 2008.
For a major eruption of violence to be averted, the new president must deal positively with the reappearance of Russia on the world stage, the emergence of China as an economic force, and the aspirations of all the nations on earth for a decent and secure way of life.
Making matters much more dangerous are the ongoing financial crisis, along with what appears to be the start of a worldwide economic recession of as yet undetermined depth and duration.
It is Europe, not the U.S., from which proposals are emerging for a transformative approach to the most compelling issues. But will it be enough?
THE DISASTROUS PRESIDENCY OF GEORGE W. BUSH
In December 2000, at the time the U.S. Supreme Court was intervening in the disputed vote count in Florida to name Republican George W. Bush president over Democrat Al Gore, the stock market began to crash. The “dot.com” bubble, based largely on foreign investment in internet companies and technology stocks, deflated. By the time Bush was inaugurated in January 2001, signs of a recession were appearing.
This did not prevent the Bush administration from initiating a $450 billion tax cut for the upper income brackets that Congress approved in March 2001. A similar cut was subsequently enacted in May 2003.
On September 11, 2001, the World Trade Center’s Twin Towers in New York City were attacked by airplanes flying into them, followed that morning by an air attack on the Pentagon in Washington, D.C.
Terrorists from Al Qaeda, an organization of Islamic extremists associated with the Afghan mujaheddin, and a Saudi figure, Osama bin Laden, alleged to be their leader, were blamed. The wealthy bin Laden family had close ties to the U.S. and the Bush family.
Within a few weeks, the Bush administration pulled a battle plan from the shelves of the Pentagon and invaded Afghanistan. The object was to wrest control of that nation from the Taliban, supposedly Al Qaeda collaborators. A new U.S. Asian land war had begun.
In March 2003, the Bush administration added to the Afghan action the second invasion of Iraq in the past thirteen years, following the “Shock and Awe” aerial attack. The assaults on Afghanistan and Iraq, with torture of prisoners, use of depleted uranium weapons, and killing of civilians, was methodical and brutal.
Americans who had opposed the Vietnam War in the 1960s and 70s were appalled at how history was repeating itself. The public was subjected to a relentless barrage of pro-war propaganda by square-jawed military talking heads
Behind the scenes were the international financial and oil interests who stood to benefit from the removal of Iraqi president Saddam Hussein as an independent actor in the Middle East. Financiers like David Rockefeller, who had founded the Trilateral Commission and was one of the “internationalist” leaders of what had come to be called the “New World Order,” tended to remain in the shadows, but their presence was palpable.
Rockefeller had reportedly expressed his world view in a statement at a 1991 meeting of the Bilderberg Group:
“The supra-national sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.”
With respect to most of the U.S. military actions after World War II, especially the ones after Ronald Reagan was elected president in 1980, an argument could be made that the internationalists were using the U.S. military as their personal global police force.
Even so, the Neocons—“new conservatives”—who had rushed to the forefront after September 11, 2001, working chiefly through Secretary of Defense Donald Rumsfeld and Vice-President Richard Cheney, seemed to be a more radical element than the officials who had been in charge during the Clinton years, when the U.S. and NATO went to war against Serbia. Many of the Neocons were Jewish, with strong ties to Israel.
In 1997 the Neocons had created the Project for a New American Century, which advocated a new invasion of Iraq, and published a statement that positive change might result from a “catalyzing event—a new Pearl Harbor.” Later this was interpreted as possibly having foreshadowed the 9/11 attacks.
President George W. Bush justified the Iraq invasion by claiming that the regime of Saddam Hussein possessed weapons of mass destruction. Later this claim proved to be a lie.
To many the attack was a simple act of aggression. Kofi Annan, Secretary General of the U.N. said of the invasion on September 16, 2004, “I have indicated it was not in conformity with the U.N. charter. From our point of view, from the charter point of view, it was illegal.” The U.S. paid no attention to Annan’s misgivings.
The U.S. attack on Iraq was not without controversy, even among the international elite. According to Daniel Estulin, writing in his breakthrough book, The Bildergerg Group, the Europeans at the 2001 Bilderberg Conference summoned Donald Rumsfeld and blasted him for prematurely planning an attack on Iraq that year. But by 2003, says Estulin, they were prepared to endorse it. Still, the U.S. had far less active support from other nations than with the 1991 invasion of Iraq under George W. Bush’s father.
WARS ARE NOT CHEAP
Starting in 2001, the Bush administration had increased the frequency of White House meetings with Alan Greenspan, chairman of the Federal Reserve, who lowered interest rates by 550 basis points from January 2001 to June 2003. This succeeded in floating the U.S. economy through injecting a huge amount of cash into what came to be called the “housing bubble.”
It’s consumer spending that keeps the U.S. economy running, but ever since the 1980s, when we began to export so many of our manufacturing jobs, family income had stagnated. It has been established by researchers, and documented as well by Daniel Estulin, that at a certain point the financial elite made the momentous decision that the U.S. would be de-industrialized. According to one account, this decision had been a topic of discussion in meetings in China, after Nixon’s visit there in 1972, that were held among David Rockefeller, Secretary of State Henry Kissinger, and Chinese Premier Chou En-Lai.
When Rockefeller and Columbia University professor Zbigniew Brzezinski—later President Jimmy Carter’s national security adviser—formed the Trilateral Commission in 1973, the plan to turn the U.S. into a financial/service economy instead of the world’s greatest industrial democracy seemed to become a key objective. How well this program succeeded is shown by statistics from the website Economy in Crisis:
· From 1978 to July 2008, more than 16,613 U.S. companies were sold to foreign corporations.
· The steel, publishing, textile, machine tool, automobile, and electronics industries declined sharply.
· By 2006 American manufacturers suffered a twenty-two percent structural cost disadvantage compared to overseas competitors through taxes, health and pension benefits, litigation, regulation, and unequal environment protection.
· In 2006, $1 in $4 of US consumption on manufactured goods went immediately and directly to imports.
· In 2007 China alone exported over $321 billion in goods to the United States compared to the $62 billion in goods we exported to them. The U.S. trade deficit, estimated to exceed $800 billion in 2008, is costing $1.5 million per minute in remittance to foreign companies.
· Three million high-paying manufacturing jobs were lost between 2000 and 2005 alone. The U.S. lost 63 thousand jobs just in February of 2008.
· Foreign manufacturers operating in the U.S. accounted for over twenty percent of our exports and manufacturing assets, and a large percentage of our employment in 2006.
· As of December, 2007, the U.S owed fifty-three percent of its debt to foreign countries and other international interests. This is 25.5 percent of our total national deficit, and we finance nearly 100 percent of all new borrowings from foreign interests. Our competitors are now our bankers.
· High-paying goods-producing industries have lost net employment over the past twenty-seven years, while lower paying non-tradable services-providing employment has doubled.
· In 2004, China and India graduated a combined 950,000 engineers versus 70,000 in the U.S. The United States ranks near the bottom of science/math proficiency
Beginning around 1991-92, with cheap credit now flowing from the Federal Reserve System, home prices soared. The money from new mortgages and home equity loans became a virtual “cash cow” for families strapped for cash.
The federal government had already been taking steps during the 1990s to ease mortgage credit so that more families could purchase homes. But after 2001, many more loans were based on fraudulent mortgage applications, where brokers exaggerated borrower incomes. ABC News later reported that during this period risk analysts at Washington Mutual, one of the nation’s largest banks, were told to ignore high risk loans because lending had to be maximized. Those who objected were disciplined or fired.
On Wall Street, banks that wrote mortgages began to offload them by packaging them into mortgage-backed securities that were sold around the world as bonds to banks and investors. Risk analysts at the leading credit-rating agencies, such as Standard and Poor’s, Moody’s, and Fitch, gave their highest ratings to mortgage-backed securities whose risks were later acknowledged to be grossly underestimated.
Also, mortgage companies, with Alan Greenspan’s endorsement, began to offer more Adjustable Rate Mortgages (ARMs), loans that would reset at higher rates in future years. Mortgage brokers fed the growing bubble by telling people they should buy now, because housing prices would keep going up and they could resell at a profit before their ARMs escalated.
As a result of the bubble, large amounts of money began to flow into the economy, not only from mortgages and home equity loans, but also from capital gains on the resale of inflating property. Meanwhile, in the world of investment securities, the Securities and Exchange Commission reduced the amount of their own capital investors were required to bring to the table, resulting in a large increase in bank leveraging of speculative trading. This fed additional bubbles in the equity, hedge fund, derivatives, and commodities markets. The SEC also eliminated most of its Office of Risk Management through budget cuts.
According to an April 2008 Washington Post article by New York governor Elliot Spitzer, state attorneys-general who wanted to investigate allegations of mortgage fraud were blocked from doing so by the Office of the Comptroller of the Currency within the U.S. Treasury Department. There was no federal agency charged with regulating mortgage fraud to take up the slack. Spitzer made these charges just before he was forced to resign from office over a sex scandal disclosed by a leak of FBI investigative documents.
Thus it appeared that a major part of U.S. economic growth was tainted by outright criminality, with collusion from the highest levels of the U.S. government, the Federal Reserve System, and the financial industry. But the housing and investment bubbles generated enough economic activity and tax revenues through 2006 to allow the Bush war policy to be implemented.
George W. Bush was reelected in 2004 at the height of the bubbles. By 2005, the housing bubble alone was accounting for half of all U.S. growth and yielding substantial tax revenues to all levels of government. Still, the Bush administration was running huge budget deficits from expenditures on the increasingly-expensive wars in Afghanistan and Iraq.
Congress approved funding for the Afghan and Iraqi wars even after the Democratic Party regained majority control in the 2006 elections. The funding also allowed for the start of construction in Baghdad of the world’s largest U.S. embassy, as well as permanent military bases in Iraq.
During this time, an internal battle raged between the U.S. State Department, which wanted to implement a plan to rebuild Iraq’s civilian infrastructure, and the Defense Department, which was mainly interested in military occupation. Defense won out.
L. Paul Bremer, former U.S. foreign service officer and managing director of Kissinger and Associates, was named occupation director. But the Iraqi economy and physical infrastructure were shattered. Two to three million Iraqi civilians were killed, injured, or driven into exile.
The housing bubble began to collapse when the Federal Reserve raised interest rates by 425 basis points from June 2003 to June 2006. In January 2006, Ben Bernanke replaced Alan Greenspan as Fed chairman. Greenspan had been chairman for nineteen years during which the largest financial bubbles in world history were created.
This sequence of events led some to contend that the Federal Reserve had both deliberately created the housing bubble, then deliberately destroyed it. Hundreds of millions of people around the world, including U.S. homeowners and foreign investors, ultimately were trapped in the Greenspan/Bernanke pincers.
By 2007, the federal government’s debt was over $9 trillion and reached $10.3 trillion by October 2008. It was now obvious that a serious economic downturn lay ahead. By 2007, signs of a recession loomed, as homeowners who had signed up for “subprime” and ARM mortgages began to default.
By 2008 the number of home foreclosures would exceed four million. The mortgage-based bonds sold through Wall Street brokerage houses to U.S. and foreign investors, began to prove worthless. They had proliferated around the world as virtual time-bombs in investment portfolios.
By August 2008, foreign investors, such as the Bank of China, were becoming increasingly involved in the crisis. Reuters ran a story that Chinese banks planned to stop investing in U.S. markets, which the Chinese government denied, but the threat remained.
If the Chinese and other Asian exporting and petroleum-rich nations pull out, the days of “dollar hegemony,” where the dollar constitutes the world’s reserve currency, providing almost unlimited funding for the U.S. commercial and military empire, will be over.
THE BUSH ADMINISTRATION HITS A WALL
By the first presidential primary elections of 2008 in Iowa and New Hampshire, the campaign to select the next president of the United States was underway. The eight-year George W. Bush presidency would be ending within a year.
By now the Bush years seemed to exemplify the most grievously wrong-headed aspects of U.S. foreign and domestic policy since the election of Ronald Reagan in 1980. The 2008 election will mark the end of an era, though no one knows for sure what will come next.
What has to be questioned are an economy that has been downgraded from one based on industry to a service economy structured around finance, an aggressive military policy with U.S. forces engaged around the world, and trade and fiscal deficits as far as the eye can see.
With all this going on, the Bush White House has brought the world’s most powerful nation to a point of crisis, possibly even to the brink of catastrophe.
In retrospect it can be seen that U.S. military occupation of the Middle East, focusing on Iraq and involving extensive collaboration with Israel, was an extension of the century-long attempt by the Anglo-Americans to control the region’s fossil fuel resources.
But the nation of Iraq and its people had been crushed in the meantime. Even if the U.S. were to withdraw combat forces at some time in the future, the permanent military bases it plans to leave behind will be islands in a sea of hostility. Today even these bases are in jeopardy, as Iraq’s elected government pressures the U.S. to commit to a complete withdrawal by 2011.
Iran has clearly been strengthened by U.S. action to destroy Sunni power in Iraq and has been emboldened by the successes of Hamas in Palestine and Hezbollah in Lebanon in standing up to the Israelis. U.S. intentions to attack Iran have evoked strong opposition among Europeans and can be seen to have enhanced the influence of Russia and China, since Iran is now an observing member of the Shanghai Cooperative Organization.
After initial successes in Afghanistan, U.S. forces have become bogged down in protecting the capital of Kabul, where President Hamid Karzai rules under virtual siege, while the Taliban have come back to contest control of the countryside. The U.S. has resorted to bombing sorties which often kill civilians and has begun to escalate the war by sending raiding parties into neighboring Pakistan.
After the 1991 collapse of the Soviet Union, the U.S., acting through NATO, moved aggressively to extend its influence into the former Soviet republics and surround Russia with nations friendly to the West. The former Soviet Union and Soviet satellite states that joined NATO were Estonia, Latvia, Lithuania, the Czech Republic and Slovakia (formerly part of Czechoslovakia), Bulgaria, and Romania.
The European members of NATO have not yet agreed to extend invitations to the Ukraine and Georgia after those nations expressed interest following establishment of pro-Western governments, though a communiqué after the 2008 NATO summit in Bucharest indicated membership would be forthcoming.
But the NATO façade may have cracked, as shown by a recent trip by German Chancellor Angela Merkel to St. Petersburg for meetings with Russian President Dmitri Medvedev.
According to a report by George Friedman:
The central question on the table was Germany’s position on NATO expansion, particularly with regard to Ukraine and Georgia. Merkel made it clear at a joint press conference that Germany would oppose NATO membership for both of these countries, and that it would even oppose placing the countries on the path to membership. Since NATO operates on the basis of consensus, any member nation can effectively block any candidate from NATO membership. The fact that Merkel and Germany have chosen this path is of great significance. Merkel acted in full knowledge of the U.S. view on the matter and is prepared to resist any American pressure that might follow.1
Also by 2008 the U.S. was losing influence with the former Soviet republics of Central Asia—Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—which had joined with Russia and China in the SCO. In central and south Asia, as well as Africa, nations have been unwilling to act as hosts for new U.S. military bases.
The U.S. had been losing ground in Central Asia and elsewhere even before Georgia invaded its former province of South Ossetia on August 8, 2008.
The invasion of South Ossetia by Georgia’s forces, armed and trained by the U.S. and Israel, was crushed so decisively by the Russians as to be a major embarrassment to the Bush administration. According to Georgian president Mikheil Saakashvili’s former defense minister Irakly Okruashvili, Saakashvili carried out the attack despite warnings from the U.S. that they could not come to his aid militarily.2
Okruashvili faulted the U.S. for not being sufficiently critical of Saaksashvili in the months leading up to the attack. From this report it is unclear whether the U.S., while trying to keep Georgia in its orbit as a pathway for natural gas pipelines, was trying to goad Russia into a major military confrontation, though such a scenario seemed possible. Of course the U.S. media and politicians blamed only Russia for the conflict.
In Latin America, the Hugo Chavez regime in Venezuela has begun to forge an alliance with Russia, even to the point of announcing a plan for joint naval maneuvers in the Caribbean. Chavez is also acting as an inspiration to populist movements elsewhere in South America, including those in Bolivia and Ecuador.
Announcements by Vladimir Putin, now the Russian prime minister, that Russia is opposed to a unipolar world were reminiscent of the 1970s, when President Richard Nixon and Russian General Secretary Leonid Brehznev met as equals to forge the policy of détente. Putin created a sensation on February 10, 2007, at the 43rd Munich Conference on Security Policy, when he said:
“What is a uni-polar world? No matter how we beautify this term, it means one single center of power, one single center of force, and one single master.”
Speaking of the U.S., Putin said:
The United States has overstepped its borders in all spheres—economic, political and humanitarian—and has imposed itself on other states.…Local and regional wars did not get fewer, the number of people who died did not get less but increased. We see no kind of restraint - a hyper-inflated use of force.…[The U.S.] has gone from one conflict to another without achieving a fully-fledged solution to any of them.
Putin clearly has rejected the one-world aspirations of the Western financial elite which acts through U.S. military power. After the Georgian crisis, Dmitry Medvedev, Putin’s successor as president, reiterated:
The world must be multipolar. Single polarity is unacceptable. Russia cannot accept a world order in which any decisions will be made by a sole nation, even such a serious one as the United States. Such a world order will be unstable and fraught with conflicts.
Where did the European Union (EU) fit in after the Georgia debacle? Clearly the Europeans were not passive spectators to a U.S.-Russian standoff. European leaders moved quickly to negotiate a cease-fire in Georgia followed by withdrawal of Russian troops.
The more the EU acts as a bloc, the more it seems that a new nationalist entity has come into existence, complete with its own Euro-based currency. The European population wants peace, prosperity, justice, and to be left alone. They particularly do not want to be dragged into America’s wars. The EU has also taken the lead economically with a 2007 GDP of $16.8 trillion vs. $13.8 for the U.S. (IMF figures)
In the Middle East times are changing too. Israel, for instance, seems to be in social crisis. Though Jews are both leaving Israel and moving in, the population is stable but small. Of a population of 7.3 million, 5.5 million are Jewish Israelis. A substantial minority of non-Jews are imported laborers.
But Israel has a poorly-formed middle class. The gap in Israel between rich and poor is growing, as in the U.S., often with only minimum wage jobs available, even to military veterans. Also, common lands in the kibbutzim are being privatized, and residents reportedly are tending to withdraw from peripheral areas to settle around Tel Aviv for safety from strife with the Palestinians.3
Some Israeli politicians say that Iran, with its supposed nuclear ambitions, poses an “existential threat” to the nation. But there are reports that the U.S. has told Israel they will not be permitted to attack Iran on their own.
ECONOMIC COLLAPSE
If the Bush administration is being challenged in the foreign policy arena, in the area of macroeconomics it may have been checkmated.
As stated previously, the financial crisis deepened in the late summer of 2008 when China and the other nations of the world that had been floating the U.S. fiscal and trade deficits by their purchase of public and private securities became alarmed. This was in reaction to Wall Street’s issuance of the huge amount of “toxic” debt from mortgage-backed securities that were now collapsing in value as the housing bubble imploded.
Analyst William Engdahl has stated that the financial meltdown was secretly planned in order to weaken the European banking system. Engdahl wrote:
“As one senior European banker put it to me in private discussion, ‘There is an all-out war going on between the United States and the EU to define the future face of European banking.’”
The start of the recession and the decline of purchasing power by consumers who can no longer borrow quantities of money also means that the U.S. will cease as the customer of last resort whose purchases conveniently float the world economy. The Japanese, sitting on billions of U.S. dollars in their bank accounts, are reportedly furious that U.S. consumers might no longer support the abundant lifestyle of the world’s richest nation.
The dollar is so shaky that some nations are reducing their dollar reserves and turning to other currencies. Talk has been rampant about a worldwide shift to a multi-currency regime, possibly including the Euro, the Yuan, the Yen, and even the Ruble. In March 2007 the Governor of China’s Central Bank Zhou Xiaochuan announced:
“China will diversify its $1 trillion foreign exchange reserves, the largest in the world, across different currencies and investment instruments, including in emerging markets.”
The U.S. Council on Foreign Relations is supporting the movement to a multiple currency regime in its journal, Foreign Affairs. Though the federal government denies any concrete plans, the so-called Amero has been mentioned as the currency of a hypothetical North American Union made up of the U.S., Canada, and Mexico.
Meanwhile, the Bush administration, led by Secretary of the Treasury Henry M. Paulson, working in league with Federal Reserve Chairman Ben Bernanke, has begun to introduce gigantic amounts of publicly-backed credit to rescue the exploding financial system.
As recently as 2006, the U.S. financial industry earned over $500 billion in profits—an astronomical sum. Some hedge fund managers were earning $1 billion a year. Now Wall Street is a disaster scene, with financial firms losing over 200,000 jobs in a year and major investment banks going bankrupt.
Also, the two quasi-governmental mortgage guarantee agencies, Fannie Mae and Freddie Mac, have failed. Despite their lavishing $175 million in the last decade on buying influence from Congress, the government has fired their executives and is taking the two agencies over in a conservatorship. The government also took over insurance giant AIG.
When, on September 23, 2008, Henry Paulson asked for $700 billion dollars to purchase bad debt from U.S. and foreign banks without any oversight or guarantee of success, Congress revolted, with the House of Representatives rejecting the proposal in an initial vote. They did so because their constituents were enraged with the terms proposed by the Bush administration for a gigantic giveaway of taxpayers’ money.4
U.S. taxpayers could now be finding themselves on the hook for possibly trillions of dollars of debt liabilities due to Wall Street mismanagement and fraud. Both the Securities and Exchange Commission and the Federal Bureau of Investigation have begun belated criminal investigations. Americans on “Main Street” and their representatives in Congress remain horrified.
Some say the capitalist era is over. The financiers and stock brokers have run rampant in the 2000s under President George W. Bush. They’ve been called, only half-jokingly, “The Masters of the Universe.”
But their excesses have been encouraged by the Bush administration, the Federal Reserve, and the government’s regulatory agencies, which have combined to facilitate an explosion of leveraged speculation in the housing, hedge, equity, commodity, and derivative markets. More shocks undoubtedly lie ahead.
By September 2008, as the bubbles were starting to blow up, the greatest financial crisis since the Great Depression was underway. Despite initial opposition, Congress caved in to pressure from Bush and the bank lobbyists and approved a revised version of Paulson’s plan. According to reports, including a statement on the floor of the House of Representatives by Rep. Brad Sherman (D-CA), members of Congress were threatened with a declaration of martial law to keep public order if the measure failed.
The Treasury Department has started to float new bond issues to raise money to buy the bad mortgage debt, not only from U.S. banks but from foreign investors as well. Meanwhile the stock market is continuing to decline and by October 10 had lost almost forty percent of its value in a year. Over $8 trillion in wealth had vanished from U.S. markets, including the retirement savings and dividend income of tens of millions of people. On October 24, the Dow Jones closed at 8,378.95 vs. 14,198.1 on October 11, 2007.
At the same time, rising prices of oil, food, and other commodities have begun to produce another era of global stagflation, similar to the 1970s, though oil prices have fallen recently. Still, the U.S. financial collapse is resulting in the onset of a worldwide recession that most commentators, including economists at the IMF, said could only get worse—possibly much worse.
Has the New World Order proved to be a parasite that killed its host? Maybe in the U.S. it has. By early October 2008, millions of Americans had been crushed by debt and were losing their homes to foreclosure, tent cities of the homeless were springing up, unemployment claims were soaring, and factory orders were plummeting.
The credit crisis is combining with shortage of consumer purchasing power to cause commerce to shut down at a time when stores should be increasing inventory for the Christmas season. Most of the major chain stores are closing unprofitable retail outlets, throwing thousands of employees out of work.
With the financial system crashing it was only a month from the presidential election, when it would be up to the next president—either Barack Obama or John McCain—to deal with these calamities. Other than a small “stimulus” tax rebate in the spring of 2008, nothing had been done by the Bush administration to rebuild the weakened U.S. producing economy or help the rank and file consumer.
Whose fault was it? David Rockefeller had clearly been the leader during past decades of the “intellectual elite and world bankers” who would replace the old-fashioned nation-state and whose legacy the U.S. was now reaping. Rockefeller had been quoted as saying at the United Nations on September 23, 1994:
“This present window of opportunity, during which a truly peaceful and interdependent world order might be built, will not be open for too long. We are on the verge of a global transformation. All we need is the right major crisis and the nations will accept the New World Order.”5
Intended or not, the “major crisis” had arrived.
Rockefeller may have been a kind of “Emperor of the West,” but he is now 93 years old. Yet he has successors who are now running things. Henry Paulson is the most visible. Also prominent are the heads of the largest banks who are being featured regularly in news reports, such as Jamie Dimon, CEO of the banking colossus J.P. Morgan Chase.
Washington Mutual Bank had run short on ready cash during the credit crisis, so Dimon’s bank was able to acquire its $307 billion in assets for only $1.9 billion. Commentators said it was a “fire sale.”
William Engdahl writes:
The Paulson plan is now clearly part of a project to create three colossal global financial giants—Citigroup, JP MorganChase and, of course, Paulson’s own Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the U.S. taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead.
THE 2008 ELECTION
When the financial crisis struck during the week of September 22, it was only six weeks before the presidential election. Democrat Barack Obama shot up in the polls, because voters perceived him as more likely than Republican John McCain to deal effectively with the situation.
Obama, with a Kenyan father and a white American mother, was the first African-American to run for the presidency of the U.S. on a major party ticket. To many it was a shock that Obama had defeated such a formidable opponent as Hillary Clinton, wife of former president Bill Clinton, in the Democratic primaries.
Now Obama was the beneficiary of the bad economic news. In American politics, Democrats, with their New Deal heritage and the semi-prosperity under Clinton in the 1990s, are viewed as being more in touch with the economic problems of ordinary citizens. Also, the Democrats’ income policies have generally favored the working and middle classes more than the rich, and Obama was promising to repeal the Bush tax cuts that benefited mainly the upper brackets.
Further, the incumbent party—in this case the Republicans—is more likely to be viewed as responsible for the current economic situation, good or bad, and McCain had consistently allied himself during his long Senate career with the financial deregulation dating from the Reagan years that was now proving disastrous.
McCain had just finished saying in a speech, “The fundamentals of our economy are strong,” but on Wednesday, September 24, he changed his tune. Now, he said, he was suspending his campaign and would return to Washington, D.C., to help solve the crisis. The Democrats howled with derision at this seeming act of political hypocrisy which showed, they said, how desperate McCain had become to maintain credibility.
Clearly the campaign had now changed—or had it? Until the financial crisis, both Obama and McCain had been extremely cautious in putting forth proposals, trying more to avoid saying anything the media could criticize than to suggest fundamental economic changes. Also, Obama’s presidential campaign had received huge contributions from Wall Street.
Both men had been presenting themselves as populists, the friends of the middle class. McCain emphasized tax reduction and limitations on government spending as means of economic growth. Obama spoke in favor of job creation, including five million new jobs from “green energy”—solar and wind power, etc. He also promised to cut taxes for those earning less than $250,000 a year.
But neither had been convincing as signs of an economic recession began to accelerate. Obama’s five million new jobs, for instance, were an intention, not a plan. But they were obviously needed. The financial emergency hit after job losses of 60,000 for August were announced.
Nor did either offer many specifics or explain how they could implement new federal programs in the face of the gigantic budget deficits being projected. CNN news commentator Lou Dobbs blasted them for delivering “poll-driven sound bytes” and failing “to even mention real economic issues,” like the overseas outsourcing of jobs.
Washington Post columnist David Broder accused the pair of “running from reality.” Broder added:
“The frustration that is growing stems from their mutual reluctance to talk candidly about the situation one of them will inherit. If either of them has a clue what to do to help stabilize this tottering economy, he is keeping it to himself.”
What was most clear about events was that the deregulation of the financial system that began in the 1980s now could be seen to have wrecked the U.S. economy. But neither Obama nor McCain proposed regulatory changes or sought in any way to challenge the machinations of the financial titans.
THE CANDIDATES TAKE NOTICE OF THE DEEPENING CRISIS
Housing and home ownership are among the key issues. During the housing bubble, the prices of homes inflated to two or three times their previous value. Now these prices have been collapsing, though homeowners still have to make payments in excess of what the homes were now worth. Critics have pointed out that the Wall Street bailout plan both Obama and McCain voted for was intended to keep home prices high, even if families have trouble making their mortgage payments and continue to lose their homes to foreclosure.
And mortgage payments are going up due to rising interest costs and the resetting of adjustable rate mortgages. On October 8, with the stock market still in free fall, the Federal Reserve cut interest rates for the banking system, but the rise in mortgage interest rates for consumers continued. It will be difficult for the Federal Reserve to cut rates further because this weakens the dollar and makes investments in the U.S. economy less attractive for China, Japan, and other foreign dollar holders.
Up to this point there has been scant mention of the fact that there had been no increase in the level of investment in the U.S. producing economy in thirty-five years. It is also a fact that with the rising level of unemployment and continued decline in the manufacturing job base, U.S. consumer purchasing power has caved in. And despite the financial bailouts, there is still no new economic engine to lead a recovery.
During the week of October 6, Obama continued to surge in the polls. Both McCain and his vice-presidential candidate, Alaska governor Sarah Palin, had performed poorly in the televised debates, and the projections of state-by-state counts in the electoral college showed Obama approaching enough votes to ensure victory. The election was now only a month away.
At this point the McCain campaign decided to “go negative” in criticizing Obama on “character issues,” with an unnamed “high-ranking campaign official” making the incredible admission to the New York Post that “if the campaign focused on the economy we would lose.” McCain’s team had already announced they were halting their campaigning in Michigan, perhaps the industrial state hit hardest by the economic downturn.
On the evening of Monday, October 13, Obama tried to seize the initiative through a major address in Toledo, Ohio, on a new economic recovery plan which included the following provisions:
* A tax credit of $3,000 per job for companies adding jobs in the U.S.
* Elimination of capital gains taxes on investments in small and start-up businesses.
* $25 billion of federal money for infrastructure projects.
* Tax cuts for workers, middle-class employees, and senior citizens.
* Extension of unemployment benefits.
* Penalty-free hardship withdrawals from retirement accounts.
* Allowing bankruptcy judges to modify mortgage terms for distressed consumers.
* A ninety-day foreclosure moratorium for financial institutions that participated in the congressional bailout plan.
But there was a glitch. Despite the variety of provisions and the obvious voter appeal, the plan would only provide a $50 billion stimulus to the economy, less than $175 per capita. The amount would be dwarfed by the estimated total of $1.5 trillion the federal government had committed to between March 16 and October 3 to rescue the financial system.
The rescue included financial institution bailouts and takeovers, costs due to bank failures, new mortgage insurance, and tax breaks added to the bailout bill. This largesse would have to be paid for by yet more government borrowing, with an unprecedented $1 trillion deficit looming for fiscal year 2009.
Obama made a serious misrepresentation about the nature of the additional deficit by claiming that the government’s $700 billion outlay in purchasing bad bank debt would be paid back when the loans the debt was based on were redeemed. But the reason the debt was bad in the first place was that it came from mortgages that homeowners were expected to default on. Not even the power of the federal government was going to squeeze blood from this turnip.
In Obama’s wake came a host of progressive commentators offering their own stimulus proposals to be financed by government debt as though it would be as easy as turning on a garden hose. An example was the $300-$400 billion plan put forth by Rutgers University professor Eileen Appelbaum who, like Obama, never mentioned the possibility of increasing overall tax revenues or curbing military spending as funding sources.
The day after Obama put forth his plan, McCain said he would offer $52 billion in tax cuts but no stimulus spending. He had campaigned against congressional “earmarks,” which were a type of budget appropriation for infrastructure projects proposed by representatives for their home districts. McCain viewed federal infrastructure spending as “pork,” making it a taboo which he could not break at this late stage of the game.
The day McCain made his proposal, the government announced that $250 billion of the Wall Street bailout would be used for the Department of the Treasury to buy shares in the nation’s largest banks. This followed similar action announced for British banks by Prime Minister Gordon Brown. The measure would restore some of the bank capitalization lost through loan defaults. U.S. banks would now be partially nationalized.
A few days later, the Federal Reserve announced it would take over a critical function of the commercial banking industry by using its emergency powers to fund day-to-day operations of U.S. businesses through the discount window of the Federal Reserve Bank of New York.
In spite of all this, the Federal Reserve, the IMF, and every commentator writing on the subject was still predicting a long and deep recession for both the U.S. and world economies. Around the world stock markets continued to fall.
Meanwhile, in foreign affairs, there has been a subtle movement among the U.S. establishment over the last three years away from Israel. Former president Jimmy Carter’s book, Palestine: Peace Not Apartheid, was a milestone. Also, Obama’s vice-presidential candidate Joe Biden reportedly told Israel they would have to live with a nuclear Iran.
The candidates made the required nods in the direction of Israel as a valued ally, but none spent much valuable air time on the topic. Jewish voters typically voted with the Democratic Party and were not seeing any reason to switch.
Obama still had a credibility problem, except it was with progressive voters.
In running after having served in the U.S. Senate for only four years, Obama had come out of nowhere to capture the imagination of younger and highly-educated voters sick of Bush’s wars. But far from being the peace candidate he seemed to be early in his election bid, now when he said he had opposed the Iraq War from the start, he clarified his position to mean that he only opposed it because the U.S. should have been focusing its military efforts more on Afghanistan and Pakistan.
He talked about “taking out Osama bin Laden,” referring to the 9/11 attacks seven years ago. But bin Laden hadn’t reliably been seen or heard from for years, and some doubt he is even still alive.
Obama also said, in accepting the Democratic Party nomination for president in Denver on August 28, that he would “truly stand up for Georgia” and “curb Russian aggression.” Later Obama called Russia’s actions “evil.” Biden referred in his acceptance speech to “Russia’s challenge to the free and democratic country of Georgia.” Obviously, these aggressive positions, based on falsehoods, could trigger a U.S.-Russian confrontation if pushed to their logical extremes.
McCain has been serving in Washington, D.C., in the House or the Senate, since 1983. He is a former Vietnam prisoner of war and the son and grandson of Navy admirals. He graduated from the U.S. Naval Academy in 1958 with a dismal ranking of 894 out of 899.
McCain is the favored candidate of the military-industrial complex and, with Alaska governor Sarah Palin as nominee for vice-president, the religious right-wing. He is also the one who would likely ensure continued record-setting oil company profits.
While Obama called for an oil windfall profits tax that could yield $15 billion a year in new federal revenue, McCain’s proposals “would deliver a $3.8 billion tax cut to the five largest American oil companies,” according to the Center for American Progress Action Fund. $1.2 billion of the cut would go to Exxon-Mobil, largely associated with the Rockefeller family.
McCain had tried to appeal to the Christian fundamentalist constituency by picking Sarah Palin as his vice-presidential running mate, though no candidate for that office ever had less experience at the national level. She said that the Iraq War was “God’s task,” while British Petroleum reportedly was a sponsor for her inauguration.
Many thoughtful people, including conservative commentator George Will, have been dissconcerted at the prospect of a McCain/Palin presidency. Will, with his typical patrician understatement, said McCain’s reaction to the economic crisis was “un-presidential” and “made some of us fearful.”
McCain also has a reputation for a bad temper and making snap judgments. The selection of Sarah Palin seemed like an example of the latter. McCain is the oldest presidential candidate in history and not of the best health. People have been looking at Sarah Palin in light of the terrifying prospects that such a seemingly clueless person could occupy the White House if McCain died in office.
If Obama had been in danger of losing the progressive wing of the Democratic Party by his unwillingness to separate himself sufficiently from the Bush administration’s militant foreign policy, events were still in his favor. By early October, with the highly unpopular bailout having been approved and the stock market continuing to sink, Obama remained calm in the televised debates and in campaign speeches.
For an outdoor speech in St. Louis, Obama drew 100,000 spectators. He has begun to look like a president-in-waiting, while McCain seems increasingly the man time has passed by.
But the next president could be faced with momentous decisions if he cares to make them. Events since the late 1970s showed how much the philosophy in U.S. ruling circles had moved away from President Richard Nixon’s concept of a multilateral world based on a balance of power to one of world conquest by an international order headed by the global financiers and enforced by a militant U.S. government.
Therefore it is difficult for many observers to be hopeful about seeing the U.S. take its place among a peaceful family of nations. Both candidates promised “change.” But would they change anything that really made a difference? Or would they just follow orders?
As the campaign entered its final month, it was Obama’s to lose. Still, many people believed that the real reason George W. Bush had won the 2000 and 2004 elections was due to campaign fraud in Florida and Ohio respectively and feared that something similar could happen in 2008.
Would the Republicans steal what was arguably one of the most important presidential elections in U.S. history? The New York Times reported on October 9:
“Tens of thousands of eligible voters in at least six swing states have been removed from the rolls or have been blocked from registering in ways that appear to violate federal law.”
The Obama campaign was even calling for appointment of a federal special prosecutor to investigate allegations of illegalities. As Obama continued to rise in the polls and McCain fell further behind, some said that if McCain did win the election, it could be done only through dishonest means.
If the Republicans do steal the election and elect McCain/Palin, a coalition of progressive activists led by David Swanson has pledged to take action. Swanson wrote:
If your television declares John McCain the president elect on the evening of November 4th, your television will be lying. You should immediately pick up your pre-packed bags and head straight to the White House in Washington, D.C., which we will surround and shut down until this attempt at a third illegitimate presidency is reversed.6
Then there were those who suspected that the 9/11 terrorist attacks had been carried out by elements within the Bush administration—or that they looked the other way and “allowed” the attacks to happen—and were afraid the Republicans would do something similar to arouse the fears of voters while McCain was staggering to apparent defeat.
Rumors that such an event was planned have been swirling for over a year. Such speculation, along with the fears about election fraud, shows just how much eight years of Bush and Vice-President Richard Cheney has alienated the public and how little the president and his party are trusted.
EUROPE WEIGHS IN
But no matter whether Obama or McCain is elected, the U.S. is part of a larger world where its credibility is in the gutter and where economic weakness has begun to remove its power of choice.
It has already been noted that it was foreign creditors, especially China, that appeared to be threatening to pull the plug on the U.S. government’s incessant borrowing which may have been the trigger that forced Henry Paulson to admit a crisis had hit by going to Congress for the financial rescue package.
Then with the election only two weeks away, it became clear that Europe had something different in mind than letting the U.S. return to its old ways of what might be called “Wild West” economics. After all, for several decades, U.S. politicians and businessmen had run all over the globe grabbing whatever they desired in order to support the world’s most wasteful and resource-intensive lifestyle.
At the same time as the U.S. was trying to shore up its failing—and flailing—financial industry, the nations of the EU have been taking actions to protect themselves. Except that the EU was focusing more on assuring solvency by increasing government control rather than the mindless “free-market” cash bailouts that Paulson and Bernanke were engineering. When in mid-October the Europeans weighed in, the U.S. stock market staged a single-day rally, with a gain of over 900 points in the Dow-Jones Industrial Average.
Over the past few years the sense has been building that the Europeans were becoming alarmed at the threat which U.S. misrule was posing to the world on a number of fronts, including 1) the breakdown of the world’s largest economy triggered by gross irresponsibility on the part of both the U.S. public and private sectors; 2) the overly-aggressive and failing U.S. military posture in the Middle East; and 3) U.S. refusal to address overriding international issues like resource conservation and global warming.
On October 18, the Canadian Globe and Mail reported on a recent meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel. The report said, “Nothing would be truly fixed, they believed, until there was a new world financial system in place, a new economic watchdog supervising the world’s economies.”
British Prime Minister Gordon Brown had written as much in a memo to the French and German leaders. The Globe and Mail report continued:
Europe had reached a consensus, at least superficially, on a solution that had not been attempted in sixty-four years: a major global meeting that would attempt to redesign the world-finance system. It was an acknowledgment, at a high level, that with the current crisis, the entire postwar economic system may have come to an end…. By Tuesday morning, the Americans were on board, at least as far as attending the proposed meeting — expected to be held in New York shortly after the November 4 presidential election. [Canadian] Prime Minister Stephen Harper, fresh from his re-election, said Friday he also supports holding the meeting. All the G8 industrialized nations have agreed to attend, at least on paper, and it is expected that China, Brazil and India will take part. While there’s no consensus on what the new financial order should be and there are signs of deeply divergent views, these countries appear at least willing to talk about a new international order at a meeting the three European leaders are calling Bretton Woods II, after the 1944 meeting that started it all.
The day before the Globe and Mail report, an article by Brown appeared in the Washington Post, where he wrote:
This is a defining moment for the world economy. We are living through the first financial crisis of this new global age. And the decisions we make will affect us over not just the next few weeks but for years to come. The global problems we face require global solutions.
Brown added that, “The next stage is to rebuild our fractured international financial system” and mentioned that the purpose was to “root out the irresponsible and often undisclosed lending at the heart of our problems.”
Perhaps what Brown has in mind was to act on behalf of Europe in rescuing the Western financial system from the excesses of those in the U.S. who have wrecked it. Brown concluded diplomatically:
“There are no Britain-only or Europe-only or America-only solutions to today’s problems. We are all in this together, and we can only resolve this crisis together. Over the past week, we have shown that with political will it is possible to agree on a global multibillion-dollar package to recapitalize our banks across many continents. In the next few weeks, we need to show the same resolve and spirit of cooperation to create the rules for our new global economy. If we do this, 2008 will be remembered not just as a year of financial crisis but as the year we started to build the world anew.”
The Globe and Mail article provided additional detail on the topics the summit would cover:
The document that Mr. Brown first made public on Wednesday morning …proposes a set of organizations — a ‘new international financial architecture for the global age’— that will monitor risks in the financial system and provide an early-warning system; determine global standards of regulation; supervise international corporations in their cross-border activities, protect markets from excessive activities of speculators; stamp out major conflicts of interest and set standards for pay and bonuses; internationalize accounting standards, and provide transparency in complex financial transactions.
Over the weekend, Sarkozy and European Commission President José Manuel Barroso met with President Bush at the presidential Camp David retreat in Maryland where they announced “a series of summits on addressing the challenges facing the global economy,” starting with one in the United States “soon after the U.S. elections.”
But Sarkozy sounded much more aggressive than Bush or other U.S. officials had been in curbing reckless “free-market” abuses. He told the press:
The president of the United States is right in saying that protectionism and closing one’s borders is a catastrophe. He is right to say that it would be wrong, catastrophic, to challenge the foundations of market economics. But we cannot continue along the same lines because the same problems will trigger the same disasters.
Sarkozy mentioned several areas where he might want to negotiate new regulations exceeding what the U.S. and Britain were looking for, including more stringent regulation of international banks, hedge funds, and credit-rating companies. According to press reports, he also said that world leaders should reconsider the rules governing offshore tax havens such as the Cayman Islands.
Sarkozy has also been reported as saying, “We want a new world to come out of this. We want to set up the basis for a capitalism of entrepreneurs, not speculators.” Another topic Sarkozy and other European leaders have mentioned is restoring the system of fixed currency exchange rates that the U.S. abandoned in 1972, an action which introduced an era of worldwide currency anarchy. He said that fixed, but flexible, exchange rates “should definitely be on the table.”7
Regarding any potential conflict with the U.S. over the upcoming summits, Sarkozy said after a meeting in Europe: “Europe wants it. Europe demands it. Europe will get it.”8
Finally, on October 23, the White House announced that President Bush would host the first summit on November 15 in Washington, D.C. The Washington Post reported that:
Sarkozy, British Prime Minister Gordon Brown, and others have signaled a desired to go much further in regulating markets than Bush seems inclined to do. Brown said yesterday that he wants greater cross-border oversight of banks and other financial firms, while Sarkozy called for much stricter government supervision of financial markets.
By now attendance had been expanded to include the entire G-20 which represents two-thirds of the world’s population. The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union.
Finally, at a meeting hosted by the Chinese on October 25 in Shanghai, Chinese Prime Minister Wen Jiabao confirmed the need for far-reaching measures. With Japanese Prime Minister Taro Aso, German Chancellor Merkel and French President Sarkozy in attendance, the attendees issued a statement which said they recognized “the need to improve the supervision and regulation of all financial actors, in particular their accountability” and agreed “to undertake effective and comprehensive reform of the international monetary and financial systems.”
Prior to this meeting, said Reuters:
The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.
The era of American unilateralism is clearly on the verge of ending, but are we seeing the same configuration of nations that run the Trilateral Commission and the Bilderberg Group taking advantage of the crisis to further the New World Order agenda of total domination of the world by Western international finance?
And is this why smaller nations such as Iceland are seeing their currencies under attack from unknown sources? Other nations with shaky currencies are Poland, Hungary, Ukraine, Serbia, the Baltic states, Kazakhstan, Indonesia, South Korea, Argentina, Russia, Pakistan, and Brazil. Is someone trying to stampede these nations into seeking shelter under an umbrella belonging exclusively to the big Western banks?
And will such measures simply bind every nation on earth more stringently to the worldwide debt-based monetary system that has failed so spectacularly? Are we in fact seeing the stage now being set for the complete and final triumph of the global reign of usury?
And if the U.S. financial system is completely controlled by whatever supranational infrastructure is devised, will it then be subjected to the same type of neoliberal regime of austerity and privatization the IMF imposes on the nations it dominates? Will the “Washington Consensus” turn and devour its originator?
In a 1998 paper, World Bank analysts stated, “Crises are a window of opportunity.” (Dr. Richard Werner, Gang8 Yahoo Group) So was the financial crisis engineered at this stage of the U.S. political process to create what could be a global financial coup d’etat before the next president takes office?
Or is there a more benign interpretation of events? Is the older, wiser, and more mature civilization of Europe riding to rescue a world the U.S. has brought to the brink of destruction?
Whether it’s Obama or McCain who is elected president on November 4, that person will sit in attendance at the planned summits with the rest of the world presenting its case for change. Of course change there has to be. The U.S. owes the world a mountain of debt, as well as redress for its lawlessness.
Also, the possibility of a federal government debt default in 2009 is looming for a nation that has never been in such a precarious financial position. The days of the Wild West are indeed over. But what will come next?
WHAT SHOULD THE NEXT PRESIDENT DO TO FACE THE CRISIS?
Senior White House correspondent Helen Thomas said of Bush, “He is the worst president in all of American history.” The public shares Thomas’s view. By mid-October 2008, ninety percent of those polled said the nation was headed in the wrong direction.
Former President Jimmy Carter said something similar in the area of foreign policy: “I think, as far as the adverse impact on the nation around the world, this administration has been the worst in history.”
One thing is certain: the legacy left by President George W. Bush is indeed a kind of Armageddon. The challenges that will face the next U.S. president are almost beyond comprehension. They include war vs. peace and the ability of the world economy to function.
But with so many changes in the world, shouldn’t we have not just an economic “summit,” but a general framework for peace that would end hostilities in Afghanistan, Iraq, and the Eastern Mediterranean?
With respect to Russia, China, India and even the EU, the new president will doubtless be expected to embrace the politics of multilateralism in order to maintain a balance of power among the nations of the world. But shouldn’t a strong voice also be given to the nations of the Islamic region, as well as Africa, Latin America, and Australia/New Zealand?
By now it is abundantly clear that global finance capitalism cannot replace the nation-state. It should be just as clear that only a world of functional and prosperous nations can create an effective international federation as contemplated by the U.N. charter.
The Europeans seem to have an inkling of this, but will the world arrive at stability if Western bank-run finance is seen as the only viable economic system? How about a broader approach to prosperity that would help the people of every nation on earth, not just those who live off lending and interest? Is our planet condemned to the misrule of various forms of “trickle-down” economics forever?
The organization that should be the most concerned is the U.N., but where is the U.N. today? Obviously it is nearly dead as a positive and active force in the world. In a farewell address preceding his 2006 retirement as secretary-general, Kofi Annan discussed three major problems of “an unjust world economy, world disorder, and widespread contempt for human rights and the rule of law,” which “have not been resolved, but have sharpened” during his service.
This disintegration has taken place during the George W. Bush presidency. In a December 11 speech, Annan asked for the U.S. to return to President Harry Truman’s multilateralist foreign policy and to follow Truman’s belief that “the responsibility of the great states is to serve and not dominate the peoples of the world.”
Anther matter the new president should deal with is to get control of the U.S. military-intelligence network. He must reverse the Neocon takeover of the State Department engineered by Secretary of State Condoleezza Rice and halt the militarization of U.S. embassies resulting from escalation of the number of military staff assigned from the Department of Defense.
Another major question is whether the danger of U.S. government bankruptcy will result in reduced military expenditures. But will the war-mongers surrender the enormous portion of the U.S. government budget they are accustomed to consuming?
While the furor over the financial meltdown was raging in October, Congress quietly passed a staggering $611 billion defense authorization on top of $189.3 billion in “supplemental” funding for the Iraqi and Afghan wars. The Pentagon says its budget will increase by $450 billion over the next five years.
Both Obama and McCain voted to approve the defense authorization bill. Among the projects they funded was a truck-mounted microwave crowd-control weapon being developed by Raytheon for 2010 deployment.
To be used to control civilian demonstrators, each weapon will cost $5 million. Wouldn’t it be reasonable to ask the next president to explain why he thinks this weapon is needed?
Under another program the Defense Department will pay contractors a staggering $300 million “to produce news stories, entertainment programs, and public service advertisements for the Iraqi media in an effort to ‘engage and inspire’ the local population to support U.S. objectives and the Iraqi government,” according to a letter from Senator Jim Webb (D-VA) to defense secretary Robert Gates. This is enough money to pay 6,000 employees $50,000 per year. Maybe Obama and McCain should explain why they voted to approve this outrageous expenditure.
Neither is NATO expecting a benign outcome to the world crisis. Author Michael Collon reported in an article on “What Will the U.S. Foreign Policy be Tomorrow?”:
In January 2008, five former NATO generals presented a preparatory document for the NATO summit meeting at Bucharest. Their proposals reflect a terrifying possibility. And what gives weight to their document is that, up until recently, all of them held very high positions. General John Shalikashvili was U.S. Chief of Staff and Commander in Chief of NATO in Europe, General Klaus Naumann ran the German army and was president of the military committee of NATO in Europe, General Henk van den Breemen was Dutch Chief of Staff and Admiral Jacques Lanxade held the same post in France, while Lord Inge ran the General Staff and was also Chief of the Defence Staff of Great Britain.9
Collon described the document in a section entitled, “Five NATO Generals Prepare a World Government.” The document stated, “What the Western allies expect is the pro-active defense of their societies and their way of life maintained over the long term.” It continued, “The objectives of our strategy are to preserve the peace, our values, economic liberalism, and stability.”
“Economic liberalism” means market-oriented global finance capitalism under the control of the Western banking system.
The document also identified enemies, the chief one being China:
China is in a situation to wreak great harm on the US and the world economies, based on its enormous reserves in dollars….China is in a position to use finance to impose itself on Africa and acquire the capacity to utilize it on a much greater scale—if it so decides.
This statement by the general is mind-boggling. Hasn’t it been U.S. government policies that resulted in these dollars being paid to China? And isn’t the West talking out of both sides of its mouth in planning a world economic summit that includes China, while contemplating war against that nation?
Indeed, the rise and fall of the U.S. bubble economy cannot be understood unless the role of China is taken into account. This role is increasingly problematic in light of statements such as one made recently by Shi Jianxun, a professor at Shanghai’s Tongji University:
“The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar’s hegemony to plunder the world’s wealth.”10
Whatever agreements U.S. bankers and politicians may once have made with China for them to take over our manufacturing while we lived off financial profits have grievously backfired. Solving this conflict with China peacefully may be the next president’s greatest challenge. But decisions to the contrary may already have been made, with the president’s job being merely to carry them out.
FACING THE ECONOMIC CRISIS
Assuming that peace may yet prevail, we may hope that in facing the economic crisis, the next president will go beyond working with other nations in attempting to fix the financial system. No financial fixes will change the fact that a severe economic repression has arrived and that the producing economy of the U.S. and other nations have begun to spiral downward.
The possibility exists of enormous human suffering. In fact the suffering has already started, with bankers filing court actions that have led to uniformed policemen or even SWAT teams evicting large numbers of innocent people, often elderly, from their homes around the country. With the stock market crash, tens off millions of people are losing their hard-earned savings and retirement nest eggs.
The downward path to further human suffering is being prepared by mass media propagandists like the Washington Post’s Robert Samuelson, who argues that the hard times mean we must slash programs for the elderly and poor like Social Security, Medicare, and Medicaid. In an October 22 article Samuelson wrote:
I wish everyone a pleasurable retirement. But we need to overhaul our government retirement programs for the common good and not just the good of the elderly. We have already waited so long that there’s no way to do this without being unfair to someone — overburdening the young or withdrawing promised benefits from older Americans. The present financial crisis, by reducing retirement savings, has made a hard job even harder. Still, these federal programs began as safety nets for the needy; now they’ve become subsidies for living long, regardless of need.
“Subsidies for living long”? With columnists for prestigious newspapers advocating policies that border on genocide, it’s time to talk about real solutions.
The first thing to realize is that the money raised through taxes and borrowing from the future, which the politicians have thrown at their wars and financial bailouts, exists as real economic purchasing power. This means that it can be used for other purposes—for purposes that directly benefit the people of the nation who work for a living, send their children to school, and want to save for their old age.
The key to having money available for beneficial social purposes, rather than war and profits from lending, is that it should be issued directly by the government, not lent through the banking system which uses public debt as collateral.
The Democrats mention investment in U.S. infrastructure, though they do not provide details about how to pay for it except through more government deficit spending funneled through the Federal Reserve System. But what if we left the banks out of it for a change?
What would really help repair the damage to the collapsing U.S. domestic economy would be an uncompromising program of interest-free lending and grants for infrastructure development and an effort at restoring the nation’s manufacturing base, along with decent, well-paying jobs. Such a program would constitute a “New Deal for the 21st Century,” as spoken of by 2008 presidential candidate Dennis Kucinich (D-OH). Kucinich has introduced legislation for zero-interest infrastructure lending in the last two sessions of Congress.
The economic recovery program proposed by Barack Obama may be a step in the right direction, but the $25 billion infrastructure provision is pathetically small. Obama should be listening to Congressman Kucinich as much as to his own advisers and Wall Street campaign contributors.
Recently Kucinich released a sixteen-point plan that included infrastructure development, as well as implementation of the American Monetary Institute’s American Monetary Act, the most progressive piece of monetary reform legislation in U.S. history. It’s in the area of monetary reform that Obama could have the greatest impact, though there’s no indication it has crossed his mind.
One feature of the American Monetary Act is nationalization of the Federal Reserve, as was done with the Bank of England in 1946. The act would also provide for direct government expenditures for public purposes as took place in the 19th century with the Civil War Greenbacks. The Greenbacks helped fuel the U.S. economy until the early 20th century. Contrary to bankers’ propaganda, they were non-inflationary. By comparison, under the Federal Reserve System, the dollar has lost ninety-five percent of its value, most of this loss taking place since 1965.
An area of economic recovery that has been ignored is the disappearance in the U.S. of family farming. During the Great Depression, a majority of Americans still lived on farms, so at least could grow food in times of trouble.
Today, the dominance of agribusiness, inflated land prices, the high cost of credit, “free trade,” and NAFTA have taken away that ability. A nation that cannot feed itself locally is playing with fire. Who can say that famine could not arise even in developed nations during a general economic collapse?
DIVIDEND ECONOMICS
The one economic measure that has made a positive difference in 2008 was the federal government’s issuance to taxpayers of a tax rebate averaging $600 per recipient. The stimulus measure demonstrates how easy it is to spend money directly into the economy if the politicians want to do so.
Along these lines, the new president could institute ongoing cash stipends to citizens similar to the Alaska Permanent Fund. This year the Alaska state government made a payment to each resident of $3,269 from resource revenues. The American Monetary Act also contains a dividend provision, as does the platform for the Green Party.
But $3,269 is not enough. An annual citizens’ dividend of $1,000 per month has been proposed by Washington, D.C., analyst Stephen Shafarman, in his new book, Peaceful, Positive Revolution (Tendril Press, 2008).
A similar program leading to an annual basic income guarantee has been enacted by Brazil and was used in modified form by Argentina to recover from its economic collapse of 1999-2002. Shafarman is part of the U.S. Basic Income Guarantee Network, which has ties to its European counterpart, the Basic Income European Network (BIEN). For the author’s own description of a dividend-based economic model, see “An Emergency Program of Monetary Reform for the United States,” Global Research.
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A citizens’ dividend could work wonders in rebuilding the economy from the bottom up, including small business and local agriculture. To assure that dividends are spent for necessities, they could be issued as tax-free food, fuel, and housing vouchers from a government recovery account not dependent on taxation or borrowing. Rather the backing for the vouchers would be the productive potential of the economy.
This way, new economic production could be generated without bank loans. The vouchers, when spent, could be funneled into a network of community savings banks that would re-lend the money locally. (Richard C. Cook, “How to Save the U.S. Economy: The Cook Plan,” Global Research.)
By taking such steps to restore economic vitality, the U.S. might eventually overcome the delusion spawned by the New World Order and clung to by all the leaders of the Western nations that financial wealth has meaning apart from a nation’s producing economy. In continuing to maintain the fictitious belief in finance-based wealth without a robust producing economy to support it, the nations of the West have wandered down a cul-de-sac.
In 1896, William Jennings Bryan spoke at the Democratic National Convention, saying to the bankers and their tyrannical gold standard, “You shall not crucify mankind on a cross of gold.” Today mankind is being crucified on a banker’s promissory note.
Real wealth is created by human labor and ingenuity applied to the resources of the earth using energy that derives from nature. It is not created by bank loans. Credit has a role, but it should be treated as a public utility, like water, electricity, and clean air.11
Today a new economic science is needed. Such a science would build on such historical movements as Distributism and Social Credit, both developed by British thinkers in the early 20th century and current as viable economic schools of thought in Canada, New Zealand, Great Britain, Australia, and elsewhere.
Distributism posits an alternative to both capitalism and socialism by arguing that the best economic system is one that provides ownership and autonomy to the maximum number of people. When the Social Credit concept of regular dividend payments as a means of monetizing future production potential is introduced as well, an entirely new monetary basis for economic democracy emerges.
A revolution in economics is needed. The future of the world is now at stake, particularly because it is obvious that the U.S.’s status as the world’s superpower is coming to an end. People know something is drastically wrong with a nation that relies more than any other on “market economics,” yet has the world’s largest prison population, a declining standard of living, decreasing life expectancy, an epidemic of drug and alcohol addiction, overwhelming debt, and so much domestic violence.
This is what turning over the nation to the financial elite has done. Will the next stage be an economic depression where millions more become homeless and people actually starve? If so, it all started when, in 1913, the financiers took over through the Federal Reserve System and created a monetary system based on usury, debt-based currency, and bank leveraging of speculation, combined with crony capitalism and criminal disregard of all legal and commonsense standards.
The politicians profited from this system which has now failed. The financiers and their enablers in the White House and Congress have driven a once-great nation off a cliff. Will the European solution of collective action to shore up the world’s debt-based monetary system make a difference? Or will it just lead to a new era of international financial looting, forced population reduction, and a more sophisticated police state than anything we have seen yet?
ECONOMICS OF THE SPIRIT
Maybe a New World Order really is needed. If so, shouldn’t it be one with a genuine spiritual basis leading to economic justice, not just a modification of the system we have today? Such a system based on economic justice was affirmed in a message to the author by an Australian author, Omna Last, who wrote:
But what if there was a truly representative world government…I do not mean a coercive world government imposing itself on the peoples of the world, but one that operated exactly as you suggest an American government should operate in helping to fulfill the potential in the lives of Americans? A government that provided free no-interest economic dividends to every nation of the world community? If the money was embezzled, used for corrupt purposes, or helped to destroy the world’s eco-system further, then that country would receive no free dividends for a period in the future.
In an article posted on his website on October 26, Omna Last wrote:
Earth is a temple. The money-changers have taken over the temple…. It is time to remove the money-changers from their positions as priests of the new religion of money…. Governments all over the world should be run by people in tune with their divine selves – their conscience, in tune with God, not in love with money and its power, but in love with the moral laws of the Universe.
Those with eyes to see knew the present crisis was coming long ago. That vision now has spread to more people. What is increasingly clear is that positive change, as opposed to the change that is just a drift to disaster, will only happen when people who love freedom demand it, work for it, and sacrifice for it. Will the next president of the United States facilitate such change or stand in its way?
1. George Friedman, “The Russian Resurgence,” www.Stratfor.com, September 18, 2008. [↩]
2. Brian Rohan, “Saakashvili “Planned S. Ossetia Invasion”: Ex-Minister,” Reuters, September 14, 2008. [↩]
3. Ian S. Lustick, “Abandoning the Iron Wall: ‘Israel and the Middle Eastern Muck’,” Middle East Policy, Vo. XV, No. 3, Fall 2008. [↩]
4. Richard C. Cook, “Mortgage Fraud: The Paulson Bailout Plan,” Global Research, September 23, 2008. [↩]
5. Berit Kjos, “The U.N. Plan for Global Migration,” News with Views, 2006. [↩]
6. David Swanson, “A McCain Win Will be Theft: Resistance Planned,” Global Research, October 20, 2008. [↩]
7. Bloomberg.com, October 6, 2008. [↩]
8. Christian Science Monitor, October 20, 2008. [↩]
9. Information Clearing House, October 12, 2008. [↩]
10. “U.S. Has Plundered World Wealth With Dollar,” Reuters, October 24, 2008. [↩]
11. Richard C. Cook, “Credit as a Public Utility: The Key to Monetary Reform,” Global Research. [↩]
War or Peace?: The World After the 2008 U.S. Presidential Election
by Richard C. Cook / October 27th, 2008
With the presidential election only a week away, the financial crisis has been dominating the news, but behind it is an even larger question of war vs. peace. This article will appear in a forthcoming issue of Eurasia Critic magazine.
INTRODUCTION
World war or world peace is the blunt choice that will face either Barack Obama or John McCain when one of them is elected president of the United States on Tuesday, November 4, 2008.
For a major eruption of violence to be averted, the new president must deal positively with the reappearance of Russia on the world stage, the emergence of China as an economic force, and the aspirations of all the nations on earth for a decent and secure way of life.
Making matters much more dangerous are the ongoing financial crisis, along with what appears to be the start of a worldwide economic recession of as yet undetermined depth and duration.
It is Europe, not the U.S., from which proposals are emerging for a transformative approach to the most compelling issues. But will it be enough?
THE DISASTROUS PRESIDENCY OF GEORGE W. BUSH
In December 2000, at the time the U.S. Supreme Court was intervening in the disputed vote count in Florida to name Republican George W. Bush president over Democrat Al Gore, the stock market began to crash. The “dot.com” bubble, based largely on foreign investment in internet companies and technology stocks, deflated. By the time Bush was inaugurated in January 2001, signs of a recession were appearing.
This did not prevent the Bush administration from initiating a $450 billion tax cut for the upper income brackets that Congress approved in March 2001. A similar cut was subsequently enacted in May 2003.
On September 11, 2001, the World Trade Center’s Twin Towers in New York City were attacked by airplanes flying into them, followed that morning by an air attack on the Pentagon in Washington, D.C.
Terrorists from Al Qaeda, an organization of Islamic extremists associated with the Afghan mujaheddin, and a Saudi figure, Osama bin Laden, alleged to be their leader, were blamed. The wealthy bin Laden family had close ties to the U.S. and the Bush family.
Within a few weeks, the Bush administration pulled a battle plan from the shelves of the Pentagon and invaded Afghanistan. The object was to wrest control of that nation from the Taliban, supposedly Al Qaeda collaborators. A new U.S. Asian land war had begun.
In March 2003, the Bush administration added to the Afghan action the second invasion of Iraq in the past thirteen years, following the “Shock and Awe” aerial attack. The assaults on Afghanistan and Iraq, with torture of prisoners, use of depleted uranium weapons, and killing of civilians, was methodical and brutal.
Americans who had opposed the Vietnam War in the 1960s and 70s were appalled at how history was repeating itself. The public was subjected to a relentless barrage of pro-war propaganda by square-jawed military talking heads
Behind the scenes were the international financial and oil interests who stood to benefit from the removal of Iraqi president Saddam Hussein as an independent actor in the Middle East. Financiers like David Rockefeller, who had founded the Trilateral Commission and was one of the “internationalist” leaders of what had come to be called the “New World Order,” tended to remain in the shadows, but their presence was palpable.
Rockefeller had reportedly expressed his world view in a statement at a 1991 meeting of the Bilderberg Group:
“The supra-national sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.”
With respect to most of the U.S. military actions after World War II, especially the ones after Ronald Reagan was elected president in 1980, an argument could be made that the internationalists were using the U.S. military as their personal global police force.
Even so, the Neocons—“new conservatives”—who had rushed to the forefront after September 11, 2001, working chiefly through Secretary of Defense Donald Rumsfeld and Vice-President Richard Cheney, seemed to be a more radical element than the officials who had been in charge during the Clinton years, when the U.S. and NATO went to war against Serbia. Many of the Neocons were Jewish, with strong ties to Israel.
In 1997 the Neocons had created the Project for a New American Century, which advocated a new invasion of Iraq, and published a statement that positive change might result from a “catalyzing event—a new Pearl Harbor.” Later this was interpreted as possibly having foreshadowed the 9/11 attacks.
President George W. Bush justified the Iraq invasion by claiming that the regime of Saddam Hussein possessed weapons of mass destruction. Later this claim proved to be a lie.
To many the attack was a simple act of aggression. Kofi Annan, Secretary General of the U.N. said of the invasion on September 16, 2004, “I have indicated it was not in conformity with the U.N. charter. From our point of view, from the charter point of view, it was illegal.” The U.S. paid no attention to Annan’s misgivings.
The U.S. attack on Iraq was not without controversy, even among the international elite. According to Daniel Estulin, writing in his breakthrough book, The Bildergerg Group, the Europeans at the 2001 Bilderberg Conference summoned Donald Rumsfeld and blasted him for prematurely planning an attack on Iraq that year. But by 2003, says Estulin, they were prepared to endorse it. Still, the U.S. had far less active support from other nations than with the 1991 invasion of Iraq under George W. Bush’s father.
WARS ARE NOT CHEAP
Starting in 2001, the Bush administration had increased the frequency of White House meetings with Alan Greenspan, chairman of the Federal Reserve, who lowered interest rates by 550 basis points from January 2001 to June 2003. This succeeded in floating the U.S. economy through injecting a huge amount of cash into what came to be called the “housing bubble.”
It’s consumer spending that keeps the U.S. economy running, but ever since the 1980s, when we began to export so many of our manufacturing jobs, family income had stagnated. It has been established by researchers, and documented as well by Daniel Estulin, that at a certain point the financial elite made the momentous decision that the U.S. would be de-industrialized. According to one account, this decision had been a topic of discussion in meetings in China, after Nixon’s visit there in 1972, that were held among David Rockefeller, Secretary of State Henry Kissinger, and Chinese Premier Chou En-Lai.
When Rockefeller and Columbia University professor Zbigniew Brzezinski—later President Jimmy Carter’s national security adviser—formed the Trilateral Commission in 1973, the plan to turn the U.S. into a financial/service economy instead of the world’s greatest industrial democracy seemed to become a key objective. How well this program succeeded is shown by statistics from the website Economy in Crisis:
· From 1978 to July 2008, more than 16,613 U.S. companies were sold to foreign corporations.
· The steel, publishing, textile, machine tool, automobile, and electronics industries declined sharply.
· By 2006 American manufacturers suffered a twenty-two percent structural cost disadvantage compared to overseas competitors through taxes, health and pension benefits, litigation, regulation, and unequal environment protection.
· In 2006, $1 in $4 of US consumption on manufactured goods went immediately and directly to imports.
· In 2007 China alone exported over $321 billion in goods to the United States compared to the $62 billion in goods we exported to them. The U.S. trade deficit, estimated to exceed $800 billion in 2008, is costing $1.5 million per minute in remittance to foreign companies.
· Three million high-paying manufacturing jobs were lost between 2000 and 2005 alone. The U.S. lost 63 thousand jobs just in February of 2008.
· Foreign manufacturers operating in the U.S. accounted for over twenty percent of our exports and manufacturing assets, and a large percentage of our employment in 2006.
· As of December, 2007, the U.S owed fifty-three percent of its debt to foreign countries and other international interests. This is 25.5 percent of our total national deficit, and we finance nearly 100 percent of all new borrowings from foreign interests. Our competitors are now our bankers.
· High-paying goods-producing industries have lost net employment over the past twenty-seven years, while lower paying non-tradable services-providing employment has doubled.
· In 2004, China and India graduated a combined 950,000 engineers versus 70,000 in the U.S. The United States ranks near the bottom of science/math proficiency
Beginning around 1991-92, with cheap credit now flowing from the Federal Reserve System, home prices soared. The money from new mortgages and home equity loans became a virtual “cash cow” for families strapped for cash.
The federal government had already been taking steps during the 1990s to ease mortgage credit so that more families could purchase homes. But after 2001, many more loans were based on fraudulent mortgage applications, where brokers exaggerated borrower incomes. ABC News later reported that during this period risk analysts at Washington Mutual, one of the nation’s largest banks, were told to ignore high risk loans because lending had to be maximized. Those who objected were disciplined or fired.
On Wall Street, banks that wrote mortgages began to offload them by packaging them into mortgage-backed securities that were sold around the world as bonds to banks and investors. Risk analysts at the leading credit-rating agencies, such as Standard and Poor’s, Moody’s, and Fitch, gave their highest ratings to mortgage-backed securities whose risks were later acknowledged to be grossly underestimated.
Also, mortgage companies, with Alan Greenspan’s endorsement, began to offer more Adjustable Rate Mortgages (ARMs), loans that would reset at higher rates in future years. Mortgage brokers fed the growing bubble by telling people they should buy now, because housing prices would keep going up and they could resell at a profit before their ARMs escalated.
As a result of the bubble, large amounts of money began to flow into the economy, not only from mortgages and home equity loans, but also from capital gains on the resale of inflating property. Meanwhile, in the world of investment securities, the Securities and Exchange Commission reduced the amount of their own capital investors were required to bring to the table, resulting in a large increase in bank leveraging of speculative trading. This fed additional bubbles in the equity, hedge fund, derivatives, and commodities markets. The SEC also eliminated most of its Office of Risk Management through budget cuts.
According to an April 2008 Washington Post article by New York governor Elliot Spitzer, state attorneys-general who wanted to investigate allegations of mortgage fraud were blocked from doing so by the Office of the Comptroller of the Currency within the U.S. Treasury Department. There was no federal agency charged with regulating mortgage fraud to take up the slack. Spitzer made these charges just before he was forced to resign from office over a sex scandal disclosed by a leak of FBI investigative documents.
Thus it appeared that a major part of U.S. economic growth was tainted by outright criminality, with collusion from the highest levels of the U.S. government, the Federal Reserve System, and the financial industry. But the housing and investment bubbles generated enough economic activity and tax revenues through 2006 to allow the Bush war policy to be implemented.
George W. Bush was reelected in 2004 at the height of the bubbles. By 2005, the housing bubble alone was accounting for half of all U.S. growth and yielding substantial tax revenues to all levels of government. Still, the Bush administration was running huge budget deficits from expenditures on the increasingly-expensive wars in Afghanistan and Iraq.
Congress approved funding for the Afghan and Iraqi wars even after the Democratic Party regained majority control in the 2006 elections. The funding also allowed for the start of construction in Baghdad of the world’s largest U.S. embassy, as well as permanent military bases in Iraq.
During this time, an internal battle raged between the U.S. State Department, which wanted to implement a plan to rebuild Iraq’s civilian infrastructure, and the Defense Department, which was mainly interested in military occupation. Defense won out.
L. Paul Bremer, former U.S. foreign service officer and managing director of Kissinger and Associates, was named occupation director. But the Iraqi economy and physical infrastructure were shattered. Two to three million Iraqi civilians were killed, injured, or driven into exile.
The housing bubble began to collapse when the Federal Reserve raised interest rates by 425 basis points from June 2003 to June 2006. In January 2006, Ben Bernanke replaced Alan Greenspan as Fed chairman. Greenspan had been chairman for nineteen years during which the largest financial bubbles in world history were created.
This sequence of events led some to contend that the Federal Reserve had both deliberately created the housing bubble, then deliberately destroyed it. Hundreds of millions of people around the world, including U.S. homeowners and foreign investors, ultimately were trapped in the Greenspan/Bernanke pincers.
By 2007, the federal government’s debt was over $9 trillion and reached $10.3 trillion by October 2008. It was now obvious that a serious economic downturn lay ahead. By 2007, signs of a recession loomed, as homeowners who had signed up for “subprime” and ARM mortgages began to default.
By 2008 the number of home foreclosures would exceed four million. The mortgage-based bonds sold through Wall Street brokerage houses to U.S. and foreign investors, began to prove worthless. They had proliferated around the world as virtual time-bombs in investment portfolios.
By August 2008, foreign investors, such as the Bank of China, were becoming increasingly involved in the crisis. Reuters ran a story that Chinese banks planned to stop investing in U.S. markets, which the Chinese government denied, but the threat remained.
If the Chinese and other Asian exporting and petroleum-rich nations pull out, the days of “dollar hegemony,” where the dollar constitutes the world’s reserve currency, providing almost unlimited funding for the U.S. commercial and military empire, will be over.
THE BUSH ADMINISTRATION HITS A WALL
By the first presidential primary elections of 2008 in Iowa and New Hampshire, the campaign to select the next president of the United States was underway. The eight-year George W. Bush presidency would be ending within a year.
By now the Bush years seemed to exemplify the most grievously wrong-headed aspects of U.S. foreign and domestic policy since the election of Ronald Reagan in 1980. The 2008 election will mark the end of an era, though no one knows for sure what will come next.
What has to be questioned are an economy that has been downgraded from one based on industry to a service economy structured around finance, an aggressive military policy with U.S. forces engaged around the world, and trade and fiscal deficits as far as the eye can see.
With all this going on, the Bush White House has brought the world’s most powerful nation to a point of crisis, possibly even to the brink of catastrophe.
In retrospect it can be seen that U.S. military occupation of the Middle East, focusing on Iraq and involving extensive collaboration with Israel, was an extension of the century-long attempt by the Anglo-Americans to control the region’s fossil fuel resources.
But the nation of Iraq and its people had been crushed in the meantime. Even if the U.S. were to withdraw combat forces at some time in the future, the permanent military bases it plans to leave behind will be islands in a sea of hostility. Today even these bases are in jeopardy, as Iraq’s elected government pressures the U.S. to commit to a complete withdrawal by 2011.
Iran has clearly been strengthened by U.S. action to destroy Sunni power in Iraq and has been emboldened by the successes of Hamas in Palestine and Hezbollah in Lebanon in standing up to the Israelis. U.S. intentions to attack Iran have evoked strong opposition among Europeans and can be seen to have enhanced the influence of Russia and China, since Iran is now an observing member of the Shanghai Cooperative Organization.
After initial successes in Afghanistan, U.S. forces have become bogged down in protecting the capital of Kabul, where President Hamid Karzai rules under virtual siege, while the Taliban have come back to contest control of the countryside. The U.S. has resorted to bombing sorties which often kill civilians and has begun to escalate the war by sending raiding parties into neighboring Pakistan.
After the 1991 collapse of the Soviet Union, the U.S., acting through NATO, moved aggressively to extend its influence into the former Soviet republics and surround Russia with nations friendly to the West. The former Soviet Union and Soviet satellite states that joined NATO were Estonia, Latvia, Lithuania, the Czech Republic and Slovakia (formerly part of Czechoslovakia), Bulgaria, and Romania.
The European members of NATO have not yet agreed to extend invitations to the Ukraine and Georgia after those nations expressed interest following establishment of pro-Western governments, though a communiqué after the 2008 NATO summit in Bucharest indicated membership would be forthcoming.
But the NATO façade may have cracked, as shown by a recent trip by German Chancellor Angela Merkel to St. Petersburg for meetings with Russian President Dmitri Medvedev.
According to a report by George Friedman:
The central question on the table was Germany’s position on NATO expansion, particularly with regard to Ukraine and Georgia. Merkel made it clear at a joint press conference that Germany would oppose NATO membership for both of these countries, and that it would even oppose placing the countries on the path to membership. Since NATO operates on the basis of consensus, any member nation can effectively block any candidate from NATO membership. The fact that Merkel and Germany have chosen this path is of great significance. Merkel acted in full knowledge of the U.S. view on the matter and is prepared to resist any American pressure that might follow.1
Also by 2008 the U.S. was losing influence with the former Soviet republics of Central Asia—Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—which had joined with Russia and China in the SCO. In central and south Asia, as well as Africa, nations have been unwilling to act as hosts for new U.S. military bases.
The U.S. had been losing ground in Central Asia and elsewhere even before Georgia invaded its former province of South Ossetia on August 8, 2008.
The invasion of South Ossetia by Georgia’s forces, armed and trained by the U.S. and Israel, was crushed so decisively by the Russians as to be a major embarrassment to the Bush administration. According to Georgian president Mikheil Saakashvili’s former defense minister Irakly Okruashvili, Saakashvili carried out the attack despite warnings from the U.S. that they could not come to his aid militarily.2
Okruashvili faulted the U.S. for not being sufficiently critical of Saaksashvili in the months leading up to the attack. From this report it is unclear whether the U.S., while trying to keep Georgia in its orbit as a pathway for natural gas pipelines, was trying to goad Russia into a major military confrontation, though such a scenario seemed possible. Of course the U.S. media and politicians blamed only Russia for the conflict.
In Latin America, the Hugo Chavez regime in Venezuela has begun to forge an alliance with Russia, even to the point of announcing a plan for joint naval maneuvers in the Caribbean. Chavez is also acting as an inspiration to populist movements elsewhere in South America, including those in Bolivia and Ecuador.
Announcements by Vladimir Putin, now the Russian prime minister, that Russia is opposed to a unipolar world were reminiscent of the 1970s, when President Richard Nixon and Russian General Secretary Leonid Brehznev met as equals to forge the policy of détente. Putin created a sensation on February 10, 2007, at the 43rd Munich Conference on Security Policy, when he said:
“What is a uni-polar world? No matter how we beautify this term, it means one single center of power, one single center of force, and one single master.”
Speaking of the U.S., Putin said:
The United States has overstepped its borders in all spheres—economic, political and humanitarian—and has imposed itself on other states.…Local and regional wars did not get fewer, the number of people who died did not get less but increased. We see no kind of restraint - a hyper-inflated use of force.…[The U.S.] has gone from one conflict to another without achieving a fully-fledged solution to any of them.
Putin clearly has rejected the one-world aspirations of the Western financial elite which acts through U.S. military power. After the Georgian crisis, Dmitry Medvedev, Putin’s successor as president, reiterated:
The world must be multipolar. Single polarity is unacceptable. Russia cannot accept a world order in which any decisions will be made by a sole nation, even such a serious one as the United States. Such a world order will be unstable and fraught with conflicts.
Where did the European Union (EU) fit in after the Georgia debacle? Clearly the Europeans were not passive spectators to a U.S.-Russian standoff. European leaders moved quickly to negotiate a cease-fire in Georgia followed by withdrawal of Russian troops.
The more the EU acts as a bloc, the more it seems that a new nationalist entity has come into existence, complete with its own Euro-based currency. The European population wants peace, prosperity, justice, and to be left alone. They particularly do not want to be dragged into America’s wars. The EU has also taken the lead economically with a 2007 GDP of $16.8 trillion vs. $13.8 for the U.S. (IMF figures)
In the Middle East times are changing too. Israel, for instance, seems to be in social crisis. Though Jews are both leaving Israel and moving in, the population is stable but small. Of a population of 7.3 million, 5.5 million are Jewish Israelis. A substantial minority of non-Jews are imported laborers.
But Israel has a poorly-formed middle class. The gap in Israel between rich and poor is growing, as in the U.S., often with only minimum wage jobs available, even to military veterans. Also, common lands in the kibbutzim are being privatized, and residents reportedly are tending to withdraw from peripheral areas to settle around Tel Aviv for safety from strife with the Palestinians.3
Some Israeli politicians say that Iran, with its supposed nuclear ambitions, poses an “existential threat” to the nation. But there are reports that the U.S. has told Israel they will not be permitted to attack Iran on their own.
ECONOMIC COLLAPSE
If the Bush administration is being challenged in the foreign policy arena, in the area of macroeconomics it may have been checkmated.
As stated previously, the financial crisis deepened in the late summer of 2008 when China and the other nations of the world that had been floating the U.S. fiscal and trade deficits by their purchase of public and private securities became alarmed. This was in reaction to Wall Street’s issuance of the huge amount of “toxic” debt from mortgage-backed securities that were now collapsing in value as the housing bubble imploded.
Analyst William Engdahl has stated that the financial meltdown was secretly planned in order to weaken the European banking system. Engdahl wrote:
“As one senior European banker put it to me in private discussion, ‘There is an all-out war going on between the United States and the EU to define the future face of European banking.’”
The start of the recession and the decline of purchasing power by consumers who can no longer borrow quantities of money also means that the U.S. will cease as the customer of last resort whose purchases conveniently float the world economy. The Japanese, sitting on billions of U.S. dollars in their bank accounts, are reportedly furious that U.S. consumers might no longer support the abundant lifestyle of the world’s richest nation.
The dollar is so shaky that some nations are reducing their dollar reserves and turning to other currencies. Talk has been rampant about a worldwide shift to a multi-currency regime, possibly including the Euro, the Yuan, the Yen, and even the Ruble. In March 2007 the Governor of China’s Central Bank Zhou Xiaochuan announced:
“China will diversify its $1 trillion foreign exchange reserves, the largest in the world, across different currencies and investment instruments, including in emerging markets.”
The U.S. Council on Foreign Relations is supporting the movement to a multiple currency regime in its journal, Foreign Affairs. Though the federal government denies any concrete plans, the so-called Amero has been mentioned as the currency of a hypothetical North American Union made up of the U.S., Canada, and Mexico.
Meanwhile, the Bush administration, led by Secretary of the Treasury Henry M. Paulson, working in league with Federal Reserve Chairman Ben Bernanke, has begun to introduce gigantic amounts of publicly-backed credit to rescue the exploding financial system.
As recently as 2006, the U.S. financial industry earned over $500 billion in profits—an astronomical sum. Some hedge fund managers were earning $1 billion a year. Now Wall Street is a disaster scene, with financial firms losing over 200,000 jobs in a year and major investment banks going bankrupt.
Also, the two quasi-governmental mortgage guarantee agencies, Fannie Mae and Freddie Mac, have failed. Despite their lavishing $175 million in the last decade on buying influence from Congress, the government has fired their executives and is taking the two agencies over in a conservatorship. The government also took over insurance giant AIG.
When, on September 23, 2008, Henry Paulson asked for $700 billion dollars to purchase bad debt from U.S. and foreign banks without any oversight or guarantee of success, Congress revolted, with the House of Representatives rejecting the proposal in an initial vote. They did so because their constituents were enraged with the terms proposed by the Bush administration for a gigantic giveaway of taxpayers’ money.4
U.S. taxpayers could now be finding themselves on the hook for possibly trillions of dollars of debt liabilities due to Wall Street mismanagement and fraud. Both the Securities and Exchange Commission and the Federal Bureau of Investigation have begun belated criminal investigations. Americans on “Main Street” and their representatives in Congress remain horrified.
Some say the capitalist era is over. The financiers and stock brokers have run rampant in the 2000s under President George W. Bush. They’ve been called, only half-jokingly, “The Masters of the Universe.”
But their excesses have been encouraged by the Bush administration, the Federal Reserve, and the government’s regulatory agencies, which have combined to facilitate an explosion of leveraged speculation in the housing, hedge, equity, commodity, and derivative markets. More shocks undoubtedly lie ahead.
By September 2008, as the bubbles were starting to blow up, the greatest financial crisis since the Great Depression was underway. Despite initial opposition, Congress caved in to pressure from Bush and the bank lobbyists and approved a revised version of Paulson’s plan. According to reports, including a statement on the floor of the House of Representatives by Rep. Brad Sherman (D-CA), members of Congress were threatened with a declaration of martial law to keep public order if the measure failed.
The Treasury Department has started to float new bond issues to raise money to buy the bad mortgage debt, not only from U.S. banks but from foreign investors as well. Meanwhile the stock market is continuing to decline and by October 10 had lost almost forty percent of its value in a year. Over $8 trillion in wealth had vanished from U.S. markets, including the retirement savings and dividend income of tens of millions of people. On October 24, the Dow Jones closed at 8,378.95 vs. 14,198.1 on October 11, 2007.
At the same time, rising prices of oil, food, and other commodities have begun to produce another era of global stagflation, similar to the 1970s, though oil prices have fallen recently. Still, the U.S. financial collapse is resulting in the onset of a worldwide recession that most commentators, including economists at the IMF, said could only get worse—possibly much worse.
Has the New World Order proved to be a parasite that killed its host? Maybe in the U.S. it has. By early October 2008, millions of Americans had been crushed by debt and were losing their homes to foreclosure, tent cities of the homeless were springing up, unemployment claims were soaring, and factory orders were plummeting.
The credit crisis is combining with shortage of consumer purchasing power to cause commerce to shut down at a time when stores should be increasing inventory for the Christmas season. Most of the major chain stores are closing unprofitable retail outlets, throwing thousands of employees out of work.
With the financial system crashing it was only a month from the presidential election, when it would be up to the next president—either Barack Obama or John McCain—to deal with these calamities. Other than a small “stimulus” tax rebate in the spring of 2008, nothing had been done by the Bush administration to rebuild the weakened U.S. producing economy or help the rank and file consumer.
Whose fault was it? David Rockefeller had clearly been the leader during past decades of the “intellectual elite and world bankers” who would replace the old-fashioned nation-state and whose legacy the U.S. was now reaping. Rockefeller had been quoted as saying at the United Nations on September 23, 1994:
“This present window of opportunity, during which a truly peaceful and interdependent world order might be built, will not be open for too long. We are on the verge of a global transformation. All we need is the right major crisis and the nations will accept the New World Order.”5
Intended or not, the “major crisis” had arrived.
Rockefeller may have been a kind of “Emperor of the West,” but he is now 93 years old. Yet he has successors who are now running things. Henry Paulson is the most visible. Also prominent are the heads of the largest banks who are being featured regularly in news reports, such as Jamie Dimon, CEO of the banking colossus J.P. Morgan Chase.
Washington Mutual Bank had run short on ready cash during the credit crisis, so Dimon’s bank was able to acquire its $307 billion in assets for only $1.9 billion. Commentators said it was a “fire sale.”
William Engdahl writes:
The Paulson plan is now clearly part of a project to create three colossal global financial giants—Citigroup, JP MorganChase and, of course, Paulson’s own Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the U.S. taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead.
THE 2008 ELECTION
When the financial crisis struck during the week of September 22, it was only six weeks before the presidential election. Democrat Barack Obama shot up in the polls, because voters perceived him as more likely than Republican John McCain to deal effectively with the situation.
Obama, with a Kenyan father and a white American mother, was the first African-American to run for the presidency of the U.S. on a major party ticket. To many it was a shock that Obama had defeated such a formidable opponent as Hillary Clinton, wife of former president Bill Clinton, in the Democratic primaries.
Now Obama was the beneficiary of the bad economic news. In American politics, Democrats, with their New Deal heritage and the semi-prosperity under Clinton in the 1990s, are viewed as being more in touch with the economic problems of ordinary citizens. Also, the Democrats’ income policies have generally favored the working and middle classes more than the rich, and Obama was promising to repeal the Bush tax cuts that benefited mainly the upper brackets.
Further, the incumbent party—in this case the Republicans—is more likely to be viewed as responsible for the current economic situation, good or bad, and McCain had consistently allied himself during his long Senate career with the financial deregulation dating from the Reagan years that was now proving disastrous.
McCain had just finished saying in a speech, “The fundamentals of our economy are strong,” but on Wednesday, September 24, he changed his tune. Now, he said, he was suspending his campaign and would return to Washington, D.C., to help solve the crisis. The Democrats howled with derision at this seeming act of political hypocrisy which showed, they said, how desperate McCain had become to maintain credibility.
Clearly the campaign had now changed—or had it? Until the financial crisis, both Obama and McCain had been extremely cautious in putting forth proposals, trying more to avoid saying anything the media could criticize than to suggest fundamental economic changes. Also, Obama’s presidential campaign had received huge contributions from Wall Street.
Both men had been presenting themselves as populists, the friends of the middle class. McCain emphasized tax reduction and limitations on government spending as means of economic growth. Obama spoke in favor of job creation, including five million new jobs from “green energy”—solar and wind power, etc. He also promised to cut taxes for those earning less than $250,000 a year.
But neither had been convincing as signs of an economic recession began to accelerate. Obama’s five million new jobs, for instance, were an intention, not a plan. But they were obviously needed. The financial emergency hit after job losses of 60,000 for August were announced.
Nor did either offer many specifics or explain how they could implement new federal programs in the face of the gigantic budget deficits being projected. CNN news commentator Lou Dobbs blasted them for delivering “poll-driven sound bytes” and failing “to even mention real economic issues,” like the overseas outsourcing of jobs.
Washington Post columnist David Broder accused the pair of “running from reality.” Broder added:
“The frustration that is growing stems from their mutual reluctance to talk candidly about the situation one of them will inherit. If either of them has a clue what to do to help stabilize this tottering economy, he is keeping it to himself.”
What was most clear about events was that the deregulation of the financial system that began in the 1980s now could be seen to have wrecked the U.S. economy. But neither Obama nor McCain proposed regulatory changes or sought in any way to challenge the machinations of the financial titans.
THE CANDIDATES TAKE NOTICE OF THE DEEPENING CRISIS
Housing and home ownership are among the key issues. During the housing bubble, the prices of homes inflated to two or three times their previous value. Now these prices have been collapsing, though homeowners still have to make payments in excess of what the homes were now worth. Critics have pointed out that the Wall Street bailout plan both Obama and McCain voted for was intended to keep home prices high, even if families have trouble making their mortgage payments and continue to lose their homes to foreclosure.
And mortgage payments are going up due to rising interest costs and the resetting of adjustable rate mortgages. On October 8, with the stock market still in free fall, the Federal Reserve cut interest rates for the banking system, but the rise in mortgage interest rates for consumers continued. It will be difficult for the Federal Reserve to cut rates further because this weakens the dollar and makes investments in the U.S. economy less attractive for China, Japan, and other foreign dollar holders.
Up to this point there has been scant mention of the fact that there had been no increase in the level of investment in the U.S. producing economy in thirty-five years. It is also a fact that with the rising level of unemployment and continued decline in the manufacturing job base, U.S. consumer purchasing power has caved in. And despite the financial bailouts, there is still no new economic engine to lead a recovery.
During the week of October 6, Obama continued to surge in the polls. Both McCain and his vice-presidential candidate, Alaska governor Sarah Palin, had performed poorly in the televised debates, and the projections of state-by-state counts in the electoral college showed Obama approaching enough votes to ensure victory. The election was now only a month away.
At this point the McCain campaign decided to “go negative” in criticizing Obama on “character issues,” with an unnamed “high-ranking campaign official” making the incredible admission to the New York Post that “if the campaign focused on the economy we would lose.” McCain’s team had already announced they were halting their campaigning in Michigan, perhaps the industrial state hit hardest by the economic downturn.
On the evening of Monday, October 13, Obama tried to seize the initiative through a major address in Toledo, Ohio, on a new economic recovery plan which included the following provisions:
* A tax credit of $3,000 per job for companies adding jobs in the U.S.
* Elimination of capital gains taxes on investments in small and start-up businesses.
* $25 billion of federal money for infrastructure projects.
* Tax cuts for workers, middle-class employees, and senior citizens.
* Extension of unemployment benefits.
* Penalty-free hardship withdrawals from retirement accounts.
* Allowing bankruptcy judges to modify mortgage terms for distressed consumers.
* A ninety-day foreclosure moratorium for financial institutions that participated in the congressional bailout plan.
But there was a glitch. Despite the variety of provisions and the obvious voter appeal, the plan would only provide a $50 billion stimulus to the economy, less than $175 per capita. The amount would be dwarfed by the estimated total of $1.5 trillion the federal government had committed to between March 16 and October 3 to rescue the financial system.
The rescue included financial institution bailouts and takeovers, costs due to bank failures, new mortgage insurance, and tax breaks added to the bailout bill. This largesse would have to be paid for by yet more government borrowing, with an unprecedented $1 trillion deficit looming for fiscal year 2009.
Obama made a serious misrepresentation about the nature of the additional deficit by claiming that the government’s $700 billion outlay in purchasing bad bank debt would be paid back when the loans the debt was based on were redeemed. But the reason the debt was bad in the first place was that it came from mortgages that homeowners were expected to default on. Not even the power of the federal government was going to squeeze blood from this turnip.
In Obama’s wake came a host of progressive commentators offering their own stimulus proposals to be financed by government debt as though it would be as easy as turning on a garden hose. An example was the $300-$400 billion plan put forth by Rutgers University professor Eileen Appelbaum who, like Obama, never mentioned the possibility of increasing overall tax revenues or curbing military spending as funding sources.
The day after Obama put forth his plan, McCain said he would offer $52 billion in tax cuts but no stimulus spending. He had campaigned against congressional “earmarks,” which were a type of budget appropriation for infrastructure projects proposed by representatives for their home districts. McCain viewed federal infrastructure spending as “pork,” making it a taboo which he could not break at this late stage of the game.
The day McCain made his proposal, the government announced that $250 billion of the Wall Street bailout would be used for the Department of the Treasury to buy shares in the nation’s largest banks. This followed similar action announced for British banks by Prime Minister Gordon Brown. The measure would restore some of the bank capitalization lost through loan defaults. U.S. banks would now be partially nationalized.
A few days later, the Federal Reserve announced it would take over a critical function of the commercial banking industry by using its emergency powers to fund day-to-day operations of U.S. businesses through the discount window of the Federal Reserve Bank of New York.
In spite of all this, the Federal Reserve, the IMF, and every commentator writing on the subject was still predicting a long and deep recession for both the U.S. and world economies. Around the world stock markets continued to fall.
Meanwhile, in foreign affairs, there has been a subtle movement among the U.S. establishment over the last three years away from Israel. Former president Jimmy Carter’s book, Palestine: Peace Not Apartheid, was a milestone. Also, Obama’s vice-presidential candidate Joe Biden reportedly told Israel they would have to live with a nuclear Iran.
The candidates made the required nods in the direction of Israel as a valued ally, but none spent much valuable air time on the topic. Jewish voters typically voted with the Democratic Party and were not seeing any reason to switch.
Obama still had a credibility problem, except it was with progressive voters.
In running after having served in the U.S. Senate for only four years, Obama had come out of nowhere to capture the imagination of younger and highly-educated voters sick of Bush’s wars. But far from being the peace candidate he seemed to be early in his election bid, now when he said he had opposed the Iraq War from the start, he clarified his position to mean that he only opposed it because the U.S. should have been focusing its military efforts more on Afghanistan and Pakistan.
He talked about “taking out Osama bin Laden,” referring to the 9/11 attacks seven years ago. But bin Laden hadn’t reliably been seen or heard from for years, and some doubt he is even still alive.
Obama also said, in accepting the Democratic Party nomination for president in Denver on August 28, that he would “truly stand up for Georgia” and “curb Russian aggression.” Later Obama called Russia’s actions “evil.” Biden referred in his acceptance speech to “Russia’s challenge to the free and democratic country of Georgia.” Obviously, these aggressive positions, based on falsehoods, could trigger a U.S.-Russian confrontation if pushed to their logical extremes.
McCain has been serving in Washington, D.C., in the House or the Senate, since 1983. He is a former Vietnam prisoner of war and the son and grandson of Navy admirals. He graduated from the U.S. Naval Academy in 1958 with a dismal ranking of 894 out of 899.
McCain is the favored candidate of the military-industrial complex and, with Alaska governor Sarah Palin as nominee for vice-president, the religious right-wing. He is also the one who would likely ensure continued record-setting oil company profits.
While Obama called for an oil windfall profits tax that could yield $15 billion a year in new federal revenue, McCain’s proposals “would deliver a $3.8 billion tax cut to the five largest American oil companies,” according to the Center for American Progress Action Fund. $1.2 billion of the cut would go to Exxon-Mobil, largely associated with the Rockefeller family.
McCain had tried to appeal to the Christian fundamentalist constituency by picking Sarah Palin as his vice-presidential running mate, though no candidate for that office ever had less experience at the national level. She said that the Iraq War was “God’s task,” while British Petroleum reportedly was a sponsor for her inauguration.
Many thoughtful people, including conservative commentator George Will, have been dissconcerted at the prospect of a McCain/Palin presidency. Will, with his typical patrician understatement, said McCain’s reaction to the economic crisis was “un-presidential” and “made some of us fearful.”
McCain also has a reputation for a bad temper and making snap judgments. The selection of Sarah Palin seemed like an example of the latter. McCain is the oldest presidential candidate in history and not of the best health. People have been looking at Sarah Palin in light of the terrifying prospects that such a seemingly clueless person could occupy the White House if McCain died in office.
If Obama had been in danger of losing the progressive wing of the Democratic Party by his unwillingness to separate himself sufficiently from the Bush administration’s militant foreign policy, events were still in his favor. By early October, with the highly unpopular bailout having been approved and the stock market continuing to sink, Obama remained calm in the televised debates and in campaign speeches.
For an outdoor speech in St. Louis, Obama drew 100,000 spectators. He has begun to look like a president-in-waiting, while McCain seems increasingly the man time has passed by.
But the next president could be faced with momentous decisions if he cares to make them. Events since the late 1970s showed how much the philosophy in U.S. ruling circles had moved away from President Richard Nixon’s concept of a multilateral world based on a balance of power to one of world conquest by an international order headed by the global financiers and enforced by a militant U.S. government.
Therefore it is difficult for many observers to be hopeful about seeing the U.S. take its place among a peaceful family of nations. Both candidates promised “change.” But would they change anything that really made a difference? Or would they just follow orders?
As the campaign entered its final month, it was Obama’s to lose. Still, many people believed that the real reason George W. Bush had won the 2000 and 2004 elections was due to campaign fraud in Florida and Ohio respectively and feared that something similar could happen in 2008.
Would the Republicans steal what was arguably one of the most important presidential elections in U.S. history? The New York Times reported on October 9:
“Tens of thousands of eligible voters in at least six swing states have been removed from the rolls or have been blocked from registering in ways that appear to violate federal law.”
The Obama campaign was even calling for appointment of a federal special prosecutor to investigate allegations of illegalities. As Obama continued to rise in the polls and McCain fell further behind, some said that if McCain did win the election, it could be done only through dishonest means.
If the Republicans do steal the election and elect McCain/Palin, a coalition of progressive activists led by David Swanson has pledged to take action. Swanson wrote:
If your television declares John McCain the president elect on the evening of November 4th, your television will be lying. You should immediately pick up your pre-packed bags and head straight to the White House in Washington, D.C., which we will surround and shut down until this attempt at a third illegitimate presidency is reversed.6
Then there were those who suspected that the 9/11 terrorist attacks had been carried out by elements within the Bush administration—or that they looked the other way and “allowed” the attacks to happen—and were afraid the Republicans would do something similar to arouse the fears of voters while McCain was staggering to apparent defeat.
Rumors that such an event was planned have been swirling for over a year. Such speculation, along with the fears about election fraud, shows just how much eight years of Bush and Vice-President Richard Cheney has alienated the public and how little the president and his party are trusted.
EUROPE WEIGHS IN
But no matter whether Obama or McCain is elected, the U.S. is part of a larger world where its credibility is in the gutter and where economic weakness has begun to remove its power of choice.
It has already been noted that it was foreign creditors, especially China, that appeared to be threatening to pull the plug on the U.S. government’s incessant borrowing which may have been the trigger that forced Henry Paulson to admit a crisis had hit by going to Congress for the financial rescue package.
Then with the election only two weeks away, it became clear that Europe had something different in mind than letting the U.S. return to its old ways of what might be called “Wild West” economics. After all, for several decades, U.S. politicians and businessmen had run all over the globe grabbing whatever they desired in order to support the world’s most wasteful and resource-intensive lifestyle.
At the same time as the U.S. was trying to shore up its failing—and flailing—financial industry, the nations of the EU have been taking actions to protect themselves. Except that the EU was focusing more on assuring solvency by increasing government control rather than the mindless “free-market” cash bailouts that Paulson and Bernanke were engineering. When in mid-October the Europeans weighed in, the U.S. stock market staged a single-day rally, with a gain of over 900 points in the Dow-Jones Industrial Average.
Over the past few years the sense has been building that the Europeans were becoming alarmed at the threat which U.S. misrule was posing to the world on a number of fronts, including 1) the breakdown of the world’s largest economy triggered by gross irresponsibility on the part of both the U.S. public and private sectors; 2) the overly-aggressive and failing U.S. military posture in the Middle East; and 3) U.S. refusal to address overriding international issues like resource conservation and global warming.
On October 18, the Canadian Globe and Mail reported on a recent meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel. The report said, “Nothing would be truly fixed, they believed, until there was a new world financial system in place, a new economic watchdog supervising the world’s economies.”
British Prime Minister Gordon Brown had written as much in a memo to the French and German leaders. The Globe and Mail report continued:
Europe had reached a consensus, at least superficially, on a solution that had not been attempted in sixty-four years: a major global meeting that would attempt to redesign the world-finance system. It was an acknowledgment, at a high level, that with the current crisis, the entire postwar economic system may have come to an end…. By Tuesday morning, the Americans were on board, at least as far as attending the proposed meeting — expected to be held in New York shortly after the November 4 presidential election. [Canadian] Prime Minister Stephen Harper, fresh from his re-election, said Friday he also supports holding the meeting. All the G8 industrialized nations have agreed to attend, at least on paper, and it is expected that China, Brazil and India will take part. While there’s no consensus on what the new financial order should be and there are signs of deeply divergent views, these countries appear at least willing to talk about a new international order at a meeting the three European leaders are calling Bretton Woods II, after the 1944 meeting that started it all.
The day before the Globe and Mail report, an article by Brown appeared in the Washington Post, where he wrote:
This is a defining moment for the world economy. We are living through the first financial crisis of this new global age. And the decisions we make will affect us over not just the next few weeks but for years to come. The global problems we face require global solutions.
Brown added that, “The next stage is to rebuild our fractured international financial system” and mentioned that the purpose was to “root out the irresponsible and often undisclosed lending at the heart of our problems.”
Perhaps what Brown has in mind was to act on behalf of Europe in rescuing the Western financial system from the excesses of those in the U.S. who have wrecked it. Brown concluded diplomatically:
“There are no Britain-only or Europe-only or America-only solutions to today’s problems. We are all in this together, and we can only resolve this crisis together. Over the past week, we have shown that with political will it is possible to agree on a global multibillion-dollar package to recapitalize our banks across many continents. In the next few weeks, we need to show the same resolve and spirit of cooperation to create the rules for our new global economy. If we do this, 2008 will be remembered not just as a year of financial crisis but as the year we started to build the world anew.”
The Globe and Mail article provided additional detail on the topics the summit would cover:
The document that Mr. Brown first made public on Wednesday morning …proposes a set of organizations — a ‘new international financial architecture for the global age’— that will monitor risks in the financial system and provide an early-warning system; determine global standards of regulation; supervise international corporations in their cross-border activities, protect markets from excessive activities of speculators; stamp out major conflicts of interest and set standards for pay and bonuses; internationalize accounting standards, and provide transparency in complex financial transactions.
Over the weekend, Sarkozy and European Commission President José Manuel Barroso met with President Bush at the presidential Camp David retreat in Maryland where they announced “a series of summits on addressing the challenges facing the global economy,” starting with one in the United States “soon after the U.S. elections.”
But Sarkozy sounded much more aggressive than Bush or other U.S. officials had been in curbing reckless “free-market” abuses. He told the press:
The president of the United States is right in saying that protectionism and closing one’s borders is a catastrophe. He is right to say that it would be wrong, catastrophic, to challenge the foundations of market economics. But we cannot continue along the same lines because the same problems will trigger the same disasters.
Sarkozy mentioned several areas where he might want to negotiate new regulations exceeding what the U.S. and Britain were looking for, including more stringent regulation of international banks, hedge funds, and credit-rating companies. According to press reports, he also said that world leaders should reconsider the rules governing offshore tax havens such as the Cayman Islands.
Sarkozy has also been reported as saying, “We want a new world to come out of this. We want to set up the basis for a capitalism of entrepreneurs, not speculators.” Another topic Sarkozy and other European leaders have mentioned is restoring the system of fixed currency exchange rates that the U.S. abandoned in 1972, an action which introduced an era of worldwide currency anarchy. He said that fixed, but flexible, exchange rates “should definitely be on the table.”7
Regarding any potential conflict with the U.S. over the upcoming summits, Sarkozy said after a meeting in Europe: “Europe wants it. Europe demands it. Europe will get it.”8
Finally, on October 23, the White House announced that President Bush would host the first summit on November 15 in Washington, D.C. The Washington Post reported that:
Sarkozy, British Prime Minister Gordon Brown, and others have signaled a desired to go much further in regulating markets than Bush seems inclined to do. Brown said yesterday that he wants greater cross-border oversight of banks and other financial firms, while Sarkozy called for much stricter government supervision of financial markets.
By now attendance had been expanded to include the entire G-20 which represents two-thirds of the world’s population. The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union.
Finally, at a meeting hosted by the Chinese on October 25 in Shanghai, Chinese Prime Minister Wen Jiabao confirmed the need for far-reaching measures. With Japanese Prime Minister Taro Aso, German Chancellor Merkel and French President Sarkozy in attendance, the attendees issued a statement which said they recognized “the need to improve the supervision and regulation of all financial actors, in particular their accountability” and agreed “to undertake effective and comprehensive reform of the international monetary and financial systems.”
Prior to this meeting, said Reuters:
The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.
The era of American unilateralism is clearly on the verge of ending, but are we seeing the same configuration of nations that run the Trilateral Commission and the Bilderberg Group taking advantage of the crisis to further the New World Order agenda of total domination of the world by Western international finance?
And is this why smaller nations such as Iceland are seeing their currencies under attack from unknown sources? Other nations with shaky currencies are Poland, Hungary, Ukraine, Serbia, the Baltic states, Kazakhstan, Indonesia, South Korea, Argentina, Russia, Pakistan, and Brazil. Is someone trying to stampede these nations into seeking shelter under an umbrella belonging exclusively to the big Western banks?
And will such measures simply bind every nation on earth more stringently to the worldwide debt-based monetary system that has failed so spectacularly? Are we in fact seeing the stage now being set for the complete and final triumph of the global reign of usury?
And if the U.S. financial system is completely controlled by whatever supranational infrastructure is devised, will it then be subjected to the same type of neoliberal regime of austerity and privatization the IMF imposes on the nations it dominates? Will the “Washington Consensus” turn and devour its originator?
In a 1998 paper, World Bank analysts stated, “Crises are a window of opportunity.” (Dr. Richard Werner, Gang8 Yahoo Group) So was the financial crisis engineered at this stage of the U.S. political process to create what could be a global financial coup d’etat before the next president takes office?
Or is there a more benign interpretation of events? Is the older, wiser, and more mature civilization of Europe riding to rescue a world the U.S. has brought to the brink of destruction?
Whether it’s Obama or McCain who is elected president on November 4, that person will sit in attendance at the planned summits with the rest of the world presenting its case for change. Of course change there has to be. The U.S. owes the world a mountain of debt, as well as redress for its lawlessness.
Also, the possibility of a federal government debt default in 2009 is looming for a nation that has never been in such a precarious financial position. The days of the Wild West are indeed over. But what will come next?
WHAT SHOULD THE NEXT PRESIDENT DO TO FACE THE CRISIS?
Senior White House correspondent Helen Thomas said of Bush, “He is the worst president in all of American history.” The public shares Thomas’s view. By mid-October 2008, ninety percent of those polled said the nation was headed in the wrong direction.
Former President Jimmy Carter said something similar in the area of foreign policy: “I think, as far as the adverse impact on the nation around the world, this administration has been the worst in history.”
One thing is certain: the legacy left by President George W. Bush is indeed a kind of Armageddon. The challenges that will face the next U.S. president are almost beyond comprehension. They include war vs. peace and the ability of the world economy to function.
But with so many changes in the world, shouldn’t we have not just an economic “summit,” but a general framework for peace that would end hostilities in Afghanistan, Iraq, and the Eastern Mediterranean?
With respect to Russia, China, India and even the EU, the new president will doubtless be expected to embrace the politics of multilateralism in order to maintain a balance of power among the nations of the world. But shouldn’t a strong voice also be given to the nations of the Islamic region, as well as Africa, Latin America, and Australia/New Zealand?
By now it is abundantly clear that global finance capitalism cannot replace the nation-state. It should be just as clear that only a world of functional and prosperous nations can create an effective international federation as contemplated by the U.N. charter.
The Europeans seem to have an inkling of this, but will the world arrive at stability if Western bank-run finance is seen as the only viable economic system? How about a broader approach to prosperity that would help the people of every nation on earth, not just those who live off lending and interest? Is our planet condemned to the misrule of various forms of “trickle-down” economics forever?
The organization that should be the most concerned is the U.N., but where is the U.N. today? Obviously it is nearly dead as a positive and active force in the world. In a farewell address preceding his 2006 retirement as secretary-general, Kofi Annan discussed three major problems of “an unjust world economy, world disorder, and widespread contempt for human rights and the rule of law,” which “have not been resolved, but have sharpened” during his service.
This disintegration has taken place during the George W. Bush presidency. In a December 11 speech, Annan asked for the U.S. to return to President Harry Truman’s multilateralist foreign policy and to follow Truman’s belief that “the responsibility of the great states is to serve and not dominate the peoples of the world.”
Anther matter the new president should deal with is to get control of the U.S. military-intelligence network. He must reverse the Neocon takeover of the State Department engineered by Secretary of State Condoleezza Rice and halt the militarization of U.S. embassies resulting from escalation of the number of military staff assigned from the Department of Defense.
Another major question is whether the danger of U.S. government bankruptcy will result in reduced military expenditures. But will the war-mongers surrender the enormous portion of the U.S. government budget they are accustomed to consuming?
While the furor over the financial meltdown was raging in October, Congress quietly passed a staggering $611 billion defense authorization on top of $189.3 billion in “supplemental” funding for the Iraqi and Afghan wars. The Pentagon says its budget will increase by $450 billion over the next five years.
Both Obama and McCain voted to approve the defense authorization bill. Among the projects they funded was a truck-mounted microwave crowd-control weapon being developed by Raytheon for 2010 deployment.
To be used to control civilian demonstrators, each weapon will cost $5 million. Wouldn’t it be reasonable to ask the next president to explain why he thinks this weapon is needed?
Under another program the Defense Department will pay contractors a staggering $300 million “to produce news stories, entertainment programs, and public service advertisements for the Iraqi media in an effort to ‘engage and inspire’ the local population to support U.S. objectives and the Iraqi government,” according to a letter from Senator Jim Webb (D-VA) to defense secretary Robert Gates. This is enough money to pay 6,000 employees $50,000 per year. Maybe Obama and McCain should explain why they voted to approve this outrageous expenditure.
Neither is NATO expecting a benign outcome to the world crisis. Author Michael Collon reported in an article on “What Will the U.S. Foreign Policy be Tomorrow?”:
In January 2008, five former NATO generals presented a preparatory document for the NATO summit meeting at Bucharest. Their proposals reflect a terrifying possibility. And what gives weight to their document is that, up until recently, all of them held very high positions. General John Shalikashvili was U.S. Chief of Staff and Commander in Chief of NATO in Europe, General Klaus Naumann ran the German army and was president of the military committee of NATO in Europe, General Henk van den Breemen was Dutch Chief of Staff and Admiral Jacques Lanxade held the same post in France, while Lord Inge ran the General Staff and was also Chief of the Defence Staff of Great Britain.9
Collon described the document in a section entitled, “Five NATO Generals Prepare a World Government.” The document stated, “What the Western allies expect is the pro-active defense of their societies and their way of life maintained over the long term.” It continued, “The objectives of our strategy are to preserve the peace, our values, economic liberalism, and stability.”
“Economic liberalism” means market-oriented global finance capitalism under the control of the Western banking system.
The document also identified enemies, the chief one being China:
China is in a situation to wreak great harm on the US and the world economies, based on its enormous reserves in dollars….China is in a position to use finance to impose itself on Africa and acquire the capacity to utilize it on a much greater scale—if it so decides.
This statement by the general is mind-boggling. Hasn’t it been U.S. government policies that resulted in these dollars being paid to China? And isn’t the West talking out of both sides of its mouth in planning a world economic summit that includes China, while contemplating war against that nation?
Indeed, the rise and fall of the U.S. bubble economy cannot be understood unless the role of China is taken into account. This role is increasingly problematic in light of statements such as one made recently by Shi Jianxun, a professor at Shanghai’s Tongji University:
“The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar’s hegemony to plunder the world’s wealth.”10
Whatever agreements U.S. bankers and politicians may once have made with China for them to take over our manufacturing while we lived off financial profits have grievously backfired. Solving this conflict with China peacefully may be the next president’s greatest challenge. But decisions to the contrary may already have been made, with the president’s job being merely to carry them out.
FACING THE ECONOMIC CRISIS
Assuming that peace may yet prevail, we may hope that in facing the economic crisis, the next president will go beyond working with other nations in attempting to fix the financial system. No financial fixes will change the fact that a severe economic repression has arrived and that the producing economy of the U.S. and other nations have begun to spiral downward.
The possibility exists of enormous human suffering. In fact the suffering has already started, with bankers filing court actions that have led to uniformed policemen or even SWAT teams evicting large numbers of innocent people, often elderly, from their homes around the country. With the stock market crash, tens off millions of people are losing their hard-earned savings and retirement nest eggs.
The downward path to further human suffering is being prepared by mass media propagandists like the Washington Post’s Robert Samuelson, who argues that the hard times mean we must slash programs for the elderly and poor like Social Security, Medicare, and Medicaid. In an October 22 article Samuelson wrote:
I wish everyone a pleasurable retirement. But we need to overhaul our government retirement programs for the common good and not just the good of the elderly. We have already waited so long that there’s no way to do this without being unfair to someone — overburdening the young or withdrawing promised benefits from older Americans. The present financial crisis, by reducing retirement savings, has made a hard job even harder. Still, these federal programs began as safety nets for the needy; now they’ve become subsidies for living long, regardless of need.
“Subsidies for living long”? With columnists for prestigious newspapers advocating policies that border on genocide, it’s time to talk about real solutions.
The first thing to realize is that the money raised through taxes and borrowing from the future, which the politicians have thrown at their wars and financial bailouts, exists as real economic purchasing power. This means that it can be used for other purposes—for purposes that directly benefit the people of the nation who work for a living, send their children to school, and want to save for their old age.
The key to having money available for beneficial social purposes, rather than war and profits from lending, is that it should be issued directly by the government, not lent through the banking system which uses public debt as collateral.
The Democrats mention investment in U.S. infrastructure, though they do not provide details about how to pay for it except through more government deficit spending funneled through the Federal Reserve System. But what if we left the banks out of it for a change?
What would really help repair the damage to the collapsing U.S. domestic economy would be an uncompromising program of interest-free lending and grants for infrastructure development and an effort at restoring the nation’s manufacturing base, along with decent, well-paying jobs. Such a program would constitute a “New Deal for the 21st Century,” as spoken of by 2008 presidential candidate Dennis Kucinich (D-OH). Kucinich has introduced legislation for zero-interest infrastructure lending in the last two sessions of Congress.
The economic recovery program proposed by Barack Obama may be a step in the right direction, but the $25 billion infrastructure provision is pathetically small. Obama should be listening to Congressman Kucinich as much as to his own advisers and Wall Street campaign contributors.
Recently Kucinich released a sixteen-point plan that included infrastructure development, as well as implementation of the American Monetary Institute’s American Monetary Act, the most progressive piece of monetary reform legislation in U.S. history. It’s in the area of monetary reform that Obama could have the greatest impact, though there’s no indication it has crossed his mind.
One feature of the American Monetary Act is nationalization of the Federal Reserve, as was done with the Bank of England in 1946. The act would also provide for direct government expenditures for public purposes as took place in the 19th century with the Civil War Greenbacks. The Greenbacks helped fuel the U.S. economy until the early 20th century. Contrary to bankers’ propaganda, they were non-inflationary. By comparison, under the Federal Reserve System, the dollar has lost ninety-five percent of its value, most of this loss taking place since 1965.
An area of economic recovery that has been ignored is the disappearance in the U.S. of family farming. During the Great Depression, a majority of Americans still lived on farms, so at least could grow food in times of trouble.
Today, the dominance of agribusiness, inflated land prices, the high cost of credit, “free trade,” and NAFTA have taken away that ability. A nation that cannot feed itself locally is playing with fire. Who can say that famine could not arise even in developed nations during a general economic collapse?
DIVIDEND ECONOMICS
The one economic measure that has made a positive difference in 2008 was the federal government’s issuance to taxpayers of a tax rebate averaging $600 per recipient. The stimulus measure demonstrates how easy it is to spend money directly into the economy if the politicians want to do so.
Along these lines, the new president could institute ongoing cash stipends to citizens similar to the Alaska Permanent Fund. This year the Alaska state government made a payment to each resident of $3,269 from resource revenues. The American Monetary Act also contains a dividend provision, as does the platform for the Green Party.
But $3,269 is not enough. An annual citizens’ dividend of $1,000 per month has been proposed by Washington, D.C., analyst Stephen Shafarman, in his new book, Peaceful, Positive Revolution (Tendril Press, 2008).
A similar program leading to an annual basic income guarantee has been enacted by Brazil and was used in modified form by Argentina to recover from its economic collapse of 1999-2002. Shafarman is part of the U.S. Basic Income Guarantee Network, which has ties to its European counterpart, the Basic Income European Network (BIEN). For the author’s own description of a dividend-based economic model, see “An Emergency Program of Monetary Reform for the United States,” Global Research.
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A citizens’ dividend could work wonders in rebuilding the economy from the bottom up, including small business and local agriculture. To assure that dividends are spent for necessities, they could be issued as tax-free food, fuel, and housing vouchers from a government recovery account not dependent on taxation or borrowing. Rather the backing for the vouchers would be the productive potential of the economy.
This way, new economic production could be generated without bank loans. The vouchers, when spent, could be funneled into a network of community savings banks that would re-lend the money locally. (Richard C. Cook, “How to Save the U.S. Economy: The Cook Plan,” Global Research.)
By taking such steps to restore economic vitality, the U.S. might eventually overcome the delusion spawned by the New World Order and clung to by all the leaders of the Western nations that financial wealth has meaning apart from a nation’s producing economy. In continuing to maintain the fictitious belief in finance-based wealth without a robust producing economy to support it, the nations of the West have wandered down a cul-de-sac.
In 1896, William Jennings Bryan spoke at the Democratic National Convention, saying to the bankers and their tyrannical gold standard, “You shall not crucify mankind on a cross of gold.” Today mankind is being crucified on a banker’s promissory note.
Real wealth is created by human labor and ingenuity applied to the resources of the earth using energy that derives from nature. It is not created by bank loans. Credit has a role, but it should be treated as a public utility, like water, electricity, and clean air.11
Today a new economic science is needed. Such a science would build on such historical movements as Distributism and Social Credit, both developed by British thinkers in the early 20th century and current as viable economic schools of thought in Canada, New Zealand, Great Britain, Australia, and elsewhere.
Distributism posits an alternative to both capitalism and socialism by arguing that the best economic system is one that provides ownership and autonomy to the maximum number of people. When the Social Credit concept of regular dividend payments as a means of monetizing future production potential is introduced as well, an entirely new monetary basis for economic democracy emerges.
A revolution in economics is needed. The future of the world is now at stake, particularly because it is obvious that the U.S.’s status as the world’s superpower is coming to an end. People know something is drastically wrong with a nation that relies more than any other on “market economics,” yet has the world’s largest prison population, a declining standard of living, decreasing life expectancy, an epidemic of drug and alcohol addiction, overwhelming debt, and so much domestic violence.
This is what turning over the nation to the financial elite has done. Will the next stage be an economic depression where millions more become homeless and people actually starve? If so, it all started when, in 1913, the financiers took over through the Federal Reserve System and created a monetary system based on usury, debt-based currency, and bank leveraging of speculation, combined with crony capitalism and criminal disregard of all legal and commonsense standards.
The politicians profited from this system which has now failed. The financiers and their enablers in the White House and Congress have driven a once-great nation off a cliff. Will the European solution of collective action to shore up the world’s debt-based monetary system make a difference? Or will it just lead to a new era of international financial looting, forced population reduction, and a more sophisticated police state than anything we have seen yet?
ECONOMICS OF THE SPIRIT
Maybe a New World Order really is needed. If so, shouldn’t it be one with a genuine spiritual basis leading to economic justice, not just a modification of the system we have today? Such a system based on economic justice was affirmed in a message to the author by an Australian author, Omna Last, who wrote:
But what if there was a truly representative world government…I do not mean a coercive world government imposing itself on the peoples of the world, but one that operated exactly as you suggest an American government should operate in helping to fulfill the potential in the lives of Americans? A government that provided free no-interest economic dividends to every nation of the world community? If the money was embezzled, used for corrupt purposes, or helped to destroy the world’s eco-system further, then that country would receive no free dividends for a period in the future.
In an article posted on his website on October 26, Omna Last wrote:
Earth is a temple. The money-changers have taken over the temple…. It is time to remove the money-changers from their positions as priests of the new religion of money…. Governments all over the world should be run by people in tune with their divine selves – their conscience, in tune with God, not in love with money and its power, but in love with the moral laws of the Universe.
Those with eyes to see knew the present crisis was coming long ago. That vision now has spread to more people. What is increasingly clear is that positive change, as opposed to the change that is just a drift to disaster, will only happen when people who love freedom demand it, work for it, and sacrifice for it. Will the next president of the United States facilitate such change or stand in its way?
1. George Friedman, “The Russian Resurgence,” www.Stratfor.com, September 18, 2008. [↩]
2. Brian Rohan, “Saakashvili “Planned S. Ossetia Invasion”: Ex-Minister,” Reuters, September 14, 2008. [↩]
3. Ian S. Lustick, “Abandoning the Iron Wall: ‘Israel and the Middle Eastern Muck’,” Middle East Policy, Vo. XV, No. 3, Fall 2008. [↩]
4. Richard C. Cook, “Mortgage Fraud: The Paulson Bailout Plan,” Global Research, September 23, 2008. [↩]
5. Berit Kjos, “The U.N. Plan for Global Migration,” News with Views, 2006. [↩]
6. David Swanson, “A McCain Win Will be Theft: Resistance Planned,” Global Research, October 20, 2008. [↩]
7. Bloomberg.com, October 6, 2008. [↩]
8. Christian Science Monitor, October 20, 2008. [↩]
9. Information Clearing House, October 12, 2008. [↩]
10. “U.S. Has Plundered World Wealth With Dollar,” Reuters, October 24, 2008. [↩]
11. Richard C. Cook, “Credit as a Public Utility: The Key to Monetary Reform,” Global Research. [↩]
We did it, we can undo it
http://www.iht.com/articles/2008/10/27/opinion/edlovejoy.php
International Herald Tribune
We did it, we can undo it
By Thomas E. Lovejoy, Tim Flannery and Achim Steiner
Monday, October 27, 2008
In the course of Earth's history, life collectively has had a strong influence on atmosphere and climate. It has helped shape both, and has been shaped by both. Today atmospheric and climate changes are driven by a single species - ourselves - and they are happening very rapidly.
One of the principal elements in this is carbon, the most basic of the building blocks of living organisms.
When we burn fossil fuels, we release solar energy captured by ancient green plants and carbon goes into the atmosphere as carbon dioxide. Similarly when current living matter is burned and degraded, as in tropical deforestation, it too converts into carbon dioxide.
Greenhouse gas emissions are central in the climate agenda. But the key question has always been, what is a "safe" concentration of atmospheric greenhouse gases. The pre-industrial concentration was 280 parts per million (ppm). Today the concentration is 389 ppm and emission rates have passed beyond the worst case scenario of the Intergovernmental Panel on Climate Change (IPCC).
Climate scientist James Hansen has suggested that 350 ppm was the concentration beyond which it was unsafe to go. The rapid retreat as well as thinning of the Arctic Ocean ice is consistent with that conclusion. So, too, Earth's ecosystems and biodiversity are sending multiple signals that essentially confirm 350 ppm as the limit. Unquestionably we are beyond where we should be.
Nature is on the move all over the planet, with species changing their natural history (e.g. earlier blooming) and their geographical location (e.g. often moving northward and up in altitude).
We have also begun to see abrupt threshold change in ecosystems. Coral reefs are being bleached all over the globe as the fundamental coral animal-alga partnership of reef systems breaks down at warmer temperatures. Evergreen forests in western North America and in Europe are experiencing major tree mortality as a longer summer tilts the balance against the trees in favor of bark beetles.
With major additional temperature increase due from current greenhouse concentrations, major ecosystem disruption is surely in store. In addition, the growing acidity of the oceans (as they absorb carbon dioxide) is already affecting some marine food chains. The outlook for the species and ecosystems so fundamental to human existence is truly grim at higher greenhouse gas concentrations and consequent climate change.
Clearly the imperative should be to peak at as low a concentration as possible and then come down to the safe level. Once in the atmosphere, a carbon dioxide molecule will stay there for 100 to 1,000 years. We need ways to remove it and reach the safe level more quickly.
Fortunately Earth's living systems can contribute to that goal in a significant way. That is why forests have been part of the climate change agenda from the outset. But the time has come to scale up to the planet's ecosystems as a whole.
In the last 300 years, the planet's ecosystems have released a staggering amount - between 200 and 250 billion tons - of carbon, as landscapes have been converted for human uses such as agriculture and cities. Were some of that to be recovered, with each billion tons restored to ecosystems the atmospheric concentration would be reduced by one part per million.
It is more complicated than that because of the equilibrium between atmospheric CO² and that which has been taken up by the oceans, but the potential to remove CO² from the atmosphere by restoring biodiversity and carbon is clearly of major consequence.
Recent studies suggest that restoring degraded grazing lands worldwide could take up billions of tons of carbon, maybe even as much as the difference between current greenhouse gas concentrations and the "safe" 350. Reforesting degraded rain forest lands has enormous potential also. Both would have biodiversity conservation benefits as well. Restored grazing lands actually would provide improved grazing and there is no reason the forest couldn't be used for forest products. Peat lands would have an important role to play.
There are complications: The climate is still changing and affecting ecosystems, human population is growing, and demands for food and biofuels will command their part of the landscapes. Those are huge factors that could work against the role ecosystems can play in reducing the greenhouse gas climate change threat, but increasing carbon retention by agricultural ecosystems can make a contribution in its own right.
Charcoal from plant waste is a relatively long-term way to add carbon to soils and could conceivably remove a significant fraction of the
CO² from the atmosphere we add annually. In addition, it is essential to integrate concerns for equity in land use and tenure, rights of indigenous peoples and local communities, and livelihoods of farmers and herders.
This in no sense reduces the imperative to redesign the energy base of human societies. It is as urgent as ever. The scale of the change needed is not beyond our abilities. Together the ecosystem and energy approaches both help reduce the peak amount of gases in the atmosphere (and consequent climate change) and can get us back to the safe level as fast as possible.
Nations are already preparing for the upcoming meetings in Poland and then Denmark of the UN Framework Convention on Climate Change. The time has come to look at this as a whole, and at the scale of the problem - namely the entire planet.
Notions of planetary engineering abound, but this is the only one essentially free of potential unintended environmental consequences. We need to turn to the rest of the living planet to influence atmosphere and climate as it has done in the past.
Thomas E. Lovejoy, of the Heinz Center for Science, Economics and the Environment, chairs the science and technology advisory panel for the Global Environment Facility. Tim Flannery is professor of environmental and life sciences at Macquarie University. Achim Steiner is executive director of the UN Environment Program.
International Herald Tribune
We did it, we can undo it
By Thomas E. Lovejoy, Tim Flannery and Achim Steiner
Monday, October 27, 2008
In the course of Earth's history, life collectively has had a strong influence on atmosphere and climate. It has helped shape both, and has been shaped by both. Today atmospheric and climate changes are driven by a single species - ourselves - and they are happening very rapidly.
One of the principal elements in this is carbon, the most basic of the building blocks of living organisms.
When we burn fossil fuels, we release solar energy captured by ancient green plants and carbon goes into the atmosphere as carbon dioxide. Similarly when current living matter is burned and degraded, as in tropical deforestation, it too converts into carbon dioxide.
Greenhouse gas emissions are central in the climate agenda. But the key question has always been, what is a "safe" concentration of atmospheric greenhouse gases. The pre-industrial concentration was 280 parts per million (ppm). Today the concentration is 389 ppm and emission rates have passed beyond the worst case scenario of the Intergovernmental Panel on Climate Change (IPCC).
Climate scientist James Hansen has suggested that 350 ppm was the concentration beyond which it was unsafe to go. The rapid retreat as well as thinning of the Arctic Ocean ice is consistent with that conclusion. So, too, Earth's ecosystems and biodiversity are sending multiple signals that essentially confirm 350 ppm as the limit. Unquestionably we are beyond where we should be.
Nature is on the move all over the planet, with species changing their natural history (e.g. earlier blooming) and their geographical location (e.g. often moving northward and up in altitude).
We have also begun to see abrupt threshold change in ecosystems. Coral reefs are being bleached all over the globe as the fundamental coral animal-alga partnership of reef systems breaks down at warmer temperatures. Evergreen forests in western North America and in Europe are experiencing major tree mortality as a longer summer tilts the balance against the trees in favor of bark beetles.
With major additional temperature increase due from current greenhouse concentrations, major ecosystem disruption is surely in store. In addition, the growing acidity of the oceans (as they absorb carbon dioxide) is already affecting some marine food chains. The outlook for the species and ecosystems so fundamental to human existence is truly grim at higher greenhouse gas concentrations and consequent climate change.
Clearly the imperative should be to peak at as low a concentration as possible and then come down to the safe level. Once in the atmosphere, a carbon dioxide molecule will stay there for 100 to 1,000 years. We need ways to remove it and reach the safe level more quickly.
Fortunately Earth's living systems can contribute to that goal in a significant way. That is why forests have been part of the climate change agenda from the outset. But the time has come to scale up to the planet's ecosystems as a whole.
In the last 300 years, the planet's ecosystems have released a staggering amount - between 200 and 250 billion tons - of carbon, as landscapes have been converted for human uses such as agriculture and cities. Were some of that to be recovered, with each billion tons restored to ecosystems the atmospheric concentration would be reduced by one part per million.
It is more complicated than that because of the equilibrium between atmospheric CO² and that which has been taken up by the oceans, but the potential to remove CO² from the atmosphere by restoring biodiversity and carbon is clearly of major consequence.
Recent studies suggest that restoring degraded grazing lands worldwide could take up billions of tons of carbon, maybe even as much as the difference between current greenhouse gas concentrations and the "safe" 350. Reforesting degraded rain forest lands has enormous potential also. Both would have biodiversity conservation benefits as well. Restored grazing lands actually would provide improved grazing and there is no reason the forest couldn't be used for forest products. Peat lands would have an important role to play.
There are complications: The climate is still changing and affecting ecosystems, human population is growing, and demands for food and biofuels will command their part of the landscapes. Those are huge factors that could work against the role ecosystems can play in reducing the greenhouse gas climate change threat, but increasing carbon retention by agricultural ecosystems can make a contribution in its own right.
Charcoal from plant waste is a relatively long-term way to add carbon to soils and could conceivably remove a significant fraction of the
CO² from the atmosphere we add annually. In addition, it is essential to integrate concerns for equity in land use and tenure, rights of indigenous peoples and local communities, and livelihoods of farmers and herders.
This in no sense reduces the imperative to redesign the energy base of human societies. It is as urgent as ever. The scale of the change needed is not beyond our abilities. Together the ecosystem and energy approaches both help reduce the peak amount of gases in the atmosphere (and consequent climate change) and can get us back to the safe level as fast as possible.
Nations are already preparing for the upcoming meetings in Poland and then Denmark of the UN Framework Convention on Climate Change. The time has come to look at this as a whole, and at the scale of the problem - namely the entire planet.
Notions of planetary engineering abound, but this is the only one essentially free of potential unintended environmental consequences. We need to turn to the rest of the living planet to influence atmosphere and climate as it has done in the past.
Thomas E. Lovejoy, of the Heinz Center for Science, Economics and the Environment, chairs the science and technology advisory panel for the Global Environment Facility. Tim Flannery is professor of environmental and life sciences at Macquarie University. Achim Steiner is executive director of the UN Environment Program.
Monday, October 27, 2008
China stays quiet amid talk of new financial order
China stays quiet amid talk of new financial order
Mon Oct 27, 2008
By Alan Wheatley, China Economics Editor - Analysis
BEIJING (Reuters) - Just as it was never realistic to think China could single-handedly save the world economy, it's probably wise to tone down any expectations that Beijing somehow holds the key to a new international financial order.
Premier Wen Jiabao promised after talks among 43 Asian and European Union countries that China would actively participate in a November 15 summit that U.S. President George W. Bush is convening to rake over the global credit crisis.
China, which keeps its own markets on a tight leash, will presumably support any drive to keep a better check on new-fangled financial instruments and cross-border money flows.
"We need financial innovation, but we need financial oversight even more," Wen told a news conference on Saturday.
But Beijing shows scant interest in debating whether a wholly new monetary regime is called for -- whether, perhaps, the current crisis has its roots in the floating exchange rates that replaced the Bretton Woods system of fixed-but-adjustable rates, centred on the dollar, backed by gold and supervised by the International Monetary Fund, that collapsed in 1971.
"I don't think China can do much. Officials have said that what is important for China is to handle its own business well, which I think is quite right," said Zhang Bin with the Chinese Academy of Social Sciences, the government's top think-tank.
NO CHANGE
To be sure, Beijing regularly rails against what it sees as Washington's irresponsible stewardship of the dollar and against market volatility that endangers the stability that China craves.
But discussion of the crisis in Beijing is dominated by the risks for China of holding so many dollars in its reserves.
A senior EU official who attended the summit said Chinese policy makers have little to say when the question turns to overhauling the system that permitted those reserves, and the economic imbalances they mirror, to build up in the first place.
An official at the People's Bank of China ruled out a new international monetary order, while Zhang, who is a financial economist, called the idea "a load of rubbish."
"The basic global monetary system with U.S. dollar as the reserve currency will not change," he said. "China is not ready yet to inject substantial change into the system."
China has the world's fastest-growing economy, but its financial markets are not mature or open enough, Zhang said.
And crucially, he added, although it may be bought and sold for purposes of trade and investment, the yuan is not convertible for purely financial transactions.
This rules out a place for the yuan in central banks' foreign exchange reserves -- something that Thailand, for one, has said it would like to change so the yuan can become an anchor currency in Asia.
Justin Lin, the World Bank's chief economist, also cited the yuan's limited convertibility as a reason why it was premature to talk about a big role for China in any new world financial order.
"China is not strong enough," he told Reuters during a forum this weekend at Peking University, where he was a professor.
FIENDISHLY COMPLEX
All this sets the stage for interesting talks in Washington.
French President Nicolas Sarkozy said on Saturday that he wanted currency questions to be on the summit agenda, while U.S. Treasury Secretary Henry Paulson put down a marker last week by saying it was "an unnatural act" for a big economy like China to have a comparatively inflexible exchange rate regime.
Beijing could be forgiven for retorting that its economic and financial model is working quite well, thank you.
Capital controls and a tightly managed exchange rate shielded China from the worst of the 1997/98 financial crisis and, 10 years on, are once more offering a large degree of protection.
"China will have a bumpy road, but I don't think it will get into serious trouble," said David Dollar, head of the World Bank's office in Beijing.
From President Hu Jintao down, officials insist the greatest contribution China can make to regional and global stability is to sustain fast growth -- an aim that chimes with the Communist party's overriding priority to raise living standards at home.
"The Chinese leadership have very clear ideas of where it's going. Domestic economics and politics come first, and for that the capital account has to remain closed," said Carsten Holz, a professor of economics at Hong Kong University of Science and Technology.
Holz said it could take 10 to 15 years for China to remove its capital controls.
The Washington summit and follow-up meetings need to establish whether there is a common will to draw up new global financial rules and, if so, what basic principles to follow on critical issues such as exchange rates and capital flows.
Pascal Lamy, the director-general of the World Trade Organisation, said the task was dauntingly complex.
"It's a minefield. It will take years, assuming people have a reasonably clear idea at the beginning of what the agenda will be," Lamy told reporters last week during a visit to Beijing.
(Additional reporting by Eadie Chen and Langi Chiang; Editing by Sonya Hepinstall)
© Thomson Reuters 2008 All rights reserved.
_______________________________________________
Mon Oct 27, 2008
By Alan Wheatley, China Economics Editor - Analysis
BEIJING (Reuters) - Just as it was never realistic to think China could single-handedly save the world economy, it's probably wise to tone down any expectations that Beijing somehow holds the key to a new international financial order.
Premier Wen Jiabao promised after talks among 43 Asian and European Union countries that China would actively participate in a November 15 summit that U.S. President George W. Bush is convening to rake over the global credit crisis.
China, which keeps its own markets on a tight leash, will presumably support any drive to keep a better check on new-fangled financial instruments and cross-border money flows.
"We need financial innovation, but we need financial oversight even more," Wen told a news conference on Saturday.
But Beijing shows scant interest in debating whether a wholly new monetary regime is called for -- whether, perhaps, the current crisis has its roots in the floating exchange rates that replaced the Bretton Woods system of fixed-but-adjustable rates, centred on the dollar, backed by gold and supervised by the International Monetary Fund, that collapsed in 1971.
"I don't think China can do much. Officials have said that what is important for China is to handle its own business well, which I think is quite right," said Zhang Bin with the Chinese Academy of Social Sciences, the government's top think-tank.
NO CHANGE
To be sure, Beijing regularly rails against what it sees as Washington's irresponsible stewardship of the dollar and against market volatility that endangers the stability that China craves.
But discussion of the crisis in Beijing is dominated by the risks for China of holding so many dollars in its reserves.
A senior EU official who attended the summit said Chinese policy makers have little to say when the question turns to overhauling the system that permitted those reserves, and the economic imbalances they mirror, to build up in the first place.
An official at the People's Bank of China ruled out a new international monetary order, while Zhang, who is a financial economist, called the idea "a load of rubbish."
"The basic global monetary system with U.S. dollar as the reserve currency will not change," he said. "China is not ready yet to inject substantial change into the system."
China has the world's fastest-growing economy, but its financial markets are not mature or open enough, Zhang said.
And crucially, he added, although it may be bought and sold for purposes of trade and investment, the yuan is not convertible for purely financial transactions.
This rules out a place for the yuan in central banks' foreign exchange reserves -- something that Thailand, for one, has said it would like to change so the yuan can become an anchor currency in Asia.
Justin Lin, the World Bank's chief economist, also cited the yuan's limited convertibility as a reason why it was premature to talk about a big role for China in any new world financial order.
"China is not strong enough," he told Reuters during a forum this weekend at Peking University, where he was a professor.
FIENDISHLY COMPLEX
All this sets the stage for interesting talks in Washington.
French President Nicolas Sarkozy said on Saturday that he wanted currency questions to be on the summit agenda, while U.S. Treasury Secretary Henry Paulson put down a marker last week by saying it was "an unnatural act" for a big economy like China to have a comparatively inflexible exchange rate regime.
Beijing could be forgiven for retorting that its economic and financial model is working quite well, thank you.
Capital controls and a tightly managed exchange rate shielded China from the worst of the 1997/98 financial crisis and, 10 years on, are once more offering a large degree of protection.
"China will have a bumpy road, but I don't think it will get into serious trouble," said David Dollar, head of the World Bank's office in Beijing.
From President Hu Jintao down, officials insist the greatest contribution China can make to regional and global stability is to sustain fast growth -- an aim that chimes with the Communist party's overriding priority to raise living standards at home.
"The Chinese leadership have very clear ideas of where it's going. Domestic economics and politics come first, and for that the capital account has to remain closed," said Carsten Holz, a professor of economics at Hong Kong University of Science and Technology.
Holz said it could take 10 to 15 years for China to remove its capital controls.
The Washington summit and follow-up meetings need to establish whether there is a common will to draw up new global financial rules and, if so, what basic principles to follow on critical issues such as exchange rates and capital flows.
Pascal Lamy, the director-general of the World Trade Organisation, said the task was dauntingly complex.
"It's a minefield. It will take years, assuming people have a reasonably clear idea at the beginning of what the agenda will be," Lamy told reporters last week during a visit to Beijing.
(Additional reporting by Eadie Chen and Langi Chiang; Editing by Sonya Hepinstall)
© Thomson Reuters 2008 All rights reserved.
_______________________________________________
Time and Money Running Out for Pakistan
TIME
10/25/08
Time and Money Running Out for Pakistan
Omar Waraich
You wouldn't want to be the President of Pakistan: Even as the military finds itself embroiled in a war against militants that much of the country's elected leadership (and even more of the electorate) opposes, it's hard even to keep the lights on as the limits of the country's electricity supply mean daily blackouts in major cities. The economy, meanwhile, is in a perilous state, with inflation running rampant, the currency having lost a third of its value, and foreign currency reserves reduced to the point that they can finance no more than six weeks of imports. Pakistan, in fact, is in danger of defaulting on its substantial foreign debt if it can't get help either from its friends or from the IMF — and the price of such help will be politically unpopular: a stepped up effort against the Taliban and, perhaps, some tough domestic economic reforms.
No wonder, then, that the forthcoming U.S. National Intelligence Estimate (NIE) on Pakistan reportedly makes "bleak" reading. The NIE represents the consensus of the 16 U.S. intelligence agencies, and according to a McClatchy newspapers report, an official familiar with the contents of the document that will brief the next President says it warns that Pakistan has "no money, no energy, no government". Washington's primary concern remains al-Qaeda, which John Kringen, the CIA's director for intelligence, recently described as being "resurgent" and "well-settled" in Pakistan's tribal areas. But the presence of Bin Laden's group is enabled by an indigenous militant insurgency — the Pakistan Taliban — and Pakistani leaders remain divided over how to respond to this challenge.
President Asif Ali Zardari and his seven month-old civilian government have given priority to combating militancy, and having abandoned failed negotiations with the Pakistan Taliban, the army is currently fighting militants in the notorious arms manufacturing town of Darra Adam Khel, the scenic Swat Valley, and most visibly in the Bajaur tribal area. Although the U.S. NIE reportedly criticizes the Pakistan army for a "reluctance" to launch an all-out confrontation with the militants, military spokesmen point out that the Pakistan army has lost over 1,500 troops since it began confronting militants on its own soil. And they see the tide turning in their favor in the ten-week-old military operation in Bajaur, where they say the Taliban last week offered negotiations — a sign, say government officials, that the militants' resolve is weakening. "It was the first time that the government rejected an offer of peace," says Mehmood Shah, a former chief secretary for Pakistan's tribal areas.
Pakistani officials are also encouraged by the emergence of tribal militias who have turned on the Taliban. "We cleared them out of our area in a week," says Akhunzada Chettan, a lawmaker from a part of Bajaur, and there have been similar successes in Dir and, reportedly, Lakki Marwat. These developments are significant, officials say, because in the past the tribes had feared that the army would fail to protect them.
Although the current offensive in Bajaur and other areas has been applauded by Washington, Prime Minister Asif Zardari is having a harder time convincing his own people of the wisdom of waging war on the militants. While some had hoped that last month's horrific terror attack on the Marriott Hotel in Islamabad would rally the nation to fight militancy, instead divisions have only deepened. Recent opinion polls still find a majority of Pakistanis opposed to their government's support for Washington's "war on terror" — despite their anger at the recent wave of suicide bombings, these Pakistanis believe the attacks are a consequence of Pakistan waging "America's war".
Zardari had hoped that holding a parliamentary debate on how to respond to militancy would help make the campaign "Pakistan's war" and give the military political support for its actions. But after more than two weeks of behind-closed-doors deliberations, parliament unanimously adopted a resolution urging a resumption of dialogue with the militants, and an end to military operations "as early as possible". Although the parliamentary debate reflected the power plays of a political culture in which parties rarely put the national interest above their own, it also reveals a profound difference in perspective even within the ruling coalition — Zardari's allies in the religious Jamiat Ulema-e-Islam party demanded an end to military operations against the militants.
"The military wants political back up, and the government is supporting them, but I do not expect all the parties to unite," says military analyst Hasan Askari-Rizvi. "The political leaders seem too interested in settling scores against each other."
The absence of a consensus on fighting the militants compounds Zardari's difficulties in tackling the economic crisis he inherited — a crisis that, in turn, threatens to deepen the militant challenge. Rising world oil and food prices have sent the inflation rate soaring to 25% (and as much as four times that on basic foodstuffs), while the political uncertainty over the past 18 months fueled extensive capital flight that has weakened the rupee and depleted forex reserves. A failure to increase the capacity of electricity production now plunges Pakistan's main cities into darkness for up to ten hours a day, with longer periods in rural areas. Industrial output has shrunk with employers now laying off employees they can no longer afford to keep. And Pakistanis have begun to take their anger to the streets. In parts of Lahore on Monday, scores of protesters laid siege to the local office of the electricity utility, ransacking the building and burning their electricity bills. The mounting economic crisis is likely to fuel social unrest — "The general mood is one of despair," says Yousuf Nazar, a leading economic commentator. And despair and anger among Pakistan's poor are likely to swell the ranks of the militants.
The bleak economic situation has prompted Pakistan to desperately seek aid from such long-term allies as Saudi Arabia, Britain, the U.S. and China. Despite Zardari flying to those countries in recent weeks to make his case, he has yet to secure the loans needed to avoid a default on Pakistan's debt. Pakistani officials insist that they have no intention of defaulting, and the Pakistani rupee rose this week amid signs that the International Monetary Fund might step in to rescue this frontline state in the war on terror. The IMF confirmed Wednesday that it would soon enter discussions with Pakistan over ways to assist its economy. But help from the international community will almost surely be conditional on a more robust effort against the militants — an option that raises political problems for Zardari — and also on economic reforms that might prove unpopular. There are clear and challenging downsides to any of the choices available to Pakistan's leadership right now. And playing for time may not be an option in the face of that dwindling pile of foreign exchange reserves
10/25/08
Time and Money Running Out for Pakistan
Omar Waraich
You wouldn't want to be the President of Pakistan: Even as the military finds itself embroiled in a war against militants that much of the country's elected leadership (and even more of the electorate) opposes, it's hard even to keep the lights on as the limits of the country's electricity supply mean daily blackouts in major cities. The economy, meanwhile, is in a perilous state, with inflation running rampant, the currency having lost a third of its value, and foreign currency reserves reduced to the point that they can finance no more than six weeks of imports. Pakistan, in fact, is in danger of defaulting on its substantial foreign debt if it can't get help either from its friends or from the IMF — and the price of such help will be politically unpopular: a stepped up effort against the Taliban and, perhaps, some tough domestic economic reforms.
No wonder, then, that the forthcoming U.S. National Intelligence Estimate (NIE) on Pakistan reportedly makes "bleak" reading. The NIE represents the consensus of the 16 U.S. intelligence agencies, and according to a McClatchy newspapers report, an official familiar with the contents of the document that will brief the next President says it warns that Pakistan has "no money, no energy, no government". Washington's primary concern remains al-Qaeda, which John Kringen, the CIA's director for intelligence, recently described as being "resurgent" and "well-settled" in Pakistan's tribal areas. But the presence of Bin Laden's group is enabled by an indigenous militant insurgency — the Pakistan Taliban — and Pakistani leaders remain divided over how to respond to this challenge.
President Asif Ali Zardari and his seven month-old civilian government have given priority to combating militancy, and having abandoned failed negotiations with the Pakistan Taliban, the army is currently fighting militants in the notorious arms manufacturing town of Darra Adam Khel, the scenic Swat Valley, and most visibly in the Bajaur tribal area. Although the U.S. NIE reportedly criticizes the Pakistan army for a "reluctance" to launch an all-out confrontation with the militants, military spokesmen point out that the Pakistan army has lost over 1,500 troops since it began confronting militants on its own soil. And they see the tide turning in their favor in the ten-week-old military operation in Bajaur, where they say the Taliban last week offered negotiations — a sign, say government officials, that the militants' resolve is weakening. "It was the first time that the government rejected an offer of peace," says Mehmood Shah, a former chief secretary for Pakistan's tribal areas.
Pakistani officials are also encouraged by the emergence of tribal militias who have turned on the Taliban. "We cleared them out of our area in a week," says Akhunzada Chettan, a lawmaker from a part of Bajaur, and there have been similar successes in Dir and, reportedly, Lakki Marwat. These developments are significant, officials say, because in the past the tribes had feared that the army would fail to protect them.
Although the current offensive in Bajaur and other areas has been applauded by Washington, Prime Minister Asif Zardari is having a harder time convincing his own people of the wisdom of waging war on the militants. While some had hoped that last month's horrific terror attack on the Marriott Hotel in Islamabad would rally the nation to fight militancy, instead divisions have only deepened. Recent opinion polls still find a majority of Pakistanis opposed to their government's support for Washington's "war on terror" — despite their anger at the recent wave of suicide bombings, these Pakistanis believe the attacks are a consequence of Pakistan waging "America's war".
Zardari had hoped that holding a parliamentary debate on how to respond to militancy would help make the campaign "Pakistan's war" and give the military political support for its actions. But after more than two weeks of behind-closed-doors deliberations, parliament unanimously adopted a resolution urging a resumption of dialogue with the militants, and an end to military operations "as early as possible". Although the parliamentary debate reflected the power plays of a political culture in which parties rarely put the national interest above their own, it also reveals a profound difference in perspective even within the ruling coalition — Zardari's allies in the religious Jamiat Ulema-e-Islam party demanded an end to military operations against the militants.
"The military wants political back up, and the government is supporting them, but I do not expect all the parties to unite," says military analyst Hasan Askari-Rizvi. "The political leaders seem too interested in settling scores against each other."
The absence of a consensus on fighting the militants compounds Zardari's difficulties in tackling the economic crisis he inherited — a crisis that, in turn, threatens to deepen the militant challenge. Rising world oil and food prices have sent the inflation rate soaring to 25% (and as much as four times that on basic foodstuffs), while the political uncertainty over the past 18 months fueled extensive capital flight that has weakened the rupee and depleted forex reserves. A failure to increase the capacity of electricity production now plunges Pakistan's main cities into darkness for up to ten hours a day, with longer periods in rural areas. Industrial output has shrunk with employers now laying off employees they can no longer afford to keep. And Pakistanis have begun to take their anger to the streets. In parts of Lahore on Monday, scores of protesters laid siege to the local office of the electricity utility, ransacking the building and burning their electricity bills. The mounting economic crisis is likely to fuel social unrest — "The general mood is one of despair," says Yousuf Nazar, a leading economic commentator. And despair and anger among Pakistan's poor are likely to swell the ranks of the militants.
The bleak economic situation has prompted Pakistan to desperately seek aid from such long-term allies as Saudi Arabia, Britain, the U.S. and China. Despite Zardari flying to those countries in recent weeks to make his case, he has yet to secure the loans needed to avoid a default on Pakistan's debt. Pakistani officials insist that they have no intention of defaulting, and the Pakistani rupee rose this week amid signs that the International Monetary Fund might step in to rescue this frontline state in the war on terror. The IMF confirmed Wednesday that it would soon enter discussions with Pakistan over ways to assist its economy. But help from the international community will almost surely be conditional on a more robust effort against the militants — an option that raises political problems for Zardari — and also on economic reforms that might prove unpopular. There are clear and challenging downsides to any of the choices available to Pakistan's leadership right now. And playing for time may not be an option in the face of that dwindling pile of foreign exchange reserves
Nouriel Roubini: I fear the worst is yet to come
Nouriel Roubini: I fear the worst is yet to come
When this man predicted a global financial crisis more than a year ago, people laughed. Not any more...
Dominic Rushe
As stock markets headed off a cliff again last week, closely followed by currencies, and as meltdown threatened entire countries such as Hungary and Iceland, one voice was in demand above all others to steer us through the gloom: that of Dr Doom.
For years Dr Doom toiled in relative obscurity as a New York University economics professor under his alias, Nouriel Roubini. But after making a series of uncannily accurate predictions about the global meltdown, Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis.
While the economic sun was shining, most other economists scoffed at Roubini and his predictions of imminent disaster. They dismissed his warnings that the sub-prime mortgage disaster would trigger a financial meltdown. They could not quite believe his view that the US mortgage giants Fannie Mae and Freddie Mac would collapse, and that the investment banks would be crushed as the world headed for a long recession.
Yet all these predictions and more came true. Few are laughing now.
* Global panic as investors take fright
* Wall Street halts futures trading amid panic
What does Roubini think is going to happen next? Rather worryingly, in London last Thursday he predicted that hundreds of hedge funds will go bust and stock markets may soon have to shut – perhaps for as long as a week – in order to stem the panic selling now sweeping the world.
What happened? The next day trading was briefly stopped in New York and Moscow.
Dubbed Dr Doom for his gloomy views, this lugubrious disciple of the "dismal science" is now the world's most in-demand economist. He reckons he is getting about four hours' sleep a night. Last week he was in Budapest, London, Madrid and New York. Next week he will address Congress in Washington. Do not expect any good news.
Contacted in Madrid on Friday, Roubini said the world economy was "at a breaking point". He believes the stock markets are now "essentially in free fall" and "we are reaching the point of sheer panic".
For all his recent predictive success, his critics still urge calm. They charge he is a professional doom-monger who was banging on about recession for years as the economy boomed. Roubini is stung by such charges, dismissing them as "pathetic".
He takes no pleasure in bad news, he says, but he makes his standpoint clear: "Frankly I was right." A combative, complex man, he is fond of the word "frankly", which may be appropriate for someone so used to delivering bad news.
Born in Istanbul 49 years ago, he comes from a family of Iranian Jews. They moved to Tehran, then to Tel Aviv and finally to Italy, where he grew up and attended college, graduating summa cum laude in economics from Bocconi University before taking a PhD in international economics at Harvard.
Fluent in English, Italian, Hebrew, and Persian, Roubini has one of those "international man of mystery" accents: think Henry Kissinger without the bonhomie. Single, he lives in a loft in Manhattan's trendy Tribeca, an area popularised by Robert De Niro, and collects contemporary art.
Despite his slightly mad-professor look, he is at pains to make clear he is normal. "I'm not a geek," said Roubini, who sounds rather concerned that people might think he is. "I mean it frankly. I'm not a geek."
He is, however, ferociously bright. When he left Harvard, he moved quickly, holding various positions at the Treasury department, rising to become an economic adviser to Bill Clinton in the late 1990s. Then his profile seemed to plateau. His doubts about the economic outlook seemed out of tune with the times, especially when a few years ago he began predicting a meltdown in the financial markets through his blog, hosted on RGEmonitor. com, the website of his advisory company.
But it was a meeting of the International Monetary Fund (IMF) in September 2006 that earned him his nickname Dr Doom.
Roubini told an audience of fellow economists that a generational crisis was coming. A once-in-a-lifetime housing bust would lay waste to the US economy as oil prices soared, consumers stopped shopping and the country went into a deep recession.
The collapse of the mortgage market would trigger a global meltdown, as trillions of dollars of mortgage-backed securities unravelled. The shockwaves would destroy banks and other big financial institutions such as Fannie Mae and Freddie Mac, America's largest home loan lenders.
"I think perhaps we will need a stiff drink after that," the moderator said. Members of the audience laughed.
Economics is not called the dismal science for nothing. While the public might be impressed by Nostradamus-like predictions, economists want figures and equations. Anirvan Banerji, economist with the New York-based Economic Cycle Research Institute, summed up the feeling of many of those at the IMF meeting when he delivered his response to Roubini's talk.
Banerji questioned Roubini's assumptions, said they were not based on mathematical models and dismissed his hunches as those of a Cassandra. At first, indeed, it seemed Roubini was wrong. Meltdown did not happen. Even by the end of 2007, the financial and economic outlook was grim but not disastrous.
Then, in February 2008, Roubini posted an entry on his blog headlined: "The rising risk of a systemic financial meltdown: the twelve steps to financial disaster".
It detailed how the housing market collapse would lead to huge losses for the financial system, particularly in the vehicles used to securitise loans. It warned that " a national bank" might go bust, and that, as trouble deepened, investment banks and hedge funds might collapse.
Even Roubini was taken aback at how quickly this scenario unfolded. The following month the US investment bank Bear Stearns went under. Since then, the pace and scale of the disaster has accelerated and, as Roubini predicted, the banking sector has been destroyed, Freddie and Fannie have collapsed, stock markets have gone mad and the economy has entered a frightening recession.
Roubini says he was able to predict the catastrophe so accurately because of his "holistic" approach to the crisis and his ability to work outside traditional economic disciplines. A long-time student of financial crises, he looked at the history and politics of past crises as well as the economic models.
"These crises don't come out of nowhere," he said. "Usually they arrive because of a systematic increase in a variety of asset and credit bubbles, macro-economic policies and other vulnerabilities. If you combine them, you may not get the timing right but you get an indication that you are closer to a tipping point."
Others who claimed the economy would escape a recession had been swept up in "a critical euphoria and mania, an irrational exuberance", he said. And many financial pundits, he believes, were just talking up their own vested interests. "I might be right or wrong, but I have never traded, bought or sold a single security in my life. I am trying to be as objective as I can."
What does his objectivity tell him now? No end is yet in sight to the crisis.
"Every time there has been a severe crisis in the last six months, people have said this is the catastrophic event that signals the bottom. They said it after Bear Stearns, after Fannie and Freddie, after AIG [the giant US insurer that had to be rescued], and after [the $700 billion bailout plan]. Each time they have called the bottom, and the bottom has not been reached."
Across the world, governments have taken more and more aggressive actions to stop the panic. However, Roubini believes investors appear to have lost confidence in governments' ability to sort out the mess.
The announcement of the US government's $700 billion bailout, Gordon Brown's grand bank rescue plan and the coordinated response of governments around the world has done little to calm the situation. "It's been a slaughter, day after day after day," said Roubini. "Markets are dysfunctional; they are totally unhinged." Economic fundamentals no longer apply, he believes.
"Even using the nuclear option of guaranteeing everything, providing unlimited liquidity, nationalising the banks, making clear that nobody of importance is going to be allowed to fail, even that has not helped. We are reaching a breaking point, frankly."
He believes governments will have to come up with an even bigger international rescue, and that the US is facing "multi-year economic stagnation".
Given such cataclysmic talk, some experts fear his new-found influence may be a bad thing in such troubled times. One senior Wall Street figure said: "He is clearly very bright and thoughtful when he is not shooting from the hip."
He said he found some of Roubini's comments "slapdash and silly". "Sometimes the rigour of his analysis seems to be missing," he said.
Banerji still has problems with Roubini's prescient IMF speech. "He has been very accurate in terms of what would happen," he said. But Roubini was predicting an "imminent" recession by the start of 2007 and he was wrong. "He hurt his credibility by being so pessimistic long before it was appropriate."
Banerji said on average the US economy had grown for five years before hitting a bad patch. "Roubini started predicting a recession four years ago and saying it was imminent. He kept changing his justification: first the trade deficit, the current account deficit, then the oil price spike, then the housing downturn and so on. But the recession actually did not arrive," he said.
"If you are an investor or a businessman and you took him seriously four years ago, what on earth would happen to you? You would be in a foetal position for years. This is why the timing is critical. It's not enough to know what will happen in some point in the distant future."
Roubini says the argument about content and timing is irrelevant. "People who have been totally blinded and wrong accusing me of getting the timing wrong, it's just a joke," he said. "It's a bit pathetic, frankly. I was not making generic statements. I have made very specific predictions and I have been right all along." Maybe so, but he does not sound too happy about it, frankly.
When this man predicted a global financial crisis more than a year ago, people laughed. Not any more...
Dominic Rushe
As stock markets headed off a cliff again last week, closely followed by currencies, and as meltdown threatened entire countries such as Hungary and Iceland, one voice was in demand above all others to steer us through the gloom: that of Dr Doom.
For years Dr Doom toiled in relative obscurity as a New York University economics professor under his alias, Nouriel Roubini. But after making a series of uncannily accurate predictions about the global meltdown, Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis.
While the economic sun was shining, most other economists scoffed at Roubini and his predictions of imminent disaster. They dismissed his warnings that the sub-prime mortgage disaster would trigger a financial meltdown. They could not quite believe his view that the US mortgage giants Fannie Mae and Freddie Mac would collapse, and that the investment banks would be crushed as the world headed for a long recession.
Yet all these predictions and more came true. Few are laughing now.
Related Links
* Global panic as investors take fright
* Wall Street halts futures trading amid panic
What does Roubini think is going to happen next? Rather worryingly, in London last Thursday he predicted that hundreds of hedge funds will go bust and stock markets may soon have to shut – perhaps for as long as a week – in order to stem the panic selling now sweeping the world.
What happened? The next day trading was briefly stopped in New York and Moscow.
Dubbed Dr Doom for his gloomy views, this lugubrious disciple of the "dismal science" is now the world's most in-demand economist. He reckons he is getting about four hours' sleep a night. Last week he was in Budapest, London, Madrid and New York. Next week he will address Congress in Washington. Do not expect any good news.
Contacted in Madrid on Friday, Roubini said the world economy was "at a breaking point". He believes the stock markets are now "essentially in free fall" and "we are reaching the point of sheer panic".
For all his recent predictive success, his critics still urge calm. They charge he is a professional doom-monger who was banging on about recession for years as the economy boomed. Roubini is stung by such charges, dismissing them as "pathetic".
He takes no pleasure in bad news, he says, but he makes his standpoint clear: "Frankly I was right." A combative, complex man, he is fond of the word "frankly", which may be appropriate for someone so used to delivering bad news.
Born in Istanbul 49 years ago, he comes from a family of Iranian Jews. They moved to Tehran, then to Tel Aviv and finally to Italy, where he grew up and attended college, graduating summa cum laude in economics from Bocconi University before taking a PhD in international economics at Harvard.
Fluent in English, Italian, Hebrew, and Persian, Roubini has one of those "international man of mystery" accents: think Henry Kissinger without the bonhomie. Single, he lives in a loft in Manhattan's trendy Tribeca, an area popularised by Robert De Niro, and collects contemporary art.
Despite his slightly mad-professor look, he is at pains to make clear he is normal. "I'm not a geek," said Roubini, who sounds rather concerned that people might think he is. "I mean it frankly. I'm not a geek."
He is, however, ferociously bright. When he left Harvard, he moved quickly, holding various positions at the Treasury department, rising to become an economic adviser to Bill Clinton in the late 1990s. Then his profile seemed to plateau. His doubts about the economic outlook seemed out of tune with the times, especially when a few years ago he began predicting a meltdown in the financial markets through his blog, hosted on RGEmonitor. com, the website of his advisory company.
But it was a meeting of the International Monetary Fund (IMF) in September 2006 that earned him his nickname Dr Doom.
Roubini told an audience of fellow economists that a generational crisis was coming. A once-in-a-lifetime housing bust would lay waste to the US economy as oil prices soared, consumers stopped shopping and the country went into a deep recession.
The collapse of the mortgage market would trigger a global meltdown, as trillions of dollars of mortgage-backed securities unravelled. The shockwaves would destroy banks and other big financial institutions such as Fannie Mae and Freddie Mac, America's largest home loan lenders.
"I think perhaps we will need a stiff drink after that," the moderator said. Members of the audience laughed.
Economics is not called the dismal science for nothing. While the public might be impressed by Nostradamus-like predictions, economists want figures and equations. Anirvan Banerji, economist with the New York-based Economic Cycle Research Institute, summed up the feeling of many of those at the IMF meeting when he delivered his response to Roubini's talk.
Banerji questioned Roubini's assumptions, said they were not based on mathematical models and dismissed his hunches as those of a Cassandra. At first, indeed, it seemed Roubini was wrong. Meltdown did not happen. Even by the end of 2007, the financial and economic outlook was grim but not disastrous.
Then, in February 2008, Roubini posted an entry on his blog headlined: "The rising risk of a systemic financial meltdown: the twelve steps to financial disaster".
It detailed how the housing market collapse would lead to huge losses for the financial system, particularly in the vehicles used to securitise loans. It warned that " a national bank" might go bust, and that, as trouble deepened, investment banks and hedge funds might collapse.
Even Roubini was taken aback at how quickly this scenario unfolded. The following month the US investment bank Bear Stearns went under. Since then, the pace and scale of the disaster has accelerated and, as Roubini predicted, the banking sector has been destroyed, Freddie and Fannie have collapsed, stock markets have gone mad and the economy has entered a frightening recession.
Roubini says he was able to predict the catastrophe so accurately because of his "holistic" approach to the crisis and his ability to work outside traditional economic disciplines. A long-time student of financial crises, he looked at the history and politics of past crises as well as the economic models.
"These crises don't come out of nowhere," he said. "Usually they arrive because of a systematic increase in a variety of asset and credit bubbles, macro-economic policies and other vulnerabilities. If you combine them, you may not get the timing right but you get an indication that you are closer to a tipping point."
Others who claimed the economy would escape a recession had been swept up in "a critical euphoria and mania, an irrational exuberance", he said. And many financial pundits, he believes, were just talking up their own vested interests. "I might be right or wrong, but I have never traded, bought or sold a single security in my life. I am trying to be as objective as I can."
What does his objectivity tell him now? No end is yet in sight to the crisis.
"Every time there has been a severe crisis in the last six months, people have said this is the catastrophic event that signals the bottom. They said it after Bear Stearns, after Fannie and Freddie, after AIG [the giant US insurer that had to be rescued], and after [the $700 billion bailout plan]. Each time they have called the bottom, and the bottom has not been reached."
Across the world, governments have taken more and more aggressive actions to stop the panic. However, Roubini believes investors appear to have lost confidence in governments' ability to sort out the mess.
The announcement of the US government's $700 billion bailout, Gordon Brown's grand bank rescue plan and the coordinated response of governments around the world has done little to calm the situation. "It's been a slaughter, day after day after day," said Roubini. "Markets are dysfunctional; they are totally unhinged." Economic fundamentals no longer apply, he believes.
"Even using the nuclear option of guaranteeing everything, providing unlimited liquidity, nationalising the banks, making clear that nobody of importance is going to be allowed to fail, even that has not helped. We are reaching a breaking point, frankly."
He believes governments will have to come up with an even bigger international rescue, and that the US is facing "multi-year economic stagnation".
Given such cataclysmic talk, some experts fear his new-found influence may be a bad thing in such troubled times. One senior Wall Street figure said: "He is clearly very bright and thoughtful when he is not shooting from the hip."
He said he found some of Roubini's comments "slapdash and silly". "Sometimes the rigour of his analysis seems to be missing," he said.
Banerji still has problems with Roubini's prescient IMF speech. "He has been very accurate in terms of what would happen," he said. But Roubini was predicting an "imminent" recession by the start of 2007 and he was wrong. "He hurt his credibility by being so pessimistic long before it was appropriate."
Banerji said on average the US economy had grown for five years before hitting a bad patch. "Roubini started predicting a recession four years ago and saying it was imminent. He kept changing his justification: first the trade deficit, the current account deficit, then the oil price spike, then the housing downturn and so on. But the recession actually did not arrive," he said.
"If you are an investor or a businessman and you took him seriously four years ago, what on earth would happen to you? You would be in a foetal position for years. This is why the timing is critical. It's not enough to know what will happen in some point in the distant future."
Roubini says the argument about content and timing is irrelevant. "People who have been totally blinded and wrong accusing me of getting the timing wrong, it's just a joke," he said. "It's a bit pathetic, frankly. I was not making generic statements. I have made very specific predictions and I have been right all along." Maybe so, but he does not sound too happy about it, frankly.
Uri Avnery: King of the Planet
Uri Avnery
25.10.08
King of the Planet
THE PRESIDENT of the United States is the king of this planet. I live on this planet. Therefore, the election of the President concerns me, too. Very much so.
The President is not the sole ruler of the world. There are other rulers too, albeit less powerful ones. His decisions are subject to many constraints beyond his control. But there is no other person on earth whose decisions have such an impact on our lives.
The eight years of George W. Bush can serve as an example. The primitive character of the man, his low intellectual level, his past as a born-again zealot - all these have influenced the state of the world, from his failure in preventing 9/11, through his bloody adventures in Afghanistan and Iraq, to the collapse of the world economy.
But still, every one of us, the citizens of the world who cannot vote in this election, has at least the right to say which of the candidates he or she would prefer in the White House.
I prefer Barack Obama.
ELECTIONS ARE not beauty contests. A wise voter must define the criteria according to which he intends to make his choice.
For me, the main attribute, overshadowing all others, is the ability to quickly recognize major changes when they occur and draw the necessary conclusions without delay.
In the words of the ancient Greek philosopher, "everything flows" - we know that the world does not stand still for a moment. In our time, with the rapid pace of modern life, the changes are quicker and more dramatic then they were 200 years ago. The development of technology, the spread of the internet, globalization, climate change, the instability of the economy, the currents of human migration, shifts in the world-wide balance of power - these and a thousand other factors ensure that changes will become more and more frequent and more and more radical.
The ability to adapt quickly to new situations is a decisive requirement for a leader. After dealing successfully with the world economic crisis, Franklin Delano Roosevelt reacted rapidly to Pearl Harbor. Winston Churchill recognized before others the danger inherent in Hitler's ascent to power in Germany. The young and inexperienced John Kennedy dealt decisively with the Cuban missile crisis, which had brought the world to the brink of World War III. Mikhail Gorbachev oversaw the sudden collapse of the Soviet Bloc and avoided world-wide bloodshed. The next American President will be faced right away with an economic crisis that is changing the face of the world.
The President resembles the helmsman of a sailing-boat who has to be ready at every moment for a sudden change of the wind and even for a hurricane.
Which of the two - Barack Obama or John McCain - is better suited for that job? The elderly Republican, who sees himself as the successor of a long row of Admirals and whose spiritual world is stuck in the middle of the 20th century, or the (comparatively) young Democrat, a man of the 21st?
THE SECOND test, in my eyes, concerns the character of the candidates. A person can change his opinions, but hardly his character. A solid - but not exaggerated - self-confidence, self-discipline, cool-headedness in a crisis - these will have a large influence on his ability to carry out his duties.
We have seen the two in the great debates. One should not pay too much attention to what was said there - everything said in an election campaign is merely a tool to catch votes. But we saw how the two candidates function under extreme stress. Obama controlled himself admirably. His self-discipline did not falter for a moment. He did not respond to provocations and he kept his cool at all times. McCain was much less in control of himself.
The most important decision the two had to make in the course of the campaign was the choice of a running mate. Since the Vice-President can assume power at a moment's notice - and there is indeed a significant probability that this may happen - the decision tells us much about the decision maker.
Obama's decision was responsible and reasonable. He did not choose a brilliant or charismatic person, but someone who is versed in the affairs of state and could assume office without a problem.
McCain's decision was a scandal that cries to high heaven. It suffices by itself to disqualify him from high office - not because of Sarah Palin's opinions or her character, but because she is totally incapable of filling the role of President.
The choice testifies to a basic flaw in McCain's character. He chose her because of the needs of the moment - to revive a flagging campaign and surprise the media, while appealing to the most primitive strata of American society. He jeopardized the future of the country for momentary expediency.
A person who is capable of making such a mistake should not be in a position to lead the most powerful country and to command the strongest military force on earth.
Moreover, the voter must ask himself or herself: if the President suffers a stroke, like Ariel Sharon, or is assassinated, like John F. Kennedy - would I prefer to see Biden or Palin in the Oval Office?
As for myself, I shrink back from the very idea of this primitive and venomous demagogue, Sarah Palin, becoming the "Leader of the Free World".
A THIRD test is the ability to choose aides. This, too, is an important attribute.
A strong leader, confident of himself, chooses highly qualified assistants, people who are prepared to advance independent opinions and contradict the boss to his face. A leader lacking self-confidence surrounds himself with flatterers and yes-men, who tell him only what he wants to hear. John Kennedy surrounded himself with the best and the brightest. George W. belongs to the second category.
I judge Israeli leaders by this measure. Yigal Allon, a much admired general and politician, surrounded himself with bright young men, who did not hesitate to interrupt him in mid-speech and contradict him. Menachem Begin was surrounded by people who agreed with his every word.
A strong leader invites disagreement, debate, brainstorming. A leader who only acts strong does not brook any opposition. (Like the ultimate dictator, Adolf Hitler, who broke out in fits of rage if anyone dared to contradict him.)
Politics is a profession by itself. Most politicians have no profound knowledge of other matters, certainly not in the areas in which they have to make fateful decisions - from economics to military strategy. So the choice of the right advisors and the readiness to listen with an open mind, to learn and to think anew are essential qualities. I have the impression that Obama can do it. I am not so sure about McCain.
THERE IS another important consideration to take into account while making the choice: in a week and a half not only will a president be chosen, but also a very large group of senior officials in all areas of government.
In the American system, the new occupant of the White House brings with him thousands of other office-holders, whose equivalents in other countries belong to the permanent civil service. It is easy to imagine the huge difference between those Obama would bring with him and those who would come with McCain.
One should not forget the Supreme Court, which plays a central part in the American system (as it does now in Israel). It is the President who chooses new justices. The appointment of one or two can bring about far-reaching changes.
WHEN ONE speaks about the election of a President of the United States, it is also very important to consider the candidate's openness to the wide world.
The United States is not just a country, it's half a continent. Many of its citizens don't give a damn about the world outside and don't want to hear about it. School children are unable to place China or Brazil on the map. Like previous empires, the USA sees itself as an island of civilization in a sea of barbarians. (Just like Ehud Barak, with his Israel as a "villa in the middle of the jungle".)
George Bush came to the White House with minimal knowledge about the world. John McCain does not know much more. True, he was born in the American military ghetto in Panama and languished for five years in a Vietnamese prison, but that does not make him a citizen of the world.
In this respect, Obama has an advantage unmatched by any previous president. He is the son of a black father who came from Kenya and a white American mother. In his childhood he attended a school in Indonesia. His manifold roots and experience give him much wider horizons. For a new arrival at the White House, that is an important treasure. There are things one cannot learn from others. Personal experience counts.
I MUST add a subjective remark. I belong to a generation that grew up admiring America. We saw the US as the freeest country in the world, an idealistic society, the bastion of democracy and human rights. In two world wars it rushed to the rescue of the opponents of tyranny.
When we had grown up, we found out that it ain't necessarily so. We saw that the US is like most other states, and worse than some. During the last eight years, the US has presented itself to the world as an arrogant, bullying, primitive and aggressive country that rides roughshod over the human rights of its own and foreign citizens, justifies torture, keeps abominable concentration camps, and the list goes on.
The election of Barack Obama, a man who is half black and half white and whose convictions are liberal and democratic, can give us back some of our faith in the United States. It would show that, as has happened several times in the past, America can draw back from the brink in time and find itself again, as it did at the end of the Joe McCarthy era.
I do not entertain many illusions. I know that even in the best of circumstances, one single person cannot turn such a huge ship around and reverse its direction completely. But even small changes can be of immense importance to the world.
Perhaps, some day, I shall regret every word I have written here. Obama may prove to be a disappointment, and very much so. We cannot know the future. Today we can judge only on the basis of what we know today, according to our impressions and feelings today.
And these tell me: Obama.
25.10.08
King of the Planet
THE PRESIDENT of the United States is the king of this planet. I live on this planet. Therefore, the election of the President concerns me, too. Very much so.
The President is not the sole ruler of the world. There are other rulers too, albeit less powerful ones. His decisions are subject to many constraints beyond his control. But there is no other person on earth whose decisions have such an impact on our lives.
The eight years of George W. Bush can serve as an example. The primitive character of the man, his low intellectual level, his past as a born-again zealot - all these have influenced the state of the world, from his failure in preventing 9/11, through his bloody adventures in Afghanistan and Iraq, to the collapse of the world economy.
But still, every one of us, the citizens of the world who cannot vote in this election, has at least the right to say which of the candidates he or she would prefer in the White House.
I prefer Barack Obama.
ELECTIONS ARE not beauty contests. A wise voter must define the criteria according to which he intends to make his choice.
For me, the main attribute, overshadowing all others, is the ability to quickly recognize major changes when they occur and draw the necessary conclusions without delay.
In the words of the ancient Greek philosopher, "everything flows" - we know that the world does not stand still for a moment. In our time, with the rapid pace of modern life, the changes are quicker and more dramatic then they were 200 years ago. The development of technology, the spread of the internet, globalization, climate change, the instability of the economy, the currents of human migration, shifts in the world-wide balance of power - these and a thousand other factors ensure that changes will become more and more frequent and more and more radical.
The ability to adapt quickly to new situations is a decisive requirement for a leader. After dealing successfully with the world economic crisis, Franklin Delano Roosevelt reacted rapidly to Pearl Harbor. Winston Churchill recognized before others the danger inherent in Hitler's ascent to power in Germany. The young and inexperienced John Kennedy dealt decisively with the Cuban missile crisis, which had brought the world to the brink of World War III. Mikhail Gorbachev oversaw the sudden collapse of the Soviet Bloc and avoided world-wide bloodshed. The next American President will be faced right away with an economic crisis that is changing the face of the world.
The President resembles the helmsman of a sailing-boat who has to be ready at every moment for a sudden change of the wind and even for a hurricane.
Which of the two - Barack Obama or John McCain - is better suited for that job? The elderly Republican, who sees himself as the successor of a long row of Admirals and whose spiritual world is stuck in the middle of the 20th century, or the (comparatively) young Democrat, a man of the 21st?
THE SECOND test, in my eyes, concerns the character of the candidates. A person can change his opinions, but hardly his character. A solid - but not exaggerated - self-confidence, self-discipline, cool-headedness in a crisis - these will have a large influence on his ability to carry out his duties.
We have seen the two in the great debates. One should not pay too much attention to what was said there - everything said in an election campaign is merely a tool to catch votes. But we saw how the two candidates function under extreme stress. Obama controlled himself admirably. His self-discipline did not falter for a moment. He did not respond to provocations and he kept his cool at all times. McCain was much less in control of himself.
The most important decision the two had to make in the course of the campaign was the choice of a running mate. Since the Vice-President can assume power at a moment's notice - and there is indeed a significant probability that this may happen - the decision tells us much about the decision maker.
Obama's decision was responsible and reasonable. He did not choose a brilliant or charismatic person, but someone who is versed in the affairs of state and could assume office without a problem.
McCain's decision was a scandal that cries to high heaven. It suffices by itself to disqualify him from high office - not because of Sarah Palin's opinions or her character, but because she is totally incapable of filling the role of President.
The choice testifies to a basic flaw in McCain's character. He chose her because of the needs of the moment - to revive a flagging campaign and surprise the media, while appealing to the most primitive strata of American society. He jeopardized the future of the country for momentary expediency.
A person who is capable of making such a mistake should not be in a position to lead the most powerful country and to command the strongest military force on earth.
Moreover, the voter must ask himself or herself: if the President suffers a stroke, like Ariel Sharon, or is assassinated, like John F. Kennedy - would I prefer to see Biden or Palin in the Oval Office?
As for myself, I shrink back from the very idea of this primitive and venomous demagogue, Sarah Palin, becoming the "Leader of the Free World".
A THIRD test is the ability to choose aides. This, too, is an important attribute.
A strong leader, confident of himself, chooses highly qualified assistants, people who are prepared to advance independent opinions and contradict the boss to his face. A leader lacking self-confidence surrounds himself with flatterers and yes-men, who tell him only what he wants to hear. John Kennedy surrounded himself with the best and the brightest. George W. belongs to the second category.
I judge Israeli leaders by this measure. Yigal Allon, a much admired general and politician, surrounded himself with bright young men, who did not hesitate to interrupt him in mid-speech and contradict him. Menachem Begin was surrounded by people who agreed with his every word.
A strong leader invites disagreement, debate, brainstorming. A leader who only acts strong does not brook any opposition. (Like the ultimate dictator, Adolf Hitler, who broke out in fits of rage if anyone dared to contradict him.)
Politics is a profession by itself. Most politicians have no profound knowledge of other matters, certainly not in the areas in which they have to make fateful decisions - from economics to military strategy. So the choice of the right advisors and the readiness to listen with an open mind, to learn and to think anew are essential qualities. I have the impression that Obama can do it. I am not so sure about McCain.
THERE IS another important consideration to take into account while making the choice: in a week and a half not only will a president be chosen, but also a very large group of senior officials in all areas of government.
In the American system, the new occupant of the White House brings with him thousands of other office-holders, whose equivalents in other countries belong to the permanent civil service. It is easy to imagine the huge difference between those Obama would bring with him and those who would come with McCain.
One should not forget the Supreme Court, which plays a central part in the American system (as it does now in Israel). It is the President who chooses new justices. The appointment of one or two can bring about far-reaching changes.
WHEN ONE speaks about the election of a President of the United States, it is also very important to consider the candidate's openness to the wide world.
The United States is not just a country, it's half a continent. Many of its citizens don't give a damn about the world outside and don't want to hear about it. School children are unable to place China or Brazil on the map. Like previous empires, the USA sees itself as an island of civilization in a sea of barbarians. (Just like Ehud Barak, with his Israel as a "villa in the middle of the jungle".)
George Bush came to the White House with minimal knowledge about the world. John McCain does not know much more. True, he was born in the American military ghetto in Panama and languished for five years in a Vietnamese prison, but that does not make him a citizen of the world.
In this respect, Obama has an advantage unmatched by any previous president. He is the son of a black father who came from Kenya and a white American mother. In his childhood he attended a school in Indonesia. His manifold roots and experience give him much wider horizons. For a new arrival at the White House, that is an important treasure. There are things one cannot learn from others. Personal experience counts.
I MUST add a subjective remark. I belong to a generation that grew up admiring America. We saw the US as the freeest country in the world, an idealistic society, the bastion of democracy and human rights. In two world wars it rushed to the rescue of the opponents of tyranny.
When we had grown up, we found out that it ain't necessarily so. We saw that the US is like most other states, and worse than some. During the last eight years, the US has presented itself to the world as an arrogant, bullying, primitive and aggressive country that rides roughshod over the human rights of its own and foreign citizens, justifies torture, keeps abominable concentration camps, and the list goes on.
The election of Barack Obama, a man who is half black and half white and whose convictions are liberal and democratic, can give us back some of our faith in the United States. It would show that, as has happened several times in the past, America can draw back from the brink in time and find itself again, as it did at the end of the Joe McCarthy era.
I do not entertain many illusions. I know that even in the best of circumstances, one single person cannot turn such a huge ship around and reverse its direction completely. But even small changes can be of immense importance to the world.
Perhaps, some day, I shall regret every word I have written here. Obama may prove to be a disappointment, and very much so. We cannot know the future. Today we can judge only on the basis of what we know today, according to our impressions and feelings today.
And these tell me: Obama.
Saturday, October 25, 2008
Sarkozy and Russian-European Relations
Sarkozy and Russian-European Relations
William Pfaff
Paris, October 23, 2008 – Andrei Grachev, the former official spokesman of Mikhail Gorbachev during the final period of the Soviet Union's existence and one of the most thoughtful survivors of the Soviet Union, made an interesting point about Russia's new president, Dimitri Medvedev, during a recent talk at the American University of Paris. He said that Medvedev's greatest importance is that he embodies generational change in Russia. Vladimir Putin is a man of the Soviet era, formed in its most important ruling institution, the KGB. He sees and reacts to the world from that perspective.
While Medvedev came to power by the grace and favor of Putin, he was formed in a Russia where the Soviet Union was over and done with. The West's influences were the most important issues for his generation. The urgent problem was how to westernize Russia itself, in the sense of finding the place for it in global institutions dominated by the United States and Europe.
Vladimir Putin as president offered a chance for changed relations with the West, but it was not taken up. The language still was of partnership and cooperation, when George W. Bush remained convinced that he had looked into Putin's soul and found it good; but Washington was interested in drawing Russia into western institutions on American terms.
The enlargement of NATO to the former Warsaw Pact states, and then to states formerly part of the Soviet Union itself, has been crucial, in my opinion. There had to be hostility in Moscow to what clearly seemed military encirclement of Russia. The opportunity was lost to create, with Putin, a new relationship between Russia and the West.
With Medvedev, there may be a second chance to spare the world a sterile reenactment of a cold war that no longer has any serious purpose.
When Russia was a Leninist state it had an ideological mission to remake human society, a messianism historically linked to the era when the Russian church believed Russia the "Third Rome" (after Rome itself, and Constantinople), with God's final message of salvation for the world. That all ended in the horrors of the second world war and then the cold war.
Now the situation is different, and for this reason the European reaction to the war in Georgia, as Nicolas Sarkozy quickly formulated it, may have been extremely important.
While Washington and most West European capitals were unreflectively denouncing Russian "aggression" and offering proposals for "punishing" Russia (throwing it out of western institutions, and the like), Sarkozy was trying to move it towards the West. He immediately sent his foreign minister, Bernard Kouchner, to Tbilissi, to ascertain the facts and find what was necessary to obtain a cease-fire.
Two days later Sarkozy himself was shuttling between Moscow and Tbilissi negotiating the truce in the name of the European Union, and offering its diplomatic resources and ability quickly to supply professional observation of how truce agreements were carried out. They were eventually carried out correctly: the Russian outposts deep in Georgia were dismantled, and Russian withdrawals made as promised.
This was possible because Sarkozy spoke to Medvedev as European to European, and moreover because (as Grachev said in Paris) Sarkozy was solving problems for Medvedev and Putin too. He showed them how their intervention could be wound up quickly and constructively, on terms proposed by Western Europe and grudgingly accepted by Washington.
The European Union has the ability to supply Russia with something it badly needs: an interlocutor in the West that is independent of the United States.
This brings me back to Mikhail Gorbachev, and to someone else I've written about recently, the American diplomat and historian George F. Kennan.
In was in 1987, at the beginning of Gorbachev's effort to reform the Soviet Union through the unprecedented method of encouraging everyone to tell the truth about the system in which they lived. (This was Glasnost. Structural reform – Perestroika, would come next.)
Kennan was in Washington and was invited to a reception at the Soviet Embassy, which he ordinarily would have turned down but on this occasion was convinced by his wife to attend. Gorbachev sought him out at the reception, and said to him: "Mr. Kennan. We in our country can believe that a man may be a friend of another country and remain, at the same time, a loyal and devoted citizen of his own; and that is the way we view you."
That is the kind of friendship the new Russia needs, and it is possible that Western Europe could provide it, and stop the reconstitution of the hostile military and political blocs of the cold war. Germany as well as France would have to take the lead, which would be useful to Germany, already suspect in some American circles because of the rising influence of the Social Democrats and the new left.
The instrument of a new European leadership could be the one Sarkozy seized on when he first took the lead, with Gordon Brown and Angela Merkel, to solve the credit crisis: the Eurogroup. This is the existing European core institution in charge of the euro-currency economy. It needs an expanded mandate.
© Copyright 2008 by Tribune Media Services International. All Rights Reserved.
This article comes from William PFAFF
http://www.williampfaff.com
The URL for this article is:
http://www.williampfaff.com/article.php?storyid=350
William Pfaff
Paris, October 23, 2008 – Andrei Grachev, the former official spokesman of Mikhail Gorbachev during the final period of the Soviet Union's existence and one of the most thoughtful survivors of the Soviet Union, made an interesting point about Russia's new president, Dimitri Medvedev, during a recent talk at the American University of Paris. He said that Medvedev's greatest importance is that he embodies generational change in Russia. Vladimir Putin is a man of the Soviet era, formed in its most important ruling institution, the KGB. He sees and reacts to the world from that perspective.
While Medvedev came to power by the grace and favor of Putin, he was formed in a Russia where the Soviet Union was over and done with. The West's influences were the most important issues for his generation. The urgent problem was how to westernize Russia itself, in the sense of finding the place for it in global institutions dominated by the United States and Europe.
Vladimir Putin as president offered a chance for changed relations with the West, but it was not taken up. The language still was of partnership and cooperation, when George W. Bush remained convinced that he had looked into Putin's soul and found it good; but Washington was interested in drawing Russia into western institutions on American terms.
The enlargement of NATO to the former Warsaw Pact states, and then to states formerly part of the Soviet Union itself, has been crucial, in my opinion. There had to be hostility in Moscow to what clearly seemed military encirclement of Russia. The opportunity was lost to create, with Putin, a new relationship between Russia and the West.
With Medvedev, there may be a second chance to spare the world a sterile reenactment of a cold war that no longer has any serious purpose.
When Russia was a Leninist state it had an ideological mission to remake human society, a messianism historically linked to the era when the Russian church believed Russia the "Third Rome" (after Rome itself, and Constantinople), with God's final message of salvation for the world. That all ended in the horrors of the second world war and then the cold war.
Now the situation is different, and for this reason the European reaction to the war in Georgia, as Nicolas Sarkozy quickly formulated it, may have been extremely important.
While Washington and most West European capitals were unreflectively denouncing Russian "aggression" and offering proposals for "punishing" Russia (throwing it out of western institutions, and the like), Sarkozy was trying to move it towards the West. He immediately sent his foreign minister, Bernard Kouchner, to Tbilissi, to ascertain the facts and find what was necessary to obtain a cease-fire.
Two days later Sarkozy himself was shuttling between Moscow and Tbilissi negotiating the truce in the name of the European Union, and offering its diplomatic resources and ability quickly to supply professional observation of how truce agreements were carried out. They were eventually carried out correctly: the Russian outposts deep in Georgia were dismantled, and Russian withdrawals made as promised.
This was possible because Sarkozy spoke to Medvedev as European to European, and moreover because (as Grachev said in Paris) Sarkozy was solving problems for Medvedev and Putin too. He showed them how their intervention could be wound up quickly and constructively, on terms proposed by Western Europe and grudgingly accepted by Washington.
The European Union has the ability to supply Russia with something it badly needs: an interlocutor in the West that is independent of the United States.
This brings me back to Mikhail Gorbachev, and to someone else I've written about recently, the American diplomat and historian George F. Kennan.
In was in 1987, at the beginning of Gorbachev's effort to reform the Soviet Union through the unprecedented method of encouraging everyone to tell the truth about the system in which they lived. (This was Glasnost. Structural reform – Perestroika, would come next.)
Kennan was in Washington and was invited to a reception at the Soviet Embassy, which he ordinarily would have turned down but on this occasion was convinced by his wife to attend. Gorbachev sought him out at the reception, and said to him: "Mr. Kennan. We in our country can believe that a man may be a friend of another country and remain, at the same time, a loyal and devoted citizen of his own; and that is the way we view you."
That is the kind of friendship the new Russia needs, and it is possible that Western Europe could provide it, and stop the reconstitution of the hostile military and political blocs of the cold war. Germany as well as France would have to take the lead, which would be useful to Germany, already suspect in some American circles because of the rising influence of the Social Democrats and the new left.
The instrument of a new European leadership could be the one Sarkozy seized on when he first took the lead, with Gordon Brown and Angela Merkel, to solve the credit crisis: the Eurogroup. This is the existing European core institution in charge of the euro-currency economy. It needs an expanded mandate.
© Copyright 2008 by Tribune Media Services International. All Rights Reserved.
This article comes from William PFAFF
http://www.williampfaff.com
The URL for this article is:
http://www.williampfaff.com/article.php?storyid=350
Friday, October 24, 2008
How Iraqi Democracy May Mean An Early U.S. Withdrawal Tony Karon
TIME
10/24/08
How Iraqi Democracy May Mean An Early U.S. Withdrawal
Tony Karon
Asked earlier this week by Wolf Blitzer whether he'd honor an agreement between the U.S. and Iraq to withdraw American troops by the end of 2011, presidential candidate John McCain chided the CNN anchor: "You know better than that, Wolf. You know it's condition-based, and that's what the big fight was all about," McCain said, referring to his difference with Barack Obama over when and how to withraw U.S. forces from Iraq. Whereas Obama has sought to set a 16-month deadline for U.S. withdrawal, McCain has denounced that as defeatist and insisted that any decision to withdraw should be based on U.S. commanders' assessment of security conditions on the ground.
But McCain seemed to ignore the fact that while Washington had certainly demanded a conditions-based formula for withdrawing U.S. troops, the Iraqi government has managed to walk the Bush Administration back to the point where it has accepted firm withdrawal deadlines. The current version, described by U.S. officials as a "final" draft, specifies that U.S. forces will withdraw from Iraq's cities "no later than June 30th, 2009", and from all Iraqi territory "no later than December 31st, 2011." There is certainly a provision for those dates to be subject to "review," but changing them would require agreement from both sides. Effectively, the draft agreement puts any "conditions-based" decision to extend the deadline into the hands of the Iraqi government. And on current indications, the Iraqis are unlikely to accept any extension. In fact, right now the Iraqi government appears unable even to accept the "final" draft agreement that contains those deadlines its negotiators demanded — for fear of enraging its electorate.
U.S. officials are signaling growing frustration over the fact that even after Washington has made substantial concessions to the Iraqi side on troop-withdrawal deadlines and other matters, the Iraqis have balked at closing the deal. Joint Chiefs of Staff Chairman Admiral Mike Mullen warned this week that the failure of Iraq's government to pass the draft Status of Forces Agreement will have "dire consequences" for Iraq, while Secretary of State Robert Gates warned the absence of an agreement might result in U.S. forces being confined to base after January 1, when the current United Nations mandate legitimizing their operations in Iraq expires. But despite such warnings from Washington, all indications from inside the Iraqi political system are that the draft agreement is unlikely to be adopted. Iraq's Political Council for National Security, which brings together representatives of the major parties in Iraq's parliament, called for modifications of the deal when it met last Saturday, and Prime Minister Maliki's own cabinet has echoed that position even though it was his government that negotiated the draft. It appears highly unlikely, now, that Iraq's parliament will endorse the agreement in its current form — a prerequisite for it becoming law.
Some American officials see the hand of Iran at work in the deadlock: U.S. commander General Ray Odierno last Sunday suggested that Tehran had tried to bribe Iraqi leaders in order to deal a setback to the U.S. — charges the Iraqis angrily reject. Iran certainly opposes any agreement extending the U.S. military presence on its doorstep, and the dominant political parties in the U.S.-backed government are, in fact, the Iraqi factions closest to Iran. More important, however, may be the fact that the U.S. invasion has led to Iraq being turned into a democracy, where the will of the people can't be ignored. Opinion polls consistently show that a strong majority of Iraqis oppose the presence of American troops in their country. And it's fear of the Iraqi electorate, rather than the allure of any Iranian funds, that appears to be driving the Iraqi government's opposition to signing the deal. Iraqi political parties will face the voters in regional polls later this year, and in a national election next year, and that has made them extremely reluctant to publicly endorse the security deal. While government opponents such as the radical anti-American Shi'ite cleric Muqtada Sadr are making hay out of the issue, mounting huge public protest demonstrations, even Maliki's own cabinet has declined to endorse the draft agreement.
The Status of Forces Agreement would mark the first time a representative Iraqi government formally declares that U.S. troops are on Iraqi soil as invited guests rather than as U.N.-sanctioned occupiers. And precisely because it is finally accountable to the Iraqi electorate, that's a step that the Iraqi government appears to remain unlikely to take. If, in fact, Iraq's government turns down the deal, it questions the very basis of the ongoing U.S. mission. (After all, enabling a democratically elected Iraqi government to take charge of the country is, ostensibly, the basic goal of the mission.)
The U.S. is in no mood to reopen negotiations, as Defense Secretary Gates and other officials have made clear. And given the political hurdles faced by any pact to extend the U.S. troop presence in Iraq, it may well be that no agreement can be reached before the current U.N. mandate expires. The Iraqis don't appear overly bothered by that possibility, suggesting that the U.N. mandate could simply be extended by the Security Council for another year. Washington has strongly discouraged that view, warning that following the summer's Georgia conflict, Russia may be in a spoiling mood and veto such an extension — although Russian foreign minister Sergei Lavrov has since made clear that Moscow would, in fact, support an extension. (After all, the failure to achieve a Status of Forces Agreement would be enough of a setback for Washington to satisfy any Russian schadenfreude.)
Sure, the continuation of the U.N. mandate would deny the Iraqis the gains they have negotiated in the current draft agreement, giving the Iraqis less control over U.S. military operations on their soil. But it would expire after a year, and leave the Iraqis holding the cards. Then again, thanks to democracy, perhaps they already do.
10/24/08
How Iraqi Democracy May Mean An Early U.S. Withdrawal
Tony Karon
Asked earlier this week by Wolf Blitzer whether he'd honor an agreement between the U.S. and Iraq to withdraw American troops by the end of 2011, presidential candidate John McCain chided the CNN anchor: "You know better than that, Wolf. You know it's condition-based, and that's what the big fight was all about," McCain said, referring to his difference with Barack Obama over when and how to withraw U.S. forces from Iraq. Whereas Obama has sought to set a 16-month deadline for U.S. withdrawal, McCain has denounced that as defeatist and insisted that any decision to withdraw should be based on U.S. commanders' assessment of security conditions on the ground.
But McCain seemed to ignore the fact that while Washington had certainly demanded a conditions-based formula for withdrawing U.S. troops, the Iraqi government has managed to walk the Bush Administration back to the point where it has accepted firm withdrawal deadlines. The current version, described by U.S. officials as a "final" draft, specifies that U.S. forces will withdraw from Iraq's cities "no later than June 30th, 2009", and from all Iraqi territory "no later than December 31st, 2011." There is certainly a provision for those dates to be subject to "review," but changing them would require agreement from both sides. Effectively, the draft agreement puts any "conditions-based" decision to extend the deadline into the hands of the Iraqi government. And on current indications, the Iraqis are unlikely to accept any extension. In fact, right now the Iraqi government appears unable even to accept the "final" draft agreement that contains those deadlines its negotiators demanded — for fear of enraging its electorate.
U.S. officials are signaling growing frustration over the fact that even after Washington has made substantial concessions to the Iraqi side on troop-withdrawal deadlines and other matters, the Iraqis have balked at closing the deal. Joint Chiefs of Staff Chairman Admiral Mike Mullen warned this week that the failure of Iraq's government to pass the draft Status of Forces Agreement will have "dire consequences" for Iraq, while Secretary of State Robert Gates warned the absence of an agreement might result in U.S. forces being confined to base after January 1, when the current United Nations mandate legitimizing their operations in Iraq expires. But despite such warnings from Washington, all indications from inside the Iraqi political system are that the draft agreement is unlikely to be adopted. Iraq's Political Council for National Security, which brings together representatives of the major parties in Iraq's parliament, called for modifications of the deal when it met last Saturday, and Prime Minister Maliki's own cabinet has echoed that position even though it was his government that negotiated the draft. It appears highly unlikely, now, that Iraq's parliament will endorse the agreement in its current form — a prerequisite for it becoming law.
Some American officials see the hand of Iran at work in the deadlock: U.S. commander General Ray Odierno last Sunday suggested that Tehran had tried to bribe Iraqi leaders in order to deal a setback to the U.S. — charges the Iraqis angrily reject. Iran certainly opposes any agreement extending the U.S. military presence on its doorstep, and the dominant political parties in the U.S.-backed government are, in fact, the Iraqi factions closest to Iran. More important, however, may be the fact that the U.S. invasion has led to Iraq being turned into a democracy, where the will of the people can't be ignored. Opinion polls consistently show that a strong majority of Iraqis oppose the presence of American troops in their country. And it's fear of the Iraqi electorate, rather than the allure of any Iranian funds, that appears to be driving the Iraqi government's opposition to signing the deal. Iraqi political parties will face the voters in regional polls later this year, and in a national election next year, and that has made them extremely reluctant to publicly endorse the security deal. While government opponents such as the radical anti-American Shi'ite cleric Muqtada Sadr are making hay out of the issue, mounting huge public protest demonstrations, even Maliki's own cabinet has declined to endorse the draft agreement.
The Status of Forces Agreement would mark the first time a representative Iraqi government formally declares that U.S. troops are on Iraqi soil as invited guests rather than as U.N.-sanctioned occupiers. And precisely because it is finally accountable to the Iraqi electorate, that's a step that the Iraqi government appears to remain unlikely to take. If, in fact, Iraq's government turns down the deal, it questions the very basis of the ongoing U.S. mission. (After all, enabling a democratically elected Iraqi government to take charge of the country is, ostensibly, the basic goal of the mission.)
The U.S. is in no mood to reopen negotiations, as Defense Secretary Gates and other officials have made clear. And given the political hurdles faced by any pact to extend the U.S. troop presence in Iraq, it may well be that no agreement can be reached before the current U.N. mandate expires. The Iraqis don't appear overly bothered by that possibility, suggesting that the U.N. mandate could simply be extended by the Security Council for another year. Washington has strongly discouraged that view, warning that following the summer's Georgia conflict, Russia may be in a spoiling mood and veto such an extension — although Russian foreign minister Sergei Lavrov has since made clear that Moscow would, in fact, support an extension. (After all, the failure to achieve a Status of Forces Agreement would be enough of a setback for Washington to satisfy any Russian schadenfreude.)
Sure, the continuation of the U.N. mandate would deny the Iraqis the gains they have negotiated in the current draft agreement, giving the Iraqis less control over U.S. military operations on their soil. But it would expire after a year, and leave the Iraqis holding the cards. Then again, thanks to democracy, perhaps they already do.
A view from Riyadh.... Death of the American Empire America is self-destructing & bringing the rest of the world down with it By Tanya Cariina Hsu
A view from Riyadh....
Death of the American Empire
America is self-destructing & bringing the rest of the world down with it
By Tanya Cariina Hsu
Global Research, October 23, 2008
I believe that banking institutions are more dangerous to our liberties than standing armies. (Thomas Jefferson, US President; 1743 - 1826)
America is dying. It is self-destructing and bringing the rest of the world down with it.
Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something 'real' can be blamed for the carnage. The problem is, this is myth. The magnitude of this fiscal collapse happened because it was all based on hot air.
The banking industry renamed insurance betting guarantees as 'credit default swaps' and risky gambling wagers were called 'derivatives'. Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century but this time in suits and ties. And by October 2009 it was a quadrillion-dollar (that's $1,000 trillion) industry that few could understand.
Propped up by false hope, America is now falling like a house of cards.
It all began in the early part of the 20th century. In 1907 J.P. Morgan, a private New York banker, published a rumour that a competing unnamed large bank was about to fail. It was a false charge but customers nonetheless raced to their banks to withdraw their money, in case it was their bank. As they pulled out their funds the banks lost their cash deposits and were forced to call in their loans. People now therefore had to pay back their mortgages to fill the banks with income, going bankrupt in the process. The 1907 panic resulted in a crash that prompted the creation of the Federal Reserve, a private banking cartel with the veneer of an independent government organisation. Effectively, it was a coup by elite bankers in order to control the industry.
When signed into law in 1913, the Federal Reserve would loan and supply the nation's money, but with interest. The more money it was able to print, the more 'income' for itself it generated. By its very nature the Federal Reserve would forever keep producing debt to stay alive. It was able to print America's monetary supply at will, regulating its value. To control valuation however, inflation had to be kept in check.
The Federal Reserve then doubled America's money supply within five years, and in 1920 it called in a mass percentage of loans. Over five thousand banks collapsed overnight. One year later the Federal Reserve again increased the money supply by 62%, but in 1929 it again called the loans back in, en masse. This time, the crash of 1929 caused over sixteen thousand banks to fail and an 89% plunge on the stock market. The private and well-protected banks within the Federal Reserve system were able to snap up the failed banks at pennies on the dollar.
The nation fell into the Great Depression and in April 1933 President Roosevelt issued an executive order that confiscated all gold bullion from the public. Those who refused to turn in their gold would be imprisoned for ten years, and by the end of the year the gold standard was abolished. What had been redeemable for gold became paper 'legal tender', and gold could no longer be exchanged for cash as it had once been.
Later, in 1971, President Nixon removed the dollar from the gold standard altogether, therefore no longer trading at the internationally fixed price of $35. The US dollar was now worth whatever the US decided it was worth because it was 'as good as gold'. It had no standard of measure, and became the universal currency. Treasury bills (short-term notes) and bonds (long-term notes) replaced gold as value, promissory notes of the US government and paid for by the taxpayer. Additionally, because gold was exempt from currency reporting requirements it could not be traced, unlike the fiduciary (i.e. that based upon trust) monetary systems of the West. That was not in America's best interest.
After the Great Depression private banks remained afraid to make home loans, so Roosevelt created Fannie Mae. A state supported mortgage bank, it provided federal funding to finance home mortgages for affordable housing. In 1968 President Johnson privatised Fannie Mae, and in 1970, Freddie Mac was created to compete with Fannie Mae. Both of them bought mortgages from banks and other lenders, and sold them onto new investors.
The post World War II boom had created an America flush with cash and assets. As a military industrial complex, war exponentially profited the US and, unlike any empire in history, it shot to superpower status. But it failed to remember that, historically, whenever empires rose they fell in direct proportion.
Americans could afford all the modern conveniences, exporting its manufactured goods all over the world. After the Vietnam War, the US went into an economic decline. But people were loath to give up their elevated standard of living despite the loss of jobs, and production was increasingly sent overseas. A sense of delusion and entitlement kept Americans on the treadmill of consumer consumption.
In 1987 the US stock market plunged by 22% in one day because of high-risk futures trading, called derivatives, and in 1989 the Savings & Loan crisis resulted in President George H.W. Bush using $142 billion in taxpayer funds to rescue half of the S&L's. To do so, Freddie Mac was given the task of giving sub-prime (below prime-rate) mortgages to low-income families. In 2000, the "irrational exuberance" of the dot-com bubble burst, and 50% of high-tech firms went bankrupt wiping $5 trillion from their over-inflated market values.
After this crisis, Federal Reserve Chairman Alan Greenspan kept interest rates so low they were less than the rate of inflation. Anyone saving his or her income actually lost money, and the savings rate soon fell into negative territory.
During the 1990s, advertisers went into overdrive, marketing an ever more luxurious lifestyle, all made available with cheap easy credit. Second mortgages became commonplace, and home equity loans were used to pay credit card bills. The more Americans bought, the more they fell into debt. But as long as they had a house their false sense of security remained: their home was their equity, it would always go up in value, and they could always remortgage at lower rates if needed. The financial industry also believed that housing prices would forever climb, but should they ever fall the central bank would cut interest rates so that prices would jump back up. It was, everyone believed, a win-win situation.
Greenspan's rock-bottom interest rates let anyone afford a home. Minimum wage service workers with aspirations to buy a half million-dollar house were able to secure 100% loans, the mortgage lenders fully aware that they would not be able to keep up the payments.
So many people received these sub-prime loans that the investment houses and lenders came up with a new scheme: bundle these virtually worthless home loans and sell them as solid US investments to unsuspecting countries who would not know the difference. American lives of excess and consumer spending never suffered, and were being propped up by foreign nations none the wiser.
It has always been the case that a bank would lend out more than it actually had, because interest payments generated its income. The more the bank loaned, the more interest it collected even with no money in the vault. It was a lucrative industry of giving away money it never had in the first place. Mortgage banks and investment houses even borrowed money on international money markets to fund these 100% plus sub-prime mortgages, and began lending more than ten times their underlying assets.
After 9/11, George Bush told the nation to spend, and during a time of war, that's what the nation did. It borrowed at unprecedented levels so as to not only pay for its war on terror in the Middle East (calculated to cost $4 trillion) but also pay for tax cuts at the very time it should have increased taxes. Bush removed the reserve requirements in Fannie Mae and Freddie Mac, from 10% to 2.5%. They were free to not only lend even more at bargain basement interest rates, they only needed a fraction of reserves. Soon banks lent thirty times asset value. It was, as one economist put it, an 'orgy of excess'.
It was flagrant overspending during a time of war. At no time in history has a nation gone into conflict without sacrifice, cutbacks, tax increases, and economic conservation.
And there was a growing chance that, just like in 1929, investors would rush to claim their money all at once.
To guarantee, therefore, these high risk mortgages, the same financial houses that sold them then created 'insurance policies' against the sub-prime investments they were selling, marketed as Credit Default Swaps (CDS). But the government must regulate insurance policies, so by calling them CDS they remained totally unregulated. Financial institutions were 'hedging their bets' and selling premiums to protect the junk assets. In other words, the asset that should go up in value could also have a side-bet, just in case, that it might go down. By October 2008, CDS were trading at $62 trillion, more than the stock markets of the whole world combined.
These bets had absolutely no value whatsoever and were not investments. They were just financial instruments called derivatives - high stakes gambling, 'nothing from nothing' - or as Warren Buffet referred to them, 'Weapons of Financial Mass Destruction'. The derivatives trade was 'worth' more than one quadrillion dollars, or larger than the economy of the entire world. (In September 2008 the global Gross Domestic Product was $60 trillion).
Challenged as being illegal in the 1990s, Greenspan legalised the derivatives practise. Soon hedge funds became an entire industry, betting on the derivatives market and gambling as much as they wanted. It was easy because it was money they did not have in the first place. The industry had all the appearances of banks, but the hedge funds, equity funds, and derivatives brokers had no access to government loans in the event of a default. If the owners defaulted, the hedge funds had no money to pay 'from nothing'. Those who had hedged on an asset going up or down would not be able to collect on the winnings or losses.
The market had become the largest industry in the world, and all the financial giants were cashing in: Bear Stearns, Lehman Brothers, Citigroup, and AIG. But homeowners, long maxed out on their credit, were now beginning to default on their mortgages. Not only were they paying for their house but also all the debt amassed over the years for car, credit card and student loans, medical payments and home equity loans. They had borrowed to pay for groceries and skyrocketing health insurance premiums to keep up with their bigger houses and cars; they refinanced the debt they had for lower rates that soon ballooned. The average American owed 25% of their annual income to credit card debts alone.
In 2008, housing prices began to slide precipitously downwards and mortgages were suddenly losing value. Manufacturing orders were down 4.5% by September, inventories began to pile up, unemployment was soaring and average house foreclosures had increased by 121% and up to 200% in California.
The financial giants had to stop trading these mortgage-backed securities, as now their losses would have to be visibly accounted for. Investors began withdrawing their funds. Bear Stearns, heavily specialised in home loan portfolios, was the first to go in March.
Just as they had done in the 20th century, JP Morgan swooped in and picked up Bear Stearns for a pittance. One year prior Bear Stearns shares traded at $159 but JP Morgan was able to buy in and take over at $2 a share. In September, Washington Mutual collapsed, the largest bank failure in history. JP Morgan again came in and paid $1.9 billion for assets valued at $176 billion. It was a fire sale.
Relatively quietly over the summer Freddie Mac and Fannie Mae, the publicly traded companies responsible for 80% of the home mortgage loans, lost almost 90% of their value for the year. Together they were responsible for half the outstanding loan amounts but were now in debt $80 to every $1 in capital reserves.
To guarantee they would stay alive, the Federal Reserve stepped in and took over Freddie Mac and Fannie Mae. On September 7th 2008 they were put into "conservatorship": known as nationalisation to the rest of the world, but Americans have difficulty with the idea of any government run industry that required taxpayer increases.
What the government was really doing was handing out an unlimited line of credit. Done by the Federal Reserve and not US Treasury, it was able to bypass Congressional approval. The Treasury Department then auctioned off Treasury bills to raise money for the Federal Reserve's own use, but nonetheless the taxpayer would be funding the rescue. The bankers had bled tens of billions from the system by hedging and derivative gambling, and triggered the portfolio inter-bank lending freeze, which then seized up and crashed.
The takeover was presented as a government funded bailout of an arbitrary $700 billion, which does nothing to solve the problem. No economists were asked to present their views to Congress, and the loan only perpetuates the myth that the banking system is not really dead.
In reality, the damage will not be $700 billion but closer to $5 trillion, the value of Freddie Mac and Fannie Mae's mortgages. It was nothing less than a bailout of the quadrillion dollar derivatives industry which otherwise faced payouts of over a trillion dollars on CDS mortgage-backed securities they had sold. It was necessary, said Treasury Secretary Henry Paulson, to save the country from a "housing correction". But, he added, the $700 billion taxpayer funded takeover would not prevent other banks from collapsing, in turn causing a stock market crash.
In other words Paulson was blackmailing Congress in order to lead a coup by the banking elite under the false guise of necessary legislation to stop the dyke from flooding. It merely shifted wealth from one class to another, as it had done almost a century prior. No sooner were the words were out of Paulson's mouth before other financial institutions began imploding, and with them the disintegration of the global financial system - much modelled after the lauded system of American banking.
In September the Federal Reserve, its line of credit assured, then bought the world largest insurance company, AIG, for $85 billion for an 80% stake. AIG was the largest seller of CDS, but now that it was in the position of having to pay out, from collateral it did not have, it was teetering on the edge of bankruptcy.
In October the entire country of Iceland went bankrupt, having bought American worthless sub-prime mortgages as investments. European banks began exploding, all wanting to cash in concurrently on their inflated US stocks to pay off the low interest rate debts before rates climbed higher. The year before the signs had been evident, when the largest US mortgage lender Countrywide fell. Soon after, the largest lender in the UK, Northern Rock, went under - London long having copied Wall Street creative financing. Japan and Korea's auto manufacturing nosedived by 37%, global economies contracting. Pakistan is on the edge of collapse too, with real reserves at $3 billion - enough to only buy a month's supply of food and oil and attempting to stall payments to Saudi Arabia for the 100,000 barrels of oil per day it provides to the country. Under President Musharraf, who left office in the nick of time, Pakistan's currency lost 25% of its value, its inflation running at 25%.
Meanwhile energy costs had soared, with oil reaching a peak of almost $150 per barrel in the summer. The costs were immediately passed on to the already spent homeowner, in rising heating and fuel, transport and manufacturing costs. Yet 30% of the cost of a barrel of oil was based upon Wall Street speculators, climbing to 60% as a speculative fear factor during the summer months. As soon as the financial crisis hit, suddenly oil prices slid down, slicing oil costs to $61 from a high of $147 in June and proving that the 60% speculation factor was far more accurate. This sudden decline also revealed OPEC's lack of control over spiralling prices during the past few years, almost squarely laid on the shoulders of Saudi Arabia alone. When OPEC, in September, sought to maintain higher prices by cutting production, it was Saudi Arabia who voted against such a move at the expense of its own revenue.
Europe then decided that no more would it be ruined by the excess of America. 'Olde Europe' may have had enough of being dictated to by the US, who refused to compromise on loans lent to their own broken nations after WWII. On October the 13th, the once divided EU nations unilaterally agreed to an emergency rescue plan totaling $2.3 trillion. It was more than three times greater than the US package for a catastrophe America alone had created.
By mid October, the Dow, NASDAQ and S&P 500 had erased all the gains they made over the previous decade. Greenspan's pyramid scheme of easy money from nothing resulted in a massive overextension of credit, inflated housing prices, and incredible stock valuations, achieved because investors would never withdraw their money all at once. But now it was crashing at break-neck speed and no solution in sight. President Bush said that people ought not to worry at all because "America is the most attractive destination for investors around the globe."
Those who will hurt the most are the very men and women who grew the country after WWII, and saved their pensions for retirement due now. They had built the country during the war production years, making its weapons and arms for global conflict. During the Cold War the USSR was the ever-present enemy and thus the military industrial complex continued to grow. Only when there is a war does America profit.
Russia will not tolerate a new cold war build-up of ballistic missiles. And the Middle East has seen its historical ally turn into its worst nightmare, be it militarily or economically. No longer will these nations continue to support the dollar as the world's currency. The world's economy is no longer America's to control and the US is now indebted to the rest of the world. No more will the US be able to demand its largest Middle Eastern oil supplier open up its banking books so as to be transparent and free from corruption and terrorist connections lest there be consequences - the biggest act of criminal corruption in history has just been perpetrated by the United States.
It was the best con game in town: get paid well for selling vast amounts of risk, fail, and then have governments fix the problem at the expense of the taxpayers who never saw a penny of shared wealth to begin with.
There is no easy solution to this crisis, its effects multiplying like an infectious disease.
Ironically, least affected by the crisis are Islamic banks.
They have largely been immune to the collapse because Ilamic banking prohibits the acquisition of wealth via gambling (or alcohol, tobacco, pornography, or stocks in armaments companies), and forbids the buying and selling of a debt as well as usury. Additionally, Shari'ah banking laws forbid investing in any company with debts that exceed thirty percent.
"Islamic banking institutions have not failed per se as they deal in tangible assets and assume the risk" said Dr. Mohammed Ramady, Professor of Economics at King Fahd University of Petroleum & Minerals. "Although the Islamic banking sector is also part of the global economy, the impact of direct exposure to sub-prime asset investments has been low" he continued. "The liquidity slowdown has especially affected Dubai, with its heavy international borrowing. The most negative effect has been a loss of confidence in the regional stock markets." Instead, said Dr. Ramady, oil surplus Arab nations are "reconsidering overseas investments in financial assets" and speeding up their own domestic projects.
Eight years ago, in May 2000, Saudi Islamic banker His Highness Dr. Nayef bin Fawaaz ibn Sha'alan publicly gave a series of economic lectures in Gulf states. At the time his research showed that Arab investments in the US, to the tune of $1.5 trillion, were effectively being held hostage and he recommended they be pulled out and reinvested in the tangibles of the Arab and Islamic markets. "Not in stocks however because the stock market could be manipulated remotely, as we have seen in the last couple of years in the Arab market where trillions of dollars evaporated" he said.
He warned then that it was a certainty that the US economic system was on the verge of collapse because of its cumulative debts, ever-increasing deficit and the interest on that debt. "When the debts and deficits come due, they just issue new Treasury bonds to cover the old bonds due, with their interest and the new deficit too." The cycle cannot be stopped or the debt cancelled because the US would no longer be able to borrow. The consequence of relieving this cycle would be a total collapse of their economic system as opposed to the partial, albeit massive, crash of 2008.
"Islamic banking", said Dr. Al-Sha'alan, "always protects the individuals' wealth while putting a cap on selfishness and greed. It has the best of capitalism - filtering out its negatives - and the best of socialism - filtering out its negatives too." Both systems inevitably had to fail. Additionally, Europe and Japan did not need to be held accountable and indebted to America anymore for protection against the Soviets.
"The essential difference between the Islamic economic system and the capitalist system", he continued "is that in Islam wealth belongs to God - the individual being only its manager. It is a means, not a goal. In capitalism, it is the reverse: money belongs to the individual, and is a goal in and of itself. In America especially, money is worshipped like God."
In sum, the crash of the entire global economic system is a result of America's fiscal arrogance based upon one set of rules for itself and another for the rest of the world. Its increased creative financing deluded its people into a false sense of security, and now looks like the failure of capitalism altogether.
The whole exercise in democracy by force against Arab Muslim nations has almost bankrupted the US. The Cold War is over and the US has nothing to offer: no exports, no production, few natural resources, and no service sector economy.
The very markets that resisted US economic policies the most, having curbed foreign direct investments into America, are those who will fare best and come out ahead.
But not before having paid a very high price.
Tanya Cariina Hsu is a political researcher and analyst focusing on Saudi Arabian and US relations. One of the contributors to recent written testimony on the Kingdom of Saudi Arabia for the US Congressional Senate Judiciary Committee on behalf of FOCA (Friends of Charities Association) in its Hearing on Capitol Hill in Washington D.C., her analysis has been published and critically acclaimed throughout the US, Europe and the Middle East.
The first to break the barrier against public discussion of the Israeli influence upon US foreign policy decision making, in Capitol Hill's "A Clean Break" Symposium in Washington D.C. in 2004, as the Institute for Research: Middle East Policy (IRmep) Director of Development and Senior Research Analyst, Ms. Hsu remains an International Fellow with the Institute.
Born in London, she re-located to Riyadh, Saudi Arabia in 2005 and is currently completing a book on US policy towards Saudi Arabia.
Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.
Death of the American Empire
America is self-destructing & bringing the rest of the world down with it
By Tanya Cariina Hsu
Global Research, October 23, 2008
I believe that banking institutions are more dangerous to our liberties than standing armies. (Thomas Jefferson, US President; 1743 - 1826)
America is dying. It is self-destructing and bringing the rest of the world down with it.
Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something 'real' can be blamed for the carnage. The problem is, this is myth. The magnitude of this fiscal collapse happened because it was all based on hot air.
The banking industry renamed insurance betting guarantees as 'credit default swaps' and risky gambling wagers were called 'derivatives'. Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century but this time in suits and ties. And by October 2009 it was a quadrillion-dollar (that's $1,000 trillion) industry that few could understand.
Propped up by false hope, America is now falling like a house of cards.
It all began in the early part of the 20th century. In 1907 J.P. Morgan, a private New York banker, published a rumour that a competing unnamed large bank was about to fail. It was a false charge but customers nonetheless raced to their banks to withdraw their money, in case it was their bank. As they pulled out their funds the banks lost their cash deposits and were forced to call in their loans. People now therefore had to pay back their mortgages to fill the banks with income, going bankrupt in the process. The 1907 panic resulted in a crash that prompted the creation of the Federal Reserve, a private banking cartel with the veneer of an independent government organisation. Effectively, it was a coup by elite bankers in order to control the industry.
When signed into law in 1913, the Federal Reserve would loan and supply the nation's money, but with interest. The more money it was able to print, the more 'income' for itself it generated. By its very nature the Federal Reserve would forever keep producing debt to stay alive. It was able to print America's monetary supply at will, regulating its value. To control valuation however, inflation had to be kept in check.
The Federal Reserve then doubled America's money supply within five years, and in 1920 it called in a mass percentage of loans. Over five thousand banks collapsed overnight. One year later the Federal Reserve again increased the money supply by 62%, but in 1929 it again called the loans back in, en masse. This time, the crash of 1929 caused over sixteen thousand banks to fail and an 89% plunge on the stock market. The private and well-protected banks within the Federal Reserve system were able to snap up the failed banks at pennies on the dollar.
The nation fell into the Great Depression and in April 1933 President Roosevelt issued an executive order that confiscated all gold bullion from the public. Those who refused to turn in their gold would be imprisoned for ten years, and by the end of the year the gold standard was abolished. What had been redeemable for gold became paper 'legal tender', and gold could no longer be exchanged for cash as it had once been.
Later, in 1971, President Nixon removed the dollar from the gold standard altogether, therefore no longer trading at the internationally fixed price of $35. The US dollar was now worth whatever the US decided it was worth because it was 'as good as gold'. It had no standard of measure, and became the universal currency. Treasury bills (short-term notes) and bonds (long-term notes) replaced gold as value, promissory notes of the US government and paid for by the taxpayer. Additionally, because gold was exempt from currency reporting requirements it could not be traced, unlike the fiduciary (i.e. that based upon trust) monetary systems of the West. That was not in America's best interest.
After the Great Depression private banks remained afraid to make home loans, so Roosevelt created Fannie Mae. A state supported mortgage bank, it provided federal funding to finance home mortgages for affordable housing. In 1968 President Johnson privatised Fannie Mae, and in 1970, Freddie Mac was created to compete with Fannie Mae. Both of them bought mortgages from banks and other lenders, and sold them onto new investors.
The post World War II boom had created an America flush with cash and assets. As a military industrial complex, war exponentially profited the US and, unlike any empire in history, it shot to superpower status. But it failed to remember that, historically, whenever empires rose they fell in direct proportion.
Americans could afford all the modern conveniences, exporting its manufactured goods all over the world. After the Vietnam War, the US went into an economic decline. But people were loath to give up their elevated standard of living despite the loss of jobs, and production was increasingly sent overseas. A sense of delusion and entitlement kept Americans on the treadmill of consumer consumption.
In 1987 the US stock market plunged by 22% in one day because of high-risk futures trading, called derivatives, and in 1989 the Savings & Loan crisis resulted in President George H.W. Bush using $142 billion in taxpayer funds to rescue half of the S&L's. To do so, Freddie Mac was given the task of giving sub-prime (below prime-rate) mortgages to low-income families. In 2000, the "irrational exuberance" of the dot-com bubble burst, and 50% of high-tech firms went bankrupt wiping $5 trillion from their over-inflated market values.
After this crisis, Federal Reserve Chairman Alan Greenspan kept interest rates so low they were less than the rate of inflation. Anyone saving his or her income actually lost money, and the savings rate soon fell into negative territory.
During the 1990s, advertisers went into overdrive, marketing an ever more luxurious lifestyle, all made available with cheap easy credit. Second mortgages became commonplace, and home equity loans were used to pay credit card bills. The more Americans bought, the more they fell into debt. But as long as they had a house their false sense of security remained: their home was their equity, it would always go up in value, and they could always remortgage at lower rates if needed. The financial industry also believed that housing prices would forever climb, but should they ever fall the central bank would cut interest rates so that prices would jump back up. It was, everyone believed, a win-win situation.
Greenspan's rock-bottom interest rates let anyone afford a home. Minimum wage service workers with aspirations to buy a half million-dollar house were able to secure 100% loans, the mortgage lenders fully aware that they would not be able to keep up the payments.
So many people received these sub-prime loans that the investment houses and lenders came up with a new scheme: bundle these virtually worthless home loans and sell them as solid US investments to unsuspecting countries who would not know the difference. American lives of excess and consumer spending never suffered, and were being propped up by foreign nations none the wiser.
It has always been the case that a bank would lend out more than it actually had, because interest payments generated its income. The more the bank loaned, the more interest it collected even with no money in the vault. It was a lucrative industry of giving away money it never had in the first place. Mortgage banks and investment houses even borrowed money on international money markets to fund these 100% plus sub-prime mortgages, and began lending more than ten times their underlying assets.
After 9/11, George Bush told the nation to spend, and during a time of war, that's what the nation did. It borrowed at unprecedented levels so as to not only pay for its war on terror in the Middle East (calculated to cost $4 trillion) but also pay for tax cuts at the very time it should have increased taxes. Bush removed the reserve requirements in Fannie Mae and Freddie Mac, from 10% to 2.5%. They were free to not only lend even more at bargain basement interest rates, they only needed a fraction of reserves. Soon banks lent thirty times asset value. It was, as one economist put it, an 'orgy of excess'.
It was flagrant overspending during a time of war. At no time in history has a nation gone into conflict without sacrifice, cutbacks, tax increases, and economic conservation.
And there was a growing chance that, just like in 1929, investors would rush to claim their money all at once.
To guarantee, therefore, these high risk mortgages, the same financial houses that sold them then created 'insurance policies' against the sub-prime investments they were selling, marketed as Credit Default Swaps (CDS). But the government must regulate insurance policies, so by calling them CDS they remained totally unregulated. Financial institutions were 'hedging their bets' and selling premiums to protect the junk assets. In other words, the asset that should go up in value could also have a side-bet, just in case, that it might go down. By October 2008, CDS were trading at $62 trillion, more than the stock markets of the whole world combined.
These bets had absolutely no value whatsoever and were not investments. They were just financial instruments called derivatives - high stakes gambling, 'nothing from nothing' - or as Warren Buffet referred to them, 'Weapons of Financial Mass Destruction'. The derivatives trade was 'worth' more than one quadrillion dollars, or larger than the economy of the entire world. (In September 2008 the global Gross Domestic Product was $60 trillion).
Challenged as being illegal in the 1990s, Greenspan legalised the derivatives practise. Soon hedge funds became an entire industry, betting on the derivatives market and gambling as much as they wanted. It was easy because it was money they did not have in the first place. The industry had all the appearances of banks, but the hedge funds, equity funds, and derivatives brokers had no access to government loans in the event of a default. If the owners defaulted, the hedge funds had no money to pay 'from nothing'. Those who had hedged on an asset going up or down would not be able to collect on the winnings or losses.
The market had become the largest industry in the world, and all the financial giants were cashing in: Bear Stearns, Lehman Brothers, Citigroup, and AIG. But homeowners, long maxed out on their credit, were now beginning to default on their mortgages. Not only were they paying for their house but also all the debt amassed over the years for car, credit card and student loans, medical payments and home equity loans. They had borrowed to pay for groceries and skyrocketing health insurance premiums to keep up with their bigger houses and cars; they refinanced the debt they had for lower rates that soon ballooned. The average American owed 25% of their annual income to credit card debts alone.
In 2008, housing prices began to slide precipitously downwards and mortgages were suddenly losing value. Manufacturing orders were down 4.5% by September, inventories began to pile up, unemployment was soaring and average house foreclosures had increased by 121% and up to 200% in California.
The financial giants had to stop trading these mortgage-backed securities, as now their losses would have to be visibly accounted for. Investors began withdrawing their funds. Bear Stearns, heavily specialised in home loan portfolios, was the first to go in March.
Just as they had done in the 20th century, JP Morgan swooped in and picked up Bear Stearns for a pittance. One year prior Bear Stearns shares traded at $159 but JP Morgan was able to buy in and take over at $2 a share. In September, Washington Mutual collapsed, the largest bank failure in history. JP Morgan again came in and paid $1.9 billion for assets valued at $176 billion. It was a fire sale.
Relatively quietly over the summer Freddie Mac and Fannie Mae, the publicly traded companies responsible for 80% of the home mortgage loans, lost almost 90% of their value for the year. Together they were responsible for half the outstanding loan amounts but were now in debt $80 to every $1 in capital reserves.
To guarantee they would stay alive, the Federal Reserve stepped in and took over Freddie Mac and Fannie Mae. On September 7th 2008 they were put into "conservatorship": known as nationalisation to the rest of the world, but Americans have difficulty with the idea of any government run industry that required taxpayer increases.
What the government was really doing was handing out an unlimited line of credit. Done by the Federal Reserve and not US Treasury, it was able to bypass Congressional approval. The Treasury Department then auctioned off Treasury bills to raise money for the Federal Reserve's own use, but nonetheless the taxpayer would be funding the rescue. The bankers had bled tens of billions from the system by hedging and derivative gambling, and triggered the portfolio inter-bank lending freeze, which then seized up and crashed.
The takeover was presented as a government funded bailout of an arbitrary $700 billion, which does nothing to solve the problem. No economists were asked to present their views to Congress, and the loan only perpetuates the myth that the banking system is not really dead.
In reality, the damage will not be $700 billion but closer to $5 trillion, the value of Freddie Mac and Fannie Mae's mortgages. It was nothing less than a bailout of the quadrillion dollar derivatives industry which otherwise faced payouts of over a trillion dollars on CDS mortgage-backed securities they had sold. It was necessary, said Treasury Secretary Henry Paulson, to save the country from a "housing correction". But, he added, the $700 billion taxpayer funded takeover would not prevent other banks from collapsing, in turn causing a stock market crash.
In other words Paulson was blackmailing Congress in order to lead a coup by the banking elite under the false guise of necessary legislation to stop the dyke from flooding. It merely shifted wealth from one class to another, as it had done almost a century prior. No sooner were the words were out of Paulson's mouth before other financial institutions began imploding, and with them the disintegration of the global financial system - much modelled after the lauded system of American banking.
In September the Federal Reserve, its line of credit assured, then bought the world largest insurance company, AIG, for $85 billion for an 80% stake. AIG was the largest seller of CDS, but now that it was in the position of having to pay out, from collateral it did not have, it was teetering on the edge of bankruptcy.
In October the entire country of Iceland went bankrupt, having bought American worthless sub-prime mortgages as investments. European banks began exploding, all wanting to cash in concurrently on their inflated US stocks to pay off the low interest rate debts before rates climbed higher. The year before the signs had been evident, when the largest US mortgage lender Countrywide fell. Soon after, the largest lender in the UK, Northern Rock, went under - London long having copied Wall Street creative financing. Japan and Korea's auto manufacturing nosedived by 37%, global economies contracting. Pakistan is on the edge of collapse too, with real reserves at $3 billion - enough to only buy a month's supply of food and oil and attempting to stall payments to Saudi Arabia for the 100,000 barrels of oil per day it provides to the country. Under President Musharraf, who left office in the nick of time, Pakistan's currency lost 25% of its value, its inflation running at 25%.
Meanwhile energy costs had soared, with oil reaching a peak of almost $150 per barrel in the summer. The costs were immediately passed on to the already spent homeowner, in rising heating and fuel, transport and manufacturing costs. Yet 30% of the cost of a barrel of oil was based upon Wall Street speculators, climbing to 60% as a speculative fear factor during the summer months. As soon as the financial crisis hit, suddenly oil prices slid down, slicing oil costs to $61 from a high of $147 in June and proving that the 60% speculation factor was far more accurate. This sudden decline also revealed OPEC's lack of control over spiralling prices during the past few years, almost squarely laid on the shoulders of Saudi Arabia alone. When OPEC, in September, sought to maintain higher prices by cutting production, it was Saudi Arabia who voted against such a move at the expense of its own revenue.
Europe then decided that no more would it be ruined by the excess of America. 'Olde Europe' may have had enough of being dictated to by the US, who refused to compromise on loans lent to their own broken nations after WWII. On October the 13th, the once divided EU nations unilaterally agreed to an emergency rescue plan totaling $2.3 trillion. It was more than three times greater than the US package for a catastrophe America alone had created.
By mid October, the Dow, NASDAQ and S&P 500 had erased all the gains they made over the previous decade. Greenspan's pyramid scheme of easy money from nothing resulted in a massive overextension of credit, inflated housing prices, and incredible stock valuations, achieved because investors would never withdraw their money all at once. But now it was crashing at break-neck speed and no solution in sight. President Bush said that people ought not to worry at all because "America is the most attractive destination for investors around the globe."
Those who will hurt the most are the very men and women who grew the country after WWII, and saved their pensions for retirement due now. They had built the country during the war production years, making its weapons and arms for global conflict. During the Cold War the USSR was the ever-present enemy and thus the military industrial complex continued to grow. Only when there is a war does America profit.
Russia will not tolerate a new cold war build-up of ballistic missiles. And the Middle East has seen its historical ally turn into its worst nightmare, be it militarily or economically. No longer will these nations continue to support the dollar as the world's currency. The world's economy is no longer America's to control and the US is now indebted to the rest of the world. No more will the US be able to demand its largest Middle Eastern oil supplier open up its banking books so as to be transparent and free from corruption and terrorist connections lest there be consequences - the biggest act of criminal corruption in history has just been perpetrated by the United States.
It was the best con game in town: get paid well for selling vast amounts of risk, fail, and then have governments fix the problem at the expense of the taxpayers who never saw a penny of shared wealth to begin with.
There is no easy solution to this crisis, its effects multiplying like an infectious disease.
Ironically, least affected by the crisis are Islamic banks.
They have largely been immune to the collapse because Ilamic banking prohibits the acquisition of wealth via gambling (or alcohol, tobacco, pornography, or stocks in armaments companies), and forbids the buying and selling of a debt as well as usury. Additionally, Shari'ah banking laws forbid investing in any company with debts that exceed thirty percent.
"Islamic banking institutions have not failed per se as they deal in tangible assets and assume the risk" said Dr. Mohammed Ramady, Professor of Economics at King Fahd University of Petroleum & Minerals. "Although the Islamic banking sector is also part of the global economy, the impact of direct exposure to sub-prime asset investments has been low" he continued. "The liquidity slowdown has especially affected Dubai, with its heavy international borrowing. The most negative effect has been a loss of confidence in the regional stock markets." Instead, said Dr. Ramady, oil surplus Arab nations are "reconsidering overseas investments in financial assets" and speeding up their own domestic projects.
Eight years ago, in May 2000, Saudi Islamic banker His Highness Dr. Nayef bin Fawaaz ibn Sha'alan publicly gave a series of economic lectures in Gulf states. At the time his research showed that Arab investments in the US, to the tune of $1.5 trillion, were effectively being held hostage and he recommended they be pulled out and reinvested in the tangibles of the Arab and Islamic markets. "Not in stocks however because the stock market could be manipulated remotely, as we have seen in the last couple of years in the Arab market where trillions of dollars evaporated" he said.
He warned then that it was a certainty that the US economic system was on the verge of collapse because of its cumulative debts, ever-increasing deficit and the interest on that debt. "When the debts and deficits come due, they just issue new Treasury bonds to cover the old bonds due, with their interest and the new deficit too." The cycle cannot be stopped or the debt cancelled because the US would no longer be able to borrow. The consequence of relieving this cycle would be a total collapse of their economic system as opposed to the partial, albeit massive, crash of 2008.
"Islamic banking", said Dr. Al-Sha'alan, "always protects the individuals' wealth while putting a cap on selfishness and greed. It has the best of capitalism - filtering out its negatives - and the best of socialism - filtering out its negatives too." Both systems inevitably had to fail. Additionally, Europe and Japan did not need to be held accountable and indebted to America anymore for protection against the Soviets.
"The essential difference between the Islamic economic system and the capitalist system", he continued "is that in Islam wealth belongs to God - the individual being only its manager. It is a means, not a goal. In capitalism, it is the reverse: money belongs to the individual, and is a goal in and of itself. In America especially, money is worshipped like God."
In sum, the crash of the entire global economic system is a result of America's fiscal arrogance based upon one set of rules for itself and another for the rest of the world. Its increased creative financing deluded its people into a false sense of security, and now looks like the failure of capitalism altogether.
The whole exercise in democracy by force against Arab Muslim nations has almost bankrupted the US. The Cold War is over and the US has nothing to offer: no exports, no production, few natural resources, and no service sector economy.
The very markets that resisted US economic policies the most, having curbed foreign direct investments into America, are those who will fare best and come out ahead.
But not before having paid a very high price.
Tanya Cariina Hsu is a political researcher and analyst focusing on Saudi Arabian and US relations. One of the contributors to recent written testimony on the Kingdom of Saudi Arabia for the US Congressional Senate Judiciary Committee on behalf of FOCA (Friends of Charities Association) in its Hearing on Capitol Hill in Washington D.C., her analysis has been published and critically acclaimed throughout the US, Europe and the Middle East.
The first to break the barrier against public discussion of the Israeli influence upon US foreign policy decision making, in Capitol Hill's "A Clean Break" Symposium in Washington D.C. in 2004, as the Institute for Research: Middle East Policy (IRmep) Director of Development and Senior Research Analyst, Ms. Hsu remains an International Fellow with the Institute.
Born in London, she re-located to Riyadh, Saudi Arabia in 2005 and is currently completing a book on US policy towards Saudi Arabia.
Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.
Russia's Revenge
Russia's Revenge
William Pfaff
Paris, October 21, 2008 – It did not take the clash between Russia and Georgia to reveal that relations between Russia and the West have taken a bad turn. They have been deteriorating since the mid-1990s, when the decision was taken to expand NATO to include the former Warsaw Pact states.
At the time of that decision, George F. Kennan, the most eminent American diplomat of his time, said this could be the most disastrous mistake made in American foreign policy in decades. He erred only in underestimating the comparative scale of the blunders that would follow, in the George W. Bush administration.
In a recent column I quoted the final U.S. Ambassador to the Soviet Union, Jack Matlock, on the promise made personally by President George H.W. Bush and Secretary of State James Baker to Mikhail Gorbachev that if East Germany was allowed to unite with West Germany, and the U.S.S.R. placed no obstacle to a unified Germany's continuing as a NATO member, the western alliance would not attempt to expand any farther into what had been Warsaw Pact Europe.
The president and the secretary of state agreed, with Baker saying, according to Matlock, "not one inch." In September 1990, German unification took place.
Unfortunately the agreement seems never to have been written down. Chairman Gorbachev undoubtedly looked deeply into Bush and Baker's eyes, as Bush's son was eleven years later to look deep into the eyes of Vladimir Putin. Gorbachev saw the souls of American gentlemen.
Or it may have been that there was misunderstanding all around. Bush may have been assuring Gorbachev that NATO forces would never move into what was about to cease to be the German Democratic Republic –- which indeed they did not, and have not.
It was Bill Clinton then who arrived in the White House at a time when the U.S. lobbies of the East European countries were demanding that these be included in NATO. The most influential was the Polish lobby in Chicago, which could swing the city and perhaps the state. In 1994 the so-called Partnership for Peace was created, a kind of cadet-membership in NATO. Poland, Hungary and the Czech Republic joined, and in 1999 became full members of NATO.
By this time, Republicans and Democrats were bidding for the election votes of American supporters of the rest of the ex-Warsaw pact states, and those of the Baltic nations as well, which during the second world war had been incorporated into the Soviet Union. They all joined NATO in 2004. Next came the candidacies of Ukraine and Georgia, both of which had been integral parts of the Czarist Russian Empire from the 19th century onward.
In his final book, "At a Century's Ending," in 1996, George Kennan said of the new post-Communist Russia something that no American government seems ever to have taken seriously. He wrote: "That Russia will ever achieve 'democracy,' in the sense of political, social and economic institutions similar to our own, is not to be expected. And even if Russian forms of self-government should differ significantly from our own, it is not to be postulated that this would be entirely a bad thing."
Nations are what history has made of them, which includes their bad experiences as well as the good. Vladimir Putin has proven extremely popular in Russia and extremely unpopular in the American government and media for exactly the same reasons. He is a Russian nationalist, has given Russia an independent and uncompromising stance that suits Russian pride, after two decades of the humiliation, disorder and social breakdown that many Russians now associate with American and western influences on their country. In Georgia he put a brisk and efficient end to what universally is seen in Russia as a deliberate provocation staged by the U.S.
Putin has also seen demonstrated that the United States and NATO are effectively powerless in the Caucasus, and in no position to interfere with Russia elsewhere in its own historical zone of interest.
Indeed, Russia now has been handed what amounts to a controlling interest in NATO's war in Afghanistan. As a result of American blundering in the Middle East, and of increasing trouble in Pakistan, the U.S. has been forced to ask Russia to permit the major supply route for the Afghanistan war to pass by way of Russia. The Russians have also just announced that they will not interfere with any new agreement keeping U.S. forces in Iraq.
The irony seems unnoticed in Washington. While abusing Russia for its policies elsewhere, the U.S. has made itself dependent on Moscow in order to continue waging the Afghanistan war. Russia is now in a position to influence how long that war goes on.
With its welcome to the United States to continue a troubled and unpopular occupation of Iraq, one might think that the Russians now are about to have their revenge for the Afghan defeat, and for their own setbacks in the Middle East.
They can sit back and observe Muslim fighters do to the American army, and American public opinion, just what the Moudjahidine did to the Russians while Russia was trying to control Afghanistan during the last years of the Soviet Union. They are saying to Washington: you want to go on fighting in Iraq and Afghanistan? Go right ahead.
© Copyright 2008 by Tribune Media Services International. All Rights Reserved.
This article comes from William PFAFF
http://www.williampfaff.com
The URL for this article is:
http://www.williampfaff.com/article.php?storyid=349
William Pfaff
Paris, October 21, 2008 – It did not take the clash between Russia and Georgia to reveal that relations between Russia and the West have taken a bad turn. They have been deteriorating since the mid-1990s, when the decision was taken to expand NATO to include the former Warsaw Pact states.
At the time of that decision, George F. Kennan, the most eminent American diplomat of his time, said this could be the most disastrous mistake made in American foreign policy in decades. He erred only in underestimating the comparative scale of the blunders that would follow, in the George W. Bush administration.
In a recent column I quoted the final U.S. Ambassador to the Soviet Union, Jack Matlock, on the promise made personally by President George H.W. Bush and Secretary of State James Baker to Mikhail Gorbachev that if East Germany was allowed to unite with West Germany, and the U.S.S.R. placed no obstacle to a unified Germany's continuing as a NATO member, the western alliance would not attempt to expand any farther into what had been Warsaw Pact Europe.
The president and the secretary of state agreed, with Baker saying, according to Matlock, "not one inch." In September 1990, German unification took place.
Unfortunately the agreement seems never to have been written down. Chairman Gorbachev undoubtedly looked deeply into Bush and Baker's eyes, as Bush's son was eleven years later to look deep into the eyes of Vladimir Putin. Gorbachev saw the souls of American gentlemen.
Or it may have been that there was misunderstanding all around. Bush may have been assuring Gorbachev that NATO forces would never move into what was about to cease to be the German Democratic Republic –- which indeed they did not, and have not.
It was Bill Clinton then who arrived in the White House at a time when the U.S. lobbies of the East European countries were demanding that these be included in NATO. The most influential was the Polish lobby in Chicago, which could swing the city and perhaps the state. In 1994 the so-called Partnership for Peace was created, a kind of cadet-membership in NATO. Poland, Hungary and the Czech Republic joined, and in 1999 became full members of NATO.
By this time, Republicans and Democrats were bidding for the election votes of American supporters of the rest of the ex-Warsaw pact states, and those of the Baltic nations as well, which during the second world war had been incorporated into the Soviet Union. They all joined NATO in 2004. Next came the candidacies of Ukraine and Georgia, both of which had been integral parts of the Czarist Russian Empire from the 19th century onward.
In his final book, "At a Century's Ending," in 1996, George Kennan said of the new post-Communist Russia something that no American government seems ever to have taken seriously. He wrote: "That Russia will ever achieve 'democracy,' in the sense of political, social and economic institutions similar to our own, is not to be expected. And even if Russian forms of self-government should differ significantly from our own, it is not to be postulated that this would be entirely a bad thing."
Nations are what history has made of them, which includes their bad experiences as well as the good. Vladimir Putin has proven extremely popular in Russia and extremely unpopular in the American government and media for exactly the same reasons. He is a Russian nationalist, has given Russia an independent and uncompromising stance that suits Russian pride, after two decades of the humiliation, disorder and social breakdown that many Russians now associate with American and western influences on their country. In Georgia he put a brisk and efficient end to what universally is seen in Russia as a deliberate provocation staged by the U.S.
Putin has also seen demonstrated that the United States and NATO are effectively powerless in the Caucasus, and in no position to interfere with Russia elsewhere in its own historical zone of interest.
Indeed, Russia now has been handed what amounts to a controlling interest in NATO's war in Afghanistan. As a result of American blundering in the Middle East, and of increasing trouble in Pakistan, the U.S. has been forced to ask Russia to permit the major supply route for the Afghanistan war to pass by way of Russia. The Russians have also just announced that they will not interfere with any new agreement keeping U.S. forces in Iraq.
The irony seems unnoticed in Washington. While abusing Russia for its policies elsewhere, the U.S. has made itself dependent on Moscow in order to continue waging the Afghanistan war. Russia is now in a position to influence how long that war goes on.
With its welcome to the United States to continue a troubled and unpopular occupation of Iraq, one might think that the Russians now are about to have their revenge for the Afghan defeat, and for their own setbacks in the Middle East.
They can sit back and observe Muslim fighters do to the American army, and American public opinion, just what the Moudjahidine did to the Russians while Russia was trying to control Afghanistan during the last years of the Soviet Union. They are saying to Washington: you want to go on fighting in Iraq and Afghanistan? Go right ahead.
© Copyright 2008 by Tribune Media Services International. All Rights Reserved.
This article comes from William PFAFF
http://www.williampfaff.com
The URL for this article is:
http://www.williampfaff.com/article.php?storyid=349
Thursday, October 23, 2008
The U.S. Dollar Death Dance - 23rd Oct 08 - Jim_Willie_CB
The U.S. Dollar Death Dance - 23rd Oct 08 - Jim_Willie_CB
http://www.marketoracle.co.uk/Article6942.html
http://www.marketoracle.co.uk/Article6942.html
The Bush Doctrine in Ruins
The Bush Doctrine in Ruins
by Tom Engelhardt
TomDispatch
http://www.antiwar.com:80/engelhardt/?articleid=13624
On the brief occasions when the president now appears in the Rose Garden to "comfort" or "reassure" a shock-and-awed nation, you can almost hear those legions of ducks quacking lamely in the background. Once upon a time, George W. Bush, along with his top officials and advisers, hoped to preside over a global Pax Americana and a domestic Pax Republicana – a legacy for the generations. More recently, their highest hope seems to have been to slip out of town in January before the you-know-what hits the fan. No such luck.
Of course, what they feared most was that the you-know-what would hit in Iraq, and so put their efforts into sweeping that disaster out of sight. Once again, however, as in September 2001 and August 2005, they were caught predictably flatfooted by a domestic disaster. In this case, they were ambushed by an insurgent stock market heading into chaos, killer squads of credit default swaps, and a hurricane of financial collapse.
At the moment, only 7 percent of Americans believe the country is "going in the right direction," Bush's job-approval ratings have dropped into the low 20s with no bottom in sight, and North Dakota is "in play" in the presidential election. Think of that as the equivalent of a report card on Bush's economic policies. In other words, the Yale legacy student with the C average has been branded for life with a resounding domestic "F" for failure. (His singular domestic triumph may prove to be paving the way for the first African American president.)
But there's another report card that's not in. Despite a media focus on Bush's wars in Iraq and Afghanistan, the record of his Global War on Terror (and the Bush Doctrine that once went with it) has yet to be fully assessed. This is surprising, since administration actions in waging that war in what neoconservatives used to call "the arc of instability" – a swath of territory running from North Africa to the Chinese border – add up to a record of failure unprecedented in American history.
On June 1, 2002, George W. Bush gave the commencement address at the U.S. Military Academy at West Point. The Afghan War was then being hailed as a triumph and the invasion of Iraq just beginning to loom on the horizon. That day, after insisting the U.S. had "no empire to extend or utopia to establish," the President laid out a vision of how the U.S. was to operate globally, facing "a threat with no precedent" – al-Qaeda-style terrorism in a world of weapons of mass destruction.
After indicating that "terror cells" were to be targeted in up to 60 countries, he offered a breathtakingly radical basis for the pursuit of American interests:
"We cannot put our faith in the word of tyrants, who solemnly sign non-proliferation treaties, and then systemically break them. If we wait for threats to fully materialize, we will have waited too long… [T]he war on terror will not be won on the defensive. We must take the battle to the enemy, disrupt his plans, and confront the worst threats before they emerge. In the world we have entered, the only path to safety is the path of action. And this nation will act… Our security will require transforming the military you will lead – a military that must be ready to strike at a moment's notice in any dark corner of the world."
This would later be known as Vice President Dick Cheney's "one percent doctrine" – even a 1 percent chance of an attack on the U.S., especially involving weapons of mass destruction, must be dealt with militarily as if it were a certainty. It may have been the rashest formula for "preventive" or "aggressive" war offered in the modern era.
The president and his neocon backers were then riding high. Some were even talking up the United States as a "new Rome," greater even than imperial Britain. For them, global control had a single prerequisite: the possession of overwhelming military force. With American military power unimpeachably #1, global domination followed logically. As Bush put it that day, in a statement unique in the annals of our history: "America has, and intends to keep, military strengths beyond challenge – thereby making the destabilizing arms races of other eras pointless, and limiting rivalries to trade and other pursuits of peace."
In other words, a planet of Great Powers was all over and it was time for the rest of the world to get used to it. Like the wimps they were, other nations could "trade" and pursue "peace." For its pure folly, not to say its misunderstanding of the nature of power on our planet, it remains a statement that should still take anyone's breath away.
The Bush Doctrine, of course, no longer exists. Within a year, it had run aground on the shoals of reality on its very first whistle stop in Iraq. More than six years later, looking back on the foreign policy that emerged from Bush's self-declared Global War on Terror, it's clear that no president has ever failed on his own terms on such a scale or quite so comprehensively.
Here, then, is a brief report card on Bush's Global War on Terror:
High-Value Targets
1. Osama bin Laden and al-Qaeda: The Global War on Terror started here. Osama bin Laden was to be brought in "dead or alive" – until, in December 2001, he escaped from a partial U.S. encirclement in the mountainous Tora Bora region of Afghanistan (and many of the U.S. troops chasing him were soon enough dispatched Iraqwards). Seven years later, bin Laden remains free, as does his second-in-command Ayman al-Zawahiri, probably in the mountainous Pakistani tribal areas near the Afghan border. Al-Qaeda has been reconstituted there and is believed to be stronger than ever. An allied organization that didn't exist in 2001, al-Qaeda in Mesopotamia, was later declared by President Bush to be the "central front in the war on terror," while al-Qaeda branches and wannabe groups have proliferated elsewhere.
Result: Terror promoted.
Grade: F
2. The Taliban and Afghanistan: The Taliban was officially defeated in November 2001 with an "invasion" that combined native troops, U.S. special operations forces, CIA agents, and U.S. air power. The Afghan capital, Kabul, was "liberated" and, not long after, a "democratic" government installed (filled, in part, with a familiar cast of warlords, human rights violators, drug lords, and the like). Seven years later, according to an upcoming National Intelligence Estimate, Afghanistan is on a "downward spiral"; the drug trade flourishes as never before; the government of President Hamid Karzai is notoriously corrupt, deeply despised, and incapable of exercising control much beyond the capital; American and NATO troops, thanks largely to a reliance upon air power and soaring civilian deaths, are increasingly unpopular; the Taliban is resurgent and has established a shadow government across much of the south, while its guerrillas are embedded at the gates of Kabul. American and NATO forces promoted a "surge" strategy in 2007 that failed and are now calling for more of the same. Reconstruction never happened.
Result: Losing war.
Grade: F
3. Pakistan: At the time of the invasion of Afghanistan, the Bush administration threw its support behind Gen. Pervez Musharraf, the military dictator of relatively stable, nuclear-armed Pakistan. In the ensuing years, the U.S. transferred at least $10 billion, mainly to the general's military associates, to fight the Global War on Terror. (Most of the money went elsewhere). Seven years later, Musharraf has fallen ingloriously, while the country has reportedly turned strongly anti-American – only 19 percent of Pakistanis in a recent BBC poll had a negative view of al-Qaeda – is on the verge of a financial meltdown, and has been strikingly destabilized, with its tribal regions at least partially in the hands of a Pakistani version of the Taliban as well as al-Qaeda and foreign jihadis. That region is also now a relatively safe haven for the Afghan Taliban. American planes and drones attack in these areas ever more regularly, causing civilian casualties and more anti-Americanism, as the U.S. edges toward its third real war in the region.
Result: Extremism promoted, destabilization in progress.
Grade: F
4. Iraq: In March 2003, with a shock-and-awe air campaign and 130,000 troops, the Bush administration launched its long-desired invasion of Saddam Hussein's Iraq, officially in search of (nonexistent) weapons of mass destruction. Baghdad fell to American troops in April and Bush declared "major combat operations … ended" from the deck of a U.S. aircraft carrier against a "Mission Accomplished" banner on May 1. Within four months, according to administration projections, there were to be only 30,000 to 40,000 American troops left in the country, stationed at bases outside Iraq's cities, in a peaceful (occupied) land with a "democratic," non-sectarian, pro-American government in formation. In the intervening five-plus years, perhaps one million Iraqis died, up to five million went into internal or external exile, a fierce insurgency blew up, an even fiercer sectarian war took place, more than 4,000 Americans died, hundreds of billions of American taxpayer dollars were spent on a war that led to chaos and on "reconstruction" that reconstructed nothing. There are still close to 150,000 American troops in the country and American military leaders are cautioning against withdrawing many more of them any time soon. Filled with killing fields and barely hanging together, Iraq is – despite recently lowered levels of violence – still among the more dangerous environments on the planet, while a largely Shi'ite government in Baghdad has grown ever closer to Shi'ite Iran. Thanks to the president's "surge strategy" of 2007, this state of affairs is often described here as a "success."
Result: Mission unaccomplished.
Grade: F
5. Iran: In his January 2002 State of the Union address, Bush dubbed Iran part of an "axis of evil" (along with Iraq and North Korea), attaching a shock-and-awe bull's-eye to that nation ruled by Islamic fundamentalists. (A neocon quip of that time was: "Everyone wants to go to Baghdad. Real men want to go to Tehran.") In later years, Bush warned repeatedly that the U.S. would not allow Iran to move toward the possession of a nuclear weapons program and his administration would indeed take numerous steps, ranging from sanctions to the funding of covert actions, to destabilize the country's ruling regime. More than six years after his "axis of evil" speech, and endless administration threats and bluster later, Iran is regionally resurgent, the most powerful foreign influence in Shiite Iraq, and continuing on a path toward that nuclear power program which, it claims, is purely peaceful, but could, of course, prove otherwise.
Result: Strengthened Iran.
Grade: F
Unlawful Enemy Combatants
6. Lebanon: Vowing to encourage a "democratic," pro-western Lebanon and crush the Shi'ite Hezbollah movement, which it categorized not only as a tool of Iran but as a terrorist organization, the administration green-lighted Israel's disastrous air assault and invasion in the summer of 2006. From that destructive war, Hezbollah emerged triumphant in its southern domain and strengthened in Lebanese national politics. Today, Lebanon is once again close to a low-level civil war and the influence of Syria, essentially the unmentioned fourth member of the president's "axis of evil," is again on the rise.
Result: Hezbollah ascendant.
Grade: F
7. Gaza: As part of the president's "freedom agenda," the administration promoted Palestinian elections on the West Bank and in the Gaza Strip meant to fend off the rising strength of the Hamas movement, which it considered a terrorist organization, and promote the power of Fatah's Mahmoud Abbas. Hamas, however, won the election. The U.S. promptly refused to accept the results and, with Israel, tried to strangle Hamas in its Gaza stronghold. Hamas today remains entrenched in Gaza, while Abbas is a weakened figure.
Result: Hamas ascendant.
Grade: F
8. Somalia: In 2006, using U.S. trained and funded Ethiopian troops, the Bush administration intervened by proxy in a Somali civil war to oust a relatively moderate Islamist militia on the verge of unifying that desperate country for the first time in a long while. Two years later, the situation has only deteriorated further: the capital Mogadishu is in chaos, militant Islamists have retaken much of the south, those Ethiopian troops are preparing to withdraw, and the Bush-backed government to fall. At least 10,000 Somalis have died, and more than a third of the population, a jump of 77 percent, needs aid just to survive.
Result: Catastrophe.
Grade: F
9. Georgia: Promoting Georgian democracy – and an oil pipeline running through its territory that brought Central Asian energy to Europe while avoiding Russia – the administration armed, trained, and advised the Georgian military, backed the country for NATO membership, and looked the other way as its leader launched an invasion of a breakaway region (where Russian troops were stationed). Support for Georgia was part of a long-term Bush administration campaign to rollback Russian influence in its "near abroad," especially in Central Asia (where results would, in the end, prove hardly more promising). The Russian military promptly crushed and then demolished the Georgian military, brought the future usefulness of the oil pipeline into question, and sidelined NATO membership for the foreseeable future. In response, the Bush administration could do nothing at all.
Result: Humiliating defeat.
Grade: F
Axis of Evil Extra Credit Target
10. North Korea: Calling North Korean dictator Kim Jong-Il variously a "dwarf," a "pygmy," and simply "evil," and his regime "the world's most dangerous," Bush targeted it in his "axis of evil" speech. As an invasion of Iraq loomed, Secretary of Defense Donald Rumsfeld made clear that the U.S. was willing to fight and win wars "on two fronts." The administration turned its back on modestly successful, Clinton-era two-party negotiations that froze North Korea's plutonium-processing program, began overt – and possibly covert – campaigns to undermine the regime, and regularly threatened it over its nuclear weapons program. The invasion of Iraq evidently led North Korean dictator Kim Jong-Il to the obvious shock-and-aweable conclusion and he promptly upped the pace of that program. In 2006, the country tested its first nuclear weapon and became a nuclear power.
Result: Nuclear proliferation encouraged.
Grade: F
Collateral Damage
11. Global Public Opinion: In the 2003 National Security Strategy of the United States was this infamous line: "Our strength as a nation-state will continue to be challenged by those who employ a strategy of the weak using international fora, judicial processes and terrorism." In other words, the UN, the International Criminal Court, and al-Qaeda were all thrown into the same despised category, along with, implicitly, international public opinion. Who needed any of them? The result? With the help of its torture policies and its prison camp at Guantanamo for public relations, the Bush administration achieved wonders. Never has global opinion of the U.S. been lower (or anti-Americanism more rampant) than in these years – and when the administration needed allies, they were hard to find (or expensive to buy).
Result: Public diplomacy in the tank.
Grade: F
12. The American Taxpayer: The Bush administration estimated that the war in Iraq might cost the U.S. $50-60 billion, the war in Afghanistan far less. By now, those wars have officially cost more than $800 billion, close to $200 billion in the last year (at an estimated $3.5 billion a week). Their real long-term costs are almost incalculable, though they will certainly reach into the trillions. The full price tag of the Global War on Terror, including the costs of extraordinary renditions, as well as the building and maintaining of offshore prisons in Iraq, Afghanistan, Cuba, and elsewhere, is unknown, but historians looking back will undoubtedly conclude that the squandering of such sums helped push the U.S. toward financial meltdown.
Result: Priceless.
Grade: F
Evaluation
If you want a final taste of pathos – to deal with the disasters it created, the Bush administration has finally turned to the most un-Global-War-on-Terror-like diplomatic maneuvers. It rushed an envoy to North Korea to save a disintegrating nuclear deal (while agreeing to remove that country from the State Department's list of state sponsors of terror), is preparing the way for possible negotiations with parts of both the Afghan and Pakistani Taliban (call it "reconciliation"), and is evidently considering setting up a "U.S. Interest Section" in Tehran soon after the election.
In these last years, the Bush administration's deepest fundamentalist faith – its cultish belief in the efficacy of military force above all else – has proven an empty vessel. With its "military strengths beyond challenge" all-too-effectively challenged, Bush's second-term officials are finally returning to some of the most boringly traditional methods of diplomacy and negotiation – under far more extreme circumstances and from a far weaker position – while their former neocon supporters scream bloody murder from right-wing think tanks in Washington and the editorial pages of the Wall Street Journal. "Having bent the knee to North Korea," former UN ambassador John Bolton wrote recently in that paper, "Secretary [of State] Rice appears primed to do the same with Iran, despite that regime's egregious and extensive involvement in terrorism and the acceleration of its nuclear program."
And they do have a point. This administration does now seem to be on bended knee to the world.
As with Pandora's Box, however, what the Bush administration unleashed cannot simply be taken back. A new administration will not only inherit an arc of instability that is truly aflame, but the paradigm, still remarkably unexamined, of a Global War on Terror. Now, there is a disaster-in-the-making for you.
[To listen to a podcast in which Tom Engelhardt discusses this article, click here.]
Copyright 2008 Tom Engelhardt
by Tom Engelhardt
TomDispatch
http://www.antiwar.com:80/engelhardt/?articleid=13624
On the brief occasions when the president now appears in the Rose Garden to "comfort" or "reassure" a shock-and-awed nation, you can almost hear those legions of ducks quacking lamely in the background. Once upon a time, George W. Bush, along with his top officials and advisers, hoped to preside over a global Pax Americana and a domestic Pax Republicana – a legacy for the generations. More recently, their highest hope seems to have been to slip out of town in January before the you-know-what hits the fan. No such luck.
Of course, what they feared most was that the you-know-what would hit in Iraq, and so put their efforts into sweeping that disaster out of sight. Once again, however, as in September 2001 and August 2005, they were caught predictably flatfooted by a domestic disaster. In this case, they were ambushed by an insurgent stock market heading into chaos, killer squads of credit default swaps, and a hurricane of financial collapse.
At the moment, only 7 percent of Americans believe the country is "going in the right direction," Bush's job-approval ratings have dropped into the low 20s with no bottom in sight, and North Dakota is "in play" in the presidential election. Think of that as the equivalent of a report card on Bush's economic policies. In other words, the Yale legacy student with the C average has been branded for life with a resounding domestic "F" for failure. (His singular domestic triumph may prove to be paving the way for the first African American president.)
But there's another report card that's not in. Despite a media focus on Bush's wars in Iraq and Afghanistan, the record of his Global War on Terror (and the Bush Doctrine that once went with it) has yet to be fully assessed. This is surprising, since administration actions in waging that war in what neoconservatives used to call "the arc of instability" – a swath of territory running from North Africa to the Chinese border – add up to a record of failure unprecedented in American history.
On June 1, 2002, George W. Bush gave the commencement address at the U.S. Military Academy at West Point. The Afghan War was then being hailed as a triumph and the invasion of Iraq just beginning to loom on the horizon. That day, after insisting the U.S. had "no empire to extend or utopia to establish," the President laid out a vision of how the U.S. was to operate globally, facing "a threat with no precedent" – al-Qaeda-style terrorism in a world of weapons of mass destruction.
After indicating that "terror cells" were to be targeted in up to 60 countries, he offered a breathtakingly radical basis for the pursuit of American interests:
"We cannot put our faith in the word of tyrants, who solemnly sign non-proliferation treaties, and then systemically break them. If we wait for threats to fully materialize, we will have waited too long… [T]he war on terror will not be won on the defensive. We must take the battle to the enemy, disrupt his plans, and confront the worst threats before they emerge. In the world we have entered, the only path to safety is the path of action. And this nation will act… Our security will require transforming the military you will lead – a military that must be ready to strike at a moment's notice in any dark corner of the world."
This would later be known as Vice President Dick Cheney's "one percent doctrine" – even a 1 percent chance of an attack on the U.S., especially involving weapons of mass destruction, must be dealt with militarily as if it were a certainty. It may have been the rashest formula for "preventive" or "aggressive" war offered in the modern era.
The president and his neocon backers were then riding high. Some were even talking up the United States as a "new Rome," greater even than imperial Britain. For them, global control had a single prerequisite: the possession of overwhelming military force. With American military power unimpeachably #1, global domination followed logically. As Bush put it that day, in a statement unique in the annals of our history: "America has, and intends to keep, military strengths beyond challenge – thereby making the destabilizing arms races of other eras pointless, and limiting rivalries to trade and other pursuits of peace."
In other words, a planet of Great Powers was all over and it was time for the rest of the world to get used to it. Like the wimps they were, other nations could "trade" and pursue "peace." For its pure folly, not to say its misunderstanding of the nature of power on our planet, it remains a statement that should still take anyone's breath away.
The Bush Doctrine, of course, no longer exists. Within a year, it had run aground on the shoals of reality on its very first whistle stop in Iraq. More than six years later, looking back on the foreign policy that emerged from Bush's self-declared Global War on Terror, it's clear that no president has ever failed on his own terms on such a scale or quite so comprehensively.
Here, then, is a brief report card on Bush's Global War on Terror:
High-Value Targets
1. Osama bin Laden and al-Qaeda: The Global War on Terror started here. Osama bin Laden was to be brought in "dead or alive" – until, in December 2001, he escaped from a partial U.S. encirclement in the mountainous Tora Bora region of Afghanistan (and many of the U.S. troops chasing him were soon enough dispatched Iraqwards). Seven years later, bin Laden remains free, as does his second-in-command Ayman al-Zawahiri, probably in the mountainous Pakistani tribal areas near the Afghan border. Al-Qaeda has been reconstituted there and is believed to be stronger than ever. An allied organization that didn't exist in 2001, al-Qaeda in Mesopotamia, was later declared by President Bush to be the "central front in the war on terror," while al-Qaeda branches and wannabe groups have proliferated elsewhere.
Result: Terror promoted.
Grade: F
2. The Taliban and Afghanistan: The Taliban was officially defeated in November 2001 with an "invasion" that combined native troops, U.S. special operations forces, CIA agents, and U.S. air power. The Afghan capital, Kabul, was "liberated" and, not long after, a "democratic" government installed (filled, in part, with a familiar cast of warlords, human rights violators, drug lords, and the like). Seven years later, according to an upcoming National Intelligence Estimate, Afghanistan is on a "downward spiral"; the drug trade flourishes as never before; the government of President Hamid Karzai is notoriously corrupt, deeply despised, and incapable of exercising control much beyond the capital; American and NATO troops, thanks largely to a reliance upon air power and soaring civilian deaths, are increasingly unpopular; the Taliban is resurgent and has established a shadow government across much of the south, while its guerrillas are embedded at the gates of Kabul. American and NATO forces promoted a "surge" strategy in 2007 that failed and are now calling for more of the same. Reconstruction never happened.
Result: Losing war.
Grade: F
3. Pakistan: At the time of the invasion of Afghanistan, the Bush administration threw its support behind Gen. Pervez Musharraf, the military dictator of relatively stable, nuclear-armed Pakistan. In the ensuing years, the U.S. transferred at least $10 billion, mainly to the general's military associates, to fight the Global War on Terror. (Most of the money went elsewhere). Seven years later, Musharraf has fallen ingloriously, while the country has reportedly turned strongly anti-American – only 19 percent of Pakistanis in a recent BBC poll had a negative view of al-Qaeda – is on the verge of a financial meltdown, and has been strikingly destabilized, with its tribal regions at least partially in the hands of a Pakistani version of the Taliban as well as al-Qaeda and foreign jihadis. That region is also now a relatively safe haven for the Afghan Taliban. American planes and drones attack in these areas ever more regularly, causing civilian casualties and more anti-Americanism, as the U.S. edges toward its third real war in the region.
Result: Extremism promoted, destabilization in progress.
Grade: F
4. Iraq: In March 2003, with a shock-and-awe air campaign and 130,000 troops, the Bush administration launched its long-desired invasion of Saddam Hussein's Iraq, officially in search of (nonexistent) weapons of mass destruction. Baghdad fell to American troops in April and Bush declared "major combat operations … ended" from the deck of a U.S. aircraft carrier against a "Mission Accomplished" banner on May 1. Within four months, according to administration projections, there were to be only 30,000 to 40,000 American troops left in the country, stationed at bases outside Iraq's cities, in a peaceful (occupied) land with a "democratic," non-sectarian, pro-American government in formation. In the intervening five-plus years, perhaps one million Iraqis died, up to five million went into internal or external exile, a fierce insurgency blew up, an even fiercer sectarian war took place, more than 4,000 Americans died, hundreds of billions of American taxpayer dollars were spent on a war that led to chaos and on "reconstruction" that reconstructed nothing. There are still close to 150,000 American troops in the country and American military leaders are cautioning against withdrawing many more of them any time soon. Filled with killing fields and barely hanging together, Iraq is – despite recently lowered levels of violence – still among the more dangerous environments on the planet, while a largely Shi'ite government in Baghdad has grown ever closer to Shi'ite Iran. Thanks to the president's "surge strategy" of 2007, this state of affairs is often described here as a "success."
Result: Mission unaccomplished.
Grade: F
5. Iran: In his January 2002 State of the Union address, Bush dubbed Iran part of an "axis of evil" (along with Iraq and North Korea), attaching a shock-and-awe bull's-eye to that nation ruled by Islamic fundamentalists. (A neocon quip of that time was: "Everyone wants to go to Baghdad. Real men want to go to Tehran.") In later years, Bush warned repeatedly that the U.S. would not allow Iran to move toward the possession of a nuclear weapons program and his administration would indeed take numerous steps, ranging from sanctions to the funding of covert actions, to destabilize the country's ruling regime. More than six years after his "axis of evil" speech, and endless administration threats and bluster later, Iran is regionally resurgent, the most powerful foreign influence in Shiite Iraq, and continuing on a path toward that nuclear power program which, it claims, is purely peaceful, but could, of course, prove otherwise.
Result: Strengthened Iran.
Grade: F
Unlawful Enemy Combatants
6. Lebanon: Vowing to encourage a "democratic," pro-western Lebanon and crush the Shi'ite Hezbollah movement, which it categorized not only as a tool of Iran but as a terrorist organization, the administration green-lighted Israel's disastrous air assault and invasion in the summer of 2006. From that destructive war, Hezbollah emerged triumphant in its southern domain and strengthened in Lebanese national politics. Today, Lebanon is once again close to a low-level civil war and the influence of Syria, essentially the unmentioned fourth member of the president's "axis of evil," is again on the rise.
Result: Hezbollah ascendant.
Grade: F
7. Gaza: As part of the president's "freedom agenda," the administration promoted Palestinian elections on the West Bank and in the Gaza Strip meant to fend off the rising strength of the Hamas movement, which it considered a terrorist organization, and promote the power of Fatah's Mahmoud Abbas. Hamas, however, won the election. The U.S. promptly refused to accept the results and, with Israel, tried to strangle Hamas in its Gaza stronghold. Hamas today remains entrenched in Gaza, while Abbas is a weakened figure.
Result: Hamas ascendant.
Grade: F
8. Somalia: In 2006, using U.S. trained and funded Ethiopian troops, the Bush administration intervened by proxy in a Somali civil war to oust a relatively moderate Islamist militia on the verge of unifying that desperate country for the first time in a long while. Two years later, the situation has only deteriorated further: the capital Mogadishu is in chaos, militant Islamists have retaken much of the south, those Ethiopian troops are preparing to withdraw, and the Bush-backed government to fall. At least 10,000 Somalis have died, and more than a third of the population, a jump of 77 percent, needs aid just to survive.
Result: Catastrophe.
Grade: F
9. Georgia: Promoting Georgian democracy – and an oil pipeline running through its territory that brought Central Asian energy to Europe while avoiding Russia – the administration armed, trained, and advised the Georgian military, backed the country for NATO membership, and looked the other way as its leader launched an invasion of a breakaway region (where Russian troops were stationed). Support for Georgia was part of a long-term Bush administration campaign to rollback Russian influence in its "near abroad," especially in Central Asia (where results would, in the end, prove hardly more promising). The Russian military promptly crushed and then demolished the Georgian military, brought the future usefulness of the oil pipeline into question, and sidelined NATO membership for the foreseeable future. In response, the Bush administration could do nothing at all.
Result: Humiliating defeat.
Grade: F
Axis of Evil Extra Credit Target
10. North Korea: Calling North Korean dictator Kim Jong-Il variously a "dwarf," a "pygmy," and simply "evil," and his regime "the world's most dangerous," Bush targeted it in his "axis of evil" speech. As an invasion of Iraq loomed, Secretary of Defense Donald Rumsfeld made clear that the U.S. was willing to fight and win wars "on two fronts." The administration turned its back on modestly successful, Clinton-era two-party negotiations that froze North Korea's plutonium-processing program, began overt – and possibly covert – campaigns to undermine the regime, and regularly threatened it over its nuclear weapons program. The invasion of Iraq evidently led North Korean dictator Kim Jong-Il to the obvious shock-and-aweable conclusion and he promptly upped the pace of that program. In 2006, the country tested its first nuclear weapon and became a nuclear power.
Result: Nuclear proliferation encouraged.
Grade: F
Collateral Damage
11. Global Public Opinion: In the 2003 National Security Strategy of the United States was this infamous line: "Our strength as a nation-state will continue to be challenged by those who employ a strategy of the weak using international fora, judicial processes and terrorism." In other words, the UN, the International Criminal Court, and al-Qaeda were all thrown into the same despised category, along with, implicitly, international public opinion. Who needed any of them? The result? With the help of its torture policies and its prison camp at Guantanamo for public relations, the Bush administration achieved wonders. Never has global opinion of the U.S. been lower (or anti-Americanism more rampant) than in these years – and when the administration needed allies, they were hard to find (or expensive to buy).
Result: Public diplomacy in the tank.
Grade: F
12. The American Taxpayer: The Bush administration estimated that the war in Iraq might cost the U.S. $50-60 billion, the war in Afghanistan far less. By now, those wars have officially cost more than $800 billion, close to $200 billion in the last year (at an estimated $3.5 billion a week). Their real long-term costs are almost incalculable, though they will certainly reach into the trillions. The full price tag of the Global War on Terror, including the costs of extraordinary renditions, as well as the building and maintaining of offshore prisons in Iraq, Afghanistan, Cuba, and elsewhere, is unknown, but historians looking back will undoubtedly conclude that the squandering of such sums helped push the U.S. toward financial meltdown.
Result: Priceless.
Grade: F
Evaluation
If you want a final taste of pathos – to deal with the disasters it created, the Bush administration has finally turned to the most un-Global-War-on-Terror-like diplomatic maneuvers. It rushed an envoy to North Korea to save a disintegrating nuclear deal (while agreeing to remove that country from the State Department's list of state sponsors of terror), is preparing the way for possible negotiations with parts of both the Afghan and Pakistani Taliban (call it "reconciliation"), and is evidently considering setting up a "U.S. Interest Section" in Tehran soon after the election.
In these last years, the Bush administration's deepest fundamentalist faith – its cultish belief in the efficacy of military force above all else – has proven an empty vessel. With its "military strengths beyond challenge" all-too-effectively challenged, Bush's second-term officials are finally returning to some of the most boringly traditional methods of diplomacy and negotiation – under far more extreme circumstances and from a far weaker position – while their former neocon supporters scream bloody murder from right-wing think tanks in Washington and the editorial pages of the Wall Street Journal. "Having bent the knee to North Korea," former UN ambassador John Bolton wrote recently in that paper, "Secretary [of State] Rice appears primed to do the same with Iran, despite that regime's egregious and extensive involvement in terrorism and the acceleration of its nuclear program."
And they do have a point. This administration does now seem to be on bended knee to the world.
As with Pandora's Box, however, what the Bush administration unleashed cannot simply be taken back. A new administration will not only inherit an arc of instability that is truly aflame, but the paradigm, still remarkably unexamined, of a Global War on Terror. Now, there is a disaster-in-the-making for you.
[To listen to a podcast in which Tom Engelhardt discusses this article, click here.]
Copyright 2008 Tom Engelhardt
Israel's Not-So-Future Perfect
Leon Hadar writes thoughtfully, as ever, in the Fall 2008 World Policy Journal.
http://www.mitpressjournals.org/doi/abs/10.1162/wopj.2008.25.3.85
Israel's Not-So-Future Perfect
Leon Hadar
Back 17 years ago, in the winter of 1991–92, when I was contemplating Israel's future in World Policy Journal, it was supposed to be the dawn of a new age—and I was there. We were about to enter the roaring globalization years of the 1990s and to be downloaded into a borderless world in which the archaic nation-state would vanish.
Arabs and Jews, Muslims and Hindus, would cease fighting each other over holy temples and olive trees and emerge in our new and brave world as the prime agents of global commerce, competing over market shares and investment flows, as Tom Friedman's McDonalds Law ("no two countries that had McDonalds had gone to war with each other") had forecasted. The "new cosmopolitans" and "global hybrids" would be the winners in this nascent universe where the prime determinant for business, political, and cultural
success would be a multicultural sense of self. Pass that Cuban-Chinese falafel, please.
Then came the Internet. Suddenly, I was an Israeli-born American "content provider" covering the Middle East, feeling somewhat ambivalent about the new global reality in which the region I had been studying all my life was rapidly becoming so very passé. The Middle East had started to feel like old news, Desert Storm was gradually turning into a distant memory, and peace seemed to be dawning over the Holy Land. Those young and extra-cool Israelis and Palestinians just want to surf the net, watch MTV, and make a lot of bucks. Even Yasir Arafat has a website. Don't you get it?
So when the editors of World Policy Journal asked me to write about the "situation" in Israel in 1991, I jumped at the opportunity to celebrate the way the land of my birth—just like me—was joining the global economy. Against the backdrop of the Madrid Middle East Peace Conference, I felt very bullish about the end of the Cold War creating conditions for peace between Arabsand Jews. The Palestine Liberation Organization (PLO) had lost its backing from the moribund Soviet Union, and Israel no longer needed to play the role of America's anti-Soviet "strategic asset" in the Middle East. The conflict was being de-internationalized and localized—with both Arabs and Israelis recognizing that they could not rely on outside powers to help them perpetuate an anachronistic tribal conflict. The only way they would emerge as successful players in the new global economy was by making peace and investing their resources in developing their economies, linking themselves to the new Information Age.
For Israel, with its educated population and world-renowned scientific centers (supplemented by a wave of highly skilled Jewish immigrants from the Soviet Union), peace and integration into the global economy would allow the Jewish state to become "normal": to reform its then-socialized economy along free-market lines and to transform itself from a Cuba-like military outpost of the United States into a technological and financial center, while inviting the Palestinians to join this futuristic journey.
Being a "normal state" has been the dream of my generation of Israelis, those who came of age in the 1960s when Beatlemania was challenging Jerusalemania. My friends and I were hoping to be relieved from the claustrophobia of being segregated in a small and militarized Jewish ghetto, hoping to be released from the suffocation of a collectivist Zionist ideology that treated with disdain the pursuit of an American-style individual path to happiness.
From that perspective, the modern, Westernized city of Tel Aviv and the Mediterranean coast of Israel represented a post-ideological spirit—unleashing a new era of political, economic, and cultural freedom. Or as the saying went, Israelis would be able to "catch America," that is, to live like an American. Indeed, in 1991 and for the rest of that swinging decade of globalization, it felt as though the dream of my generation was finally being realized. As I proposed in my article in World Policy Journal, the city of Tel Aviv, representing a political philosophy that stressed the need to make Israel a normal state, continued to assert itself as Israelis and Palestinians took the first steps towards reconciliation. But those who had hoped to catch America in Israel—by introducing a constitution, changing the relations between synagogue and state, integrating the Arab citizens into Israeli life, and most important, creating the foundations for an independent Palestinian state that would live in peace with Israel—found themselves on the defensive. They were confronted by powerful political forces that emerged in the aftermath of the Six Day War and were still very much alive.
Indeed, as I out pointed in my 1991 article, the coalition of Greater Israel (symbolized by Jerusalem and the Jewish settlements that started to pop up in the West Bank after the Six Day War) represented the new spirit of radical Zionism, led by right-wing nationalist parties that had been marginalized politically until 1967. These Jewish settlers and ultra-Orthodox militants held fast to an isolationist, unilateralist, and angry vision of a Jewish state in a never-ending confrontation with the Palestinians, the Arab world, the Muslims, and the Gentiles.
The struggle between the two value systems, Jerusalem vs. Tel Aviv, and the political forces that represented them was never really resolved, as power shifted back and forth between those favoring accommodation with the Palestinians and those fantasizing about Greater Israel. But as I had forecast in my original article, Tel Aviv seemed to be on the rise. The ensuing defeat of the Likud Party in the 1992 election of Yitzhak Rabin and the Labor Party represented a clear victory by the peace camp over the Greater Israel coalition. Rabin led the process of Israeli-Palestinian reconciliation that brought about the Oslo Accords and the peace agreement with Jordan. He enjoyed the support of young Israelis hoping to transform their country into a modern center of high-tech and business—the Singapore of the Middle East—which was exactly how another Labor party leader, Shimon Peres, described his vision of Israel when I interviewed him in 1992. Sitting on the lawn of the White House on September 13, 1993, and watching Rabin shaking hands with Arafat it seemed to me as though the Six Day War normalcy was arriving to the Holy Land.
While the first Intifadah may have demonstrated to Rabin and other members of Israel's elite the costs involved in continuing to maintain control over the territories they helped "liberate" in 1967, the demographic reality was already apparent. Arab Palestinians, with their higher birth rate, would outnumber Jews in Israel by the first decade of the twenty-first century; Israel would have to make a choice between remaining a democratic state with a Jewish majority or becoming a bi-national state. "We tended to believe that
the whole world is against us, that we have to live alone in a new ghetto of ours," Rabin said five months before the Oslo accords were signed. But now it was "an entirely different world."
Only two years later, as he was leaving a mass rally in the center of Tel Aviv in support of the Oslo process, Rabin was assassinated by Yigal Amir, a right-wing Orthodox Jewish extremist living in a West Bank settlement. Amir and the Greater Israel camp had won. The Oslo process came gradually to an end, the Palestinian-Israeli talks collapsed in 2000, the second Intifadah started, and post-9/11, the Israeli and American narratives that combined victimology with arrogance seemed to have tragically merged.
In a way, the second Intifadah and 9/11 were part of a powerful challenge to the globalization of the 1990s, as old and new political animosities started rearing their ugly heads. wo countries with McDonalds—the United States and Serbia—went to war with each other. India embraced the market economy, but that did not deter New Delhi from going nuclear. The Israelis and Palestinians made it clear they were willing to continue fighting over holy temples in Jerusalem and olive trees in the West Bank, even as they continued going online. Trade and investment in the global economy does not seem to have deterred any nation from launching costly military campaigns. The suggestion that those who make money do not make wars—that a capitalist peace would envelope all—proved to be a grand illusion.
In a marriage made in hell, the post-9/11 era created conditions that enabled the ideologues and planners of the U.S. hegemon to wed those Israelis whose vision assumed that only a Middle East dominated by American power would secure the survival of a militarized Jewish ghetto. Hence the notion of "the whole world is against us" ended up resonating among the neoconservatives and Christian Zionists who hijacked U.S. foreign policy in the aftermath of 9/11 and plunged the Middle East into war in Iraq. But while Americans are bound to leave Iraq one day, Israelis will probably be stuck in the territories "liberated" in 1967 for many years to come. And the dream of a normal state could be buried forever.
In some respects, Israel's ties with the United States are starting to resemble the relationship between the old political and economic elites and the Jewish community in Europe during the nineteenth century. As Hannah Arendt observed in her classic study of European anti-Semitism, it was the erosion in the power of those elites—and their growing inability to protect the Jews of Europe—that sealed the latter's fate. Then, new and angry social classes and political players turned their frustration against the group they associated with the hated status quo—a group that was also very vulnerable. Today, a similar scenario could take place on an international scale, when a weaker and less confident United States would be under pressure at home and abroad to reduce its global commitments. This would leave Israel, the weakest link, vulnerable to attacks not only from Arab and Muslim nations, but from other new anti-status quo powers.
88 WORLD POLICY JOURNAL • FALL 2008
Leon Hadar is a research fellow in foreign policy studies at the Cato Institute and the former United
Nations bureau chief for the Jerusalem Post. He is currently Washington correspondent for the Singapore
Business Times.
http://www.mitpressjournals.org/doi/abs/10.1162/wopj.2008.25.3.85
Israel's Not-So-Future Perfect
Leon Hadar
Back 17 years ago, in the winter of 1991–92, when I was contemplating Israel's future in World Policy Journal, it was supposed to be the dawn of a new age—and I was there. We were about to enter the roaring globalization years of the 1990s and to be downloaded into a borderless world in which the archaic nation-state would vanish.
Arabs and Jews, Muslims and Hindus, would cease fighting each other over holy temples and olive trees and emerge in our new and brave world as the prime agents of global commerce, competing over market shares and investment flows, as Tom Friedman's McDonalds Law ("no two countries that had McDonalds had gone to war with each other") had forecasted. The "new cosmopolitans" and "global hybrids" would be the winners in this nascent universe where the prime determinant for business, political, and cultural
success would be a multicultural sense of self. Pass that Cuban-Chinese falafel, please.
Then came the Internet. Suddenly, I was an Israeli-born American "content provider" covering the Middle East, feeling somewhat ambivalent about the new global reality in which the region I had been studying all my life was rapidly becoming so very passé. The Middle East had started to feel like old news, Desert Storm was gradually turning into a distant memory, and peace seemed to be dawning over the Holy Land. Those young and extra-cool Israelis and Palestinians just want to surf the net, watch MTV, and make a lot of bucks. Even Yasir Arafat has a website. Don't you get it?
So when the editors of World Policy Journal asked me to write about the "situation" in Israel in 1991, I jumped at the opportunity to celebrate the way the land of my birth—just like me—was joining the global economy. Against the backdrop of the Madrid Middle East Peace Conference, I felt very bullish about the end of the Cold War creating conditions for peace between Arabsand Jews. The Palestine Liberation Organization (PLO) had lost its backing from the moribund Soviet Union, and Israel no longer needed to play the role of America's anti-Soviet "strategic asset" in the Middle East. The conflict was being de-internationalized and localized—with both Arabs and Israelis recognizing that they could not rely on outside powers to help them perpetuate an anachronistic tribal conflict. The only way they would emerge as successful players in the new global economy was by making peace and investing their resources in developing their economies, linking themselves to the new Information Age.
For Israel, with its educated population and world-renowned scientific centers (supplemented by a wave of highly skilled Jewish immigrants from the Soviet Union), peace and integration into the global economy would allow the Jewish state to become "normal": to reform its then-socialized economy along free-market lines and to transform itself from a Cuba-like military outpost of the United States into a technological and financial center, while inviting the Palestinians to join this futuristic journey.
Being a "normal state" has been the dream of my generation of Israelis, those who came of age in the 1960s when Beatlemania was challenging Jerusalemania. My friends and I were hoping to be relieved from the claustrophobia of being segregated in a small and militarized Jewish ghetto, hoping to be released from the suffocation of a collectivist Zionist ideology that treated with disdain the pursuit of an American-style individual path to happiness.
From that perspective, the modern, Westernized city of Tel Aviv and the Mediterranean coast of Israel represented a post-ideological spirit—unleashing a new era of political, economic, and cultural freedom. Or as the saying went, Israelis would be able to "catch America," that is, to live like an American. Indeed, in 1991 and for the rest of that swinging decade of globalization, it felt as though the dream of my generation was finally being realized. As I proposed in my article in World Policy Journal, the city of Tel Aviv, representing a political philosophy that stressed the need to make Israel a normal state, continued to assert itself as Israelis and Palestinians took the first steps towards reconciliation. But those who had hoped to catch America in Israel—by introducing a constitution, changing the relations between synagogue and state, integrating the Arab citizens into Israeli life, and most important, creating the foundations for an independent Palestinian state that would live in peace with Israel—found themselves on the defensive. They were confronted by powerful political forces that emerged in the aftermath of the Six Day War and were still very much alive.
Indeed, as I out pointed in my 1991 article, the coalition of Greater Israel (symbolized by Jerusalem and the Jewish settlements that started to pop up in the West Bank after the Six Day War) represented the new spirit of radical Zionism, led by right-wing nationalist parties that had been marginalized politically until 1967. These Jewish settlers and ultra-Orthodox militants held fast to an isolationist, unilateralist, and angry vision of a Jewish state in a never-ending confrontation with the Palestinians, the Arab world, the Muslims, and the Gentiles.
The struggle between the two value systems, Jerusalem vs. Tel Aviv, and the political forces that represented them was never really resolved, as power shifted back and forth between those favoring accommodation with the Palestinians and those fantasizing about Greater Israel. But as I had forecast in my original article, Tel Aviv seemed to be on the rise. The ensuing defeat of the Likud Party in the 1992 election of Yitzhak Rabin and the Labor Party represented a clear victory by the peace camp over the Greater Israel coalition. Rabin led the process of Israeli-Palestinian reconciliation that brought about the Oslo Accords and the peace agreement with Jordan. He enjoyed the support of young Israelis hoping to transform their country into a modern center of high-tech and business—the Singapore of the Middle East—which was exactly how another Labor party leader, Shimon Peres, described his vision of Israel when I interviewed him in 1992. Sitting on the lawn of the White House on September 13, 1993, and watching Rabin shaking hands with Arafat it seemed to me as though the Six Day War normalcy was arriving to the Holy Land.
While the first Intifadah may have demonstrated to Rabin and other members of Israel's elite the costs involved in continuing to maintain control over the territories they helped "liberate" in 1967, the demographic reality was already apparent. Arab Palestinians, with their higher birth rate, would outnumber Jews in Israel by the first decade of the twenty-first century; Israel would have to make a choice between remaining a democratic state with a Jewish majority or becoming a bi-national state. "We tended to believe that
the whole world is against us, that we have to live alone in a new ghetto of ours," Rabin said five months before the Oslo accords were signed. But now it was "an entirely different world."
Only two years later, as he was leaving a mass rally in the center of Tel Aviv in support of the Oslo process, Rabin was assassinated by Yigal Amir, a right-wing Orthodox Jewish extremist living in a West Bank settlement. Amir and the Greater Israel camp had won. The Oslo process came gradually to an end, the Palestinian-Israeli talks collapsed in 2000, the second Intifadah started, and post-9/11, the Israeli and American narratives that combined victimology with arrogance seemed to have tragically merged.
In a way, the second Intifadah and 9/11 were part of a powerful challenge to the globalization of the 1990s, as old and new political animosities started rearing their ugly heads. wo countries with McDonalds—the United States and Serbia—went to war with each other. India embraced the market economy, but that did not deter New Delhi from going nuclear. The Israelis and Palestinians made it clear they were willing to continue fighting over holy temples in Jerusalem and olive trees in the West Bank, even as they continued going online. Trade and investment in the global economy does not seem to have deterred any nation from launching costly military campaigns. The suggestion that those who make money do not make wars—that a capitalist peace would envelope all—proved to be a grand illusion.
In a marriage made in hell, the post-9/11 era created conditions that enabled the ideologues and planners of the U.S. hegemon to wed those Israelis whose vision assumed that only a Middle East dominated by American power would secure the survival of a militarized Jewish ghetto. Hence the notion of "the whole world is against us" ended up resonating among the neoconservatives and Christian Zionists who hijacked U.S. foreign policy in the aftermath of 9/11 and plunged the Middle East into war in Iraq. But while Americans are bound to leave Iraq one day, Israelis will probably be stuck in the territories "liberated" in 1967 for many years to come. And the dream of a normal state could be buried forever.
In some respects, Israel's ties with the United States are starting to resemble the relationship between the old political and economic elites and the Jewish community in Europe during the nineteenth century. As Hannah Arendt observed in her classic study of European anti-Semitism, it was the erosion in the power of those elites—and their growing inability to protect the Jews of Europe—that sealed the latter's fate. Then, new and angry social classes and political players turned their frustration against the group they associated with the hated status quo—a group that was also very vulnerable. Today, a similar scenario could take place on an international scale, when a weaker and less confident United States would be under pressure at home and abroad to reduce its global commitments. This would leave Israel, the weakest link, vulnerable to attacks not only from Arab and Muslim nations, but from other new anti-status quo powers.
88 WORLD POLICY JOURNAL • FALL 2008
Leon Hadar is a research fellow in foreign policy studies at the Cato Institute and the former United
Nations bureau chief for the Jerusalem Post. He is currently Washington correspondent for the Singapore
Business Times.
Tuesday, October 21, 2008
Russia, Iran, Qatar discuss OPEC-style gas cartel
NEWSWEEK
Russia, Iran, Qatar discuss OPEC-style gas cartel
Natural gas giants Russia, Iran and Qatar make moves toward forming OPEC-style cartel
Mike Eckel Adam Schreck Constant Brand
AP -- Russia, Iran and Qatar took their first serious steps toward forming an OPEC-style cartel for natural gas on Tuesday, a prospect that has unnerved energy-importing nations in Europe and the United States.
The three countries together account for 60 percent of the world's gas reserves, and Russia and Iran have both been accused of using their hold on energy supplies to bully neighboring countries. The European Union, which is heavily dependent on Russian gas, criticized the proposal, saying "energy supplies have to be sold in a free market."
Russia, which most recently came into confrontation with the West over its five-day war with Georgia in August, has been accused of using its hold on energy supplies to exert influence on neighboring nations, particularly Ukraine. Its energy grip adds to its leverage in disputes over other issues, too, such as the United States' missile defense plans.
For its part, Iran, in its standoff with world powers over its nuclear program, has threatened to choke off oil shipments through the Persian Gulf if it is attacked.
A gas cartel to determine supply and influence prices could extend both countries' reach in energy and politics, particularly if oil prices bounce back to the highs seen earlier this year — prompting politicians, businesses and consumers to look toward cleaner burning natural gas and other alternative fuels.
The gathering in Tehran, which included the chief excutive of Russia's state-controlled energy company Gazprom and the oil ministers of the other two nations, appeared to be the most significant step toward the formation of such a group since Iran's supreme leader, Ayatollah Ali Khamenei, first raised the idea in January 2007.
"Big decisions were made," said Iranian Oil Minister Gholam Hossein Nozari. The three countries will "seriously pursue the formation of an organization of gas-exporting countries," he added.
Two more meetings, in Qatar's capital and in Moscow, are needed to reach a final deal, said his Qatari counterpart, Abdulla Bin Hamad al-Attiya, according to the Iranian Oil Ministry's Web site. No timeframe was given.
"We are consolidating the largest gas reserves in the world, the general strategic interests and, what is very important, the high potential for cooperation on three-party projects," Miller said in a statement from Gazprom. What he called the "big gas troika" would meet three or four times a year.
In a separate statement on the Iranian Oil Ministry Web site, Miller was quoted as saying that the group would "review the market and supply and demand" and try to act in both the "interest of all gas-exporting countries as well as consumers."
The prospect of a gas cartel has raised concern in the United States and around the 27-nation European Union, which depends on Russia for nearly half of its natural gas imports. Moscow, which controls many of the European pipelines delivering gas from Russia and Central Asia, already has a tight hold on supplies.
The European Union's executive office, the European Commission, said Tuesday that it would oppose the creation of a cartel.
"The European Commission feels that energy supplies have to be sold in a free market," said EU spokesman Ferran Tarradellas Espuny.
Experts say a natural gas cartel that resembles the Organization of Petroleum Exporting Countries group would not have the same influence on prices as OPEC has on oil.
But it could still have benefits for gas-producing countries. Such a body would allow its members to potentially wield more influence on world prices, particularly in Europe and Asia, than they can individually.
"To try to maneuver the supply ... makes perfect sense," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com. "Just because it doesn't have the clout of oil, it's still in their best interest to deliver natural gas where it needs to go and manage supply in order to help manage the price."
Plans for a gas cartel are also anticipating a future in which global crude supplies will become even more scarce and expensive.
Liquefied natural gas — a rapidly growing segment of the market — could be traded as a commodity similar to oil at some point in the future, and the move by Russia, Iran and Qatar for closer cooperation appears to anticipate that, said Konstantin Batunin, an analyst with Moscow's Alfa Bank.
"My take is that it is just a commitment to create something in the future, it's just a first step," he said.
Russia, Iran, Qatar discuss OPEC-style gas cartel
Natural gas giants Russia, Iran and Qatar make moves toward forming OPEC-style cartel
Mike Eckel Adam Schreck Constant Brand
AP -- Russia, Iran and Qatar took their first serious steps toward forming an OPEC-style cartel for natural gas on Tuesday, a prospect that has unnerved energy-importing nations in Europe and the United States.
The three countries together account for 60 percent of the world's gas reserves, and Russia and Iran have both been accused of using their hold on energy supplies to bully neighboring countries. The European Union, which is heavily dependent on Russian gas, criticized the proposal, saying "energy supplies have to be sold in a free market."
Russia, which most recently came into confrontation with the West over its five-day war with Georgia in August, has been accused of using its hold on energy supplies to exert influence on neighboring nations, particularly Ukraine. Its energy grip adds to its leverage in disputes over other issues, too, such as the United States' missile defense plans.
For its part, Iran, in its standoff with world powers over its nuclear program, has threatened to choke off oil shipments through the Persian Gulf if it is attacked.
A gas cartel to determine supply and influence prices could extend both countries' reach in energy and politics, particularly if oil prices bounce back to the highs seen earlier this year — prompting politicians, businesses and consumers to look toward cleaner burning natural gas and other alternative fuels.
The gathering in Tehran, which included the chief excutive of Russia's state-controlled energy company Gazprom and the oil ministers of the other two nations, appeared to be the most significant step toward the formation of such a group since Iran's supreme leader, Ayatollah Ali Khamenei, first raised the idea in January 2007.
"Big decisions were made," said Iranian Oil Minister Gholam Hossein Nozari. The three countries will "seriously pursue the formation of an organization of gas-exporting countries," he added.
Two more meetings, in Qatar's capital and in Moscow, are needed to reach a final deal, said his Qatari counterpart, Abdulla Bin Hamad al-Attiya, according to the Iranian Oil Ministry's Web site. No timeframe was given.
"We are consolidating the largest gas reserves in the world, the general strategic interests and, what is very important, the high potential for cooperation on three-party projects," Miller said in a statement from Gazprom. What he called the "big gas troika" would meet three or four times a year.
In a separate statement on the Iranian Oil Ministry Web site, Miller was quoted as saying that the group would "review the market and supply and demand" and try to act in both the "interest of all gas-exporting countries as well as consumers."
The prospect of a gas cartel has raised concern in the United States and around the 27-nation European Union, which depends on Russia for nearly half of its natural gas imports. Moscow, which controls many of the European pipelines delivering gas from Russia and Central Asia, already has a tight hold on supplies.
The European Union's executive office, the European Commission, said Tuesday that it would oppose the creation of a cartel.
"The European Commission feels that energy supplies have to be sold in a free market," said EU spokesman Ferran Tarradellas Espuny.
Experts say a natural gas cartel that resembles the Organization of Petroleum Exporting Countries group would not have the same influence on prices as OPEC has on oil.
But it could still have benefits for gas-producing countries. Such a body would allow its members to potentially wield more influence on world prices, particularly in Europe and Asia, than they can individually.
"To try to maneuver the supply ... makes perfect sense," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com. "Just because it doesn't have the clout of oil, it's still in their best interest to deliver natural gas where it needs to go and manage supply in order to help manage the price."
Plans for a gas cartel are also anticipating a future in which global crude supplies will become even more scarce and expensive.
Liquefied natural gas — a rapidly growing segment of the market — could be traded as a commodity similar to oil at some point in the future, and the move by Russia, Iran and Qatar for closer cooperation appears to anticipate that, said Konstantin Batunin, an analyst with Moscow's Alfa Bank.
"My take is that it is just a commitment to create something in the future, it's just a first step," he said.
The Limits of Nuclear Power
The Limits of Nuclear Power
Daniel B. Botkin, International Herald Tribune John McCain has called for building 45 new nuclear power plants by 2030 and 100 eventually. Barack Obama's Web site says, "It is unlikely that we can meet our aggressive climate goals if we eliminate nuclear power from the table."
http://www.iht.com/articles/2008/10/20/opinion/edbotkin.php
Daniel B. Botkin, International Herald Tribune John McCain has called for building 45 new nuclear power plants by 2030 and 100 eventually. Barack Obama's Web site says, "It is unlikely that we can meet our aggressive climate goals if we eliminate nuclear power from the table."
http://www.iht.com/articles/2008/10/20/opinion/edbotkin.php
China to Help Build 2 Pakistan Nuclear Plants
China to Help Build 2 Pakistan Nuclear Plants
Munir Ahmad, Associated Press Pakistan said Saturday that China will help it build two more nuclear power plants, offsetting Pakistani frustration over a recent nuclear deal between archrival India and the United States.
http://ap.google.com/article/ALeqM5jb4knIrkSTiC6qdm1qhDpFK7Es8QD93SS5TO0
Munir Ahmad, Associated Press Pakistan said Saturday that China will help it build two more nuclear power plants, offsetting Pakistani frustration over a recent nuclear deal between archrival India and the United States.
http://ap.google.com/article/ALeqM5jb4knIrkSTiC6qdm1qhDpFK7Es8QD93SS5TO0
Nuclear Incident Would Make 9/11 'Insignificant'
Nuclear Incident Would Make 9/11 'Insignificant': Nuke Commission
Agence France-Presse The world is on the brink of an avalanche in the spread of devastating weaponry, a new global non-proliferation group warned Tuesday, saying that a nuclear incident would dwarf the September 11 attacks.
http://afp.google.com/article/ALeqM5gtW4R5X16sSsWPtKlo-SCugZ42qg
Agence France-Presse The world is on the brink of an avalanche in the spread of devastating weaponry, a new global non-proliferation group warned Tuesday, saying that a nuclear incident would dwarf the September 11 attacks.
http://afp.google.com/article/ALeqM5gtW4R5X16sSsWPtKlo-SCugZ42qg
Japan May Help North Korea to Scrap Nuclear Programme Reuters
Japan May Help North Korea to Scrap Nuclear Programme Reuters Japan may provide help to North Korea in scrapping its nuclear programme but it still refuses to give energy assistance because of a feud over abducted Japanese citizens, the top government spokesman said on Tuesday.
http://africa.reuters.com/world/news/usnTRE49K12W.html
http://africa.reuters.com/world/news/usnTRE49K12W.html
Abolishing Nuclear Weapons: Why the United States Should Lead by George Perkovich
Abolishing Nuclear Weapons: Why the United States Should Lead George Perkovich, Policy Brief Efforts to re-invigorate a movement to abolish nuclear weapons are rising on the international agenda, made clear in statements by the U.S. presidential candidates, British and Indian leaders, and a campaign led by former U.S. officials. For states without weapons, talk of nuclear disarmament is embraced as a welcome change, but viewed with skepticism. The next U.S. president should emphasize the goal of a world without nuclear weapons, explains George Perkovich in a new report (PDF).
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=22297&prog=zgp&proj=znpp
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=22297&prog=zgp&proj=znpp
The Coming Backlash By Patrick Buchanan
As Americans render what Catholics call temporal judgment on George Bush, are they aware of the radical course correction they are about to make?
This center-right country is about to vastly strengthen a liberal Congress whose approval rating is 10 percent and implant in Washington a regime further to the left than any in U.S. history. Consider.
As of today, Speaker Nancy Pelosi, the San Francisco Democrat, anticipates gains of 15-30 seats. Sen. Harry Reid, whose partisanship grates even on many in his own party, may see his caucus expand to a filibuster-proof majority where he can ignore Republican dissent.
Headed for the White House is the most left-wing member of the Senate, according to the National Journal. To the vice president's mansion is headed Joe Biden, third most liberal as ranked by the National Journal, ahead of No. 4, Vermont Socialist Bernie Sanders.
What will this mean to America? An administration that is either at war with its base or at war with the nation.
America may desperately desire to close the book on the Bush presidency. Yet there is, as of now, no hard evidence it has embraced Obama, his ideology, or agenda. Indeed, his campaign testifies, by its policy shifts, that it is fully aware the nation is still resisting the idea of an Obama presidency.
n the later primaries, even as a panicked media were demanding that Hillary drop out of the race, she consistently routed Obama in Ohio and Pennsylvania and crushed him in West Virginia and Kentucky.
By April and May, the Democratic Party was manifesting all the symptoms of buyer's remorse over how it had voted in January and February.
Obama's convention put him eight points up. But, as soon as America heard Sarah Palin in St. Paul, the Republicans shot up 10 points and seemed headed for victory.
What brought about the Obama-Biden resurgence was nothing Obama and Biden did, but the mid-September crash of Fannie, Freddie, Lehman Brothers, AIG, the stock market, where $4 trillion was wiped out, the $700 billion bailout of Wall Street that enraged Middle America -- and John McCain's classically inept handling of the crisis.
In short, Obama has still not closed the sale. Every time America takes a second look at him, it has second thoughts, and backs away.
Even after the media have mocked and pilloried Palin and ceded Obama and Biden victory in all four debates, the nation, according to Gallup, is slowly moving back toward the Republican ticket.
Moreover, Obama knows Middle America harbors deep suspicions of him. Thus, he has jettisoned the rhetoric about the "fierce urgency of now," and "We are the people we've been waiting for," even as he has jettisoned position after position to make himself acceptable.
His "flip-flops" testify most convincingly to the fact that Obama knows that where he comes from is far outside the American mainstream. For what are flip-flops other than concessions that a position is untenable and must be abandoned?
Flip-flopping reveals the prime meridian of presidential politics. If an analyst will collate all the positions to which all the candidates move, he will find himself close to the true center of national politics.
Thus, though he is the nominee of a party that is in thrall to the environmental movement, Obama has signaled conditional support for offshore drilling and pumping out of the Strategic Petroleum Reserve.
While holding to his pledge for a pullout of combat brigades from Iraq in 16 months, he has talked of "refining" his position and of a residual U.S. force to train the Iraqi Army and deal with Al Qaeda.
On Afghanistan, he has called for 10,000 more troops and U.S. strikes in Pakistan to kill Bin Laden, even without prior notice or the permission of the Pakistani government.
Since securing the nomination, Obama has adopted the Scalia position on the death penalty for child rape and the right to keep a handgun in the home. He voted to give the telecoms immunity from prosecution for colluding in Bush wiretaps. This onetime sympathizer of the Palestinians now does a passable imitation of Ariel Sharon.
No Democrat has ever come out of the far left of his party to win the presidency. McGovern, the furthest left, stayed true to his convictions and lost 49 states.
Obama has chosen another course. Though he comes out of the McGovern-Jesse Jackson left, he has shed past positions like support for partial birth abortion as fast as he has shed past associations, from William Ayers to ACORN, from the Rev. Jeremiah Wright to his fellow parishioners at Trinity United.
One question remains: Will a President Obama, with his party in absolute control of both Houses, revert to the politics and policies of the Left that brought him the nomination, or resist his ex-comrades' demands that he seize the hour and impose the agenda ACORN, Ayers, Jesse, and Wright have long dreamed of?
Whichever way he decides, he will be at war with them, or at war with us. If Barack wins, a backlash is coming.
Copyright 2008, Creators Syndicate Inc.
http://www.realclearpolitics.com/articles/2008/10/the_coming_backlash.html
This center-right country is about to vastly strengthen a liberal Congress whose approval rating is 10 percent and implant in Washington a regime further to the left than any in U.S. history. Consider.
As of today, Speaker Nancy Pelosi, the San Francisco Democrat, anticipates gains of 15-30 seats. Sen. Harry Reid, whose partisanship grates even on many in his own party, may see his caucus expand to a filibuster-proof majority where he can ignore Republican dissent.
Headed for the White House is the most left-wing member of the Senate, according to the National Journal. To the vice president's mansion is headed Joe Biden, third most liberal as ranked by the National Journal, ahead of No. 4, Vermont Socialist Bernie Sanders.
What will this mean to America? An administration that is either at war with its base or at war with the nation.
America may desperately desire to close the book on the Bush presidency. Yet there is, as of now, no hard evidence it has embraced Obama, his ideology, or agenda. Indeed, his campaign testifies, by its policy shifts, that it is fully aware the nation is still resisting the idea of an Obama presidency.
n the later primaries, even as a panicked media were demanding that Hillary drop out of the race, she consistently routed Obama in Ohio and Pennsylvania and crushed him in West Virginia and Kentucky.
By April and May, the Democratic Party was manifesting all the symptoms of buyer's remorse over how it had voted in January and February.
Obama's convention put him eight points up. But, as soon as America heard Sarah Palin in St. Paul, the Republicans shot up 10 points and seemed headed for victory.
What brought about the Obama-Biden resurgence was nothing Obama and Biden did, but the mid-September crash of Fannie, Freddie, Lehman Brothers, AIG, the stock market, where $4 trillion was wiped out, the $700 billion bailout of Wall Street that enraged Middle America -- and John McCain's classically inept handling of the crisis.
In short, Obama has still not closed the sale. Every time America takes a second look at him, it has second thoughts, and backs away.
Even after the media have mocked and pilloried Palin and ceded Obama and Biden victory in all four debates, the nation, according to Gallup, is slowly moving back toward the Republican ticket.
Moreover, Obama knows Middle America harbors deep suspicions of him. Thus, he has jettisoned the rhetoric about the "fierce urgency of now," and "We are the people we've been waiting for," even as he has jettisoned position after position to make himself acceptable.
His "flip-flops" testify most convincingly to the fact that Obama knows that where he comes from is far outside the American mainstream. For what are flip-flops other than concessions that a position is untenable and must be abandoned?
Flip-flopping reveals the prime meridian of presidential politics. If an analyst will collate all the positions to which all the candidates move, he will find himself close to the true center of national politics.
Thus, though he is the nominee of a party that is in thrall to the environmental movement, Obama has signaled conditional support for offshore drilling and pumping out of the Strategic Petroleum Reserve.
While holding to his pledge for a pullout of combat brigades from Iraq in 16 months, he has talked of "refining" his position and of a residual U.S. force to train the Iraqi Army and deal with Al Qaeda.
On Afghanistan, he has called for 10,000 more troops and U.S. strikes in Pakistan to kill Bin Laden, even without prior notice or the permission of the Pakistani government.
Since securing the nomination, Obama has adopted the Scalia position on the death penalty for child rape and the right to keep a handgun in the home. He voted to give the telecoms immunity from prosecution for colluding in Bush wiretaps. This onetime sympathizer of the Palestinians now does a passable imitation of Ariel Sharon.
No Democrat has ever come out of the far left of his party to win the presidency. McGovern, the furthest left, stayed true to his convictions and lost 49 states.
Obama has chosen another course. Though he comes out of the McGovern-Jesse Jackson left, he has shed past positions like support for partial birth abortion as fast as he has shed past associations, from William Ayers to ACORN, from the Rev. Jeremiah Wright to his fellow parishioners at Trinity United.
One question remains: Will a President Obama, with his party in absolute control of both Houses, revert to the politics and policies of the Left that brought him the nomination, or resist his ex-comrades' demands that he seize the hour and impose the agenda ACORN, Ayers, Jesse, and Wright have long dreamed of?
Whichever way he decides, he will be at war with them, or at war with us. If Barack wins, a backlash is coming.
Copyright 2008, Creators Syndicate Inc.
http://www.realclearpolitics.com/articles/2008/10/the_coming_backlash.html
From Arab News: Editorial: Iraq-American security pact
Monday 20 October 2008 (21 Shawwal 1429)
Editorial: Iraq-American security pact
20 October 2008
Any poll taken of Iraqis will reveal that they want US troops out sooner rather than later. But the Bush administration, the Americans who supported the war and members of the Iraqi government installed by the occupation authorities would insist that a US withdrawal must depend on Iraq's ability to stand on its own two feet by the time the last American soldier leaves town. And who will decide whether Iraqis are capable of standing on their own two feet? Of course, those who initiated the war, supported it and stand to benefit by it.
This is the context in which the security pact that has been agreed by Iraqi officials and US should be seen and analyzed. The most important thing is that this is not a deal between two sovereign states, despite all talk of two elections and the Iraqi people braving terrorists to exercise their voting rights.
The deal would require the US forces to leave Iraq by Dec. 31, 2011 unless the Iraqi government asked some of them to stay. Thousands of people marched in central Baghdad on Saturday to protest the proposed security agreement. They were furious that they would have to live three more years under an occupation that has destroyed their nation beyond recognition. More important, they were protesting the fact that it will be a government installed by the occupation authorities that will decide whether "some of the troops" will stay after three years and in what size and in what capacity. The pact must be ratified by the Iraqi Parliament but given the narrow partisan interests, sectarian and ethnic divisions that characterize Iraqi politics, trouble awaits the deal. The weekend protests in Baghdad by tens of thousands of supporters of cleric Moqtada Sadr calling on Parliament to reject the pact was a clear signal to lawmakers of what ordinary Iraqis expect of them.
Eight years is a long time for the military of one country to remain in another country, especially when there was no credible reason for the foray in the first place. The Bush administration used every ruse, including lies and false documents, to establish the presence of weapons of mass destruction in Iraq, and a link between Saddam Hussein and Al-Qaeda. While the ploy worked to win domestic support for the war and get US forces into Iraq, there was nothing that could be done after that but watch as American forces sank deeper and deeper into the Iraqi quagmire. The American insistence on pursuing its project of global hegemony in the guise of the war on terror was ultimately detrimental to both causes. Hundreds of thousands of innocent Iraqis have been killed, the US and Iraq have been sapped of enormous resources, and terrorism has become more widespread. The war has created the biggest exodus of people in the Middle East since the creation of the State of Israel in 1948. One of the many lessons learned from Iraq: Terrorism can be created where there was none. Another is that it is dangerous for a single nation, however powerful, to monopolize the international decision-making process, especially on matters that concern war.
The US went to Iraq saying it wanted to put down a "threat" to its security. The Bush administration now seems to be seeking to legitimize its entry and gains by way of a security deal. But what is in the interest of Washington may not be in the interest of the Iraqi people. It may be even detrimental to their interests if the leaked details of the terms of the pact are true. The US also needs to think whether the best way of helping the Baghdad government to win legitimacy and acceptability by the Iraqi people is to impose on that government a treaty the Iraqis consider very unfavorable to them.
Editorial: Iraq-American security pact
20 October 2008
Any poll taken of Iraqis will reveal that they want US troops out sooner rather than later. But the Bush administration, the Americans who supported the war and members of the Iraqi government installed by the occupation authorities would insist that a US withdrawal must depend on Iraq's ability to stand on its own two feet by the time the last American soldier leaves town. And who will decide whether Iraqis are capable of standing on their own two feet? Of course, those who initiated the war, supported it and stand to benefit by it.
This is the context in which the security pact that has been agreed by Iraqi officials and US should be seen and analyzed. The most important thing is that this is not a deal between two sovereign states, despite all talk of two elections and the Iraqi people braving terrorists to exercise their voting rights.
The deal would require the US forces to leave Iraq by Dec. 31, 2011 unless the Iraqi government asked some of them to stay. Thousands of people marched in central Baghdad on Saturday to protest the proposed security agreement. They were furious that they would have to live three more years under an occupation that has destroyed their nation beyond recognition. More important, they were protesting the fact that it will be a government installed by the occupation authorities that will decide whether "some of the troops" will stay after three years and in what size and in what capacity. The pact must be ratified by the Iraqi Parliament but given the narrow partisan interests, sectarian and ethnic divisions that characterize Iraqi politics, trouble awaits the deal. The weekend protests in Baghdad by tens of thousands of supporters of cleric Moqtada Sadr calling on Parliament to reject the pact was a clear signal to lawmakers of what ordinary Iraqis expect of them.
Eight years is a long time for the military of one country to remain in another country, especially when there was no credible reason for the foray in the first place. The Bush administration used every ruse, including lies and false documents, to establish the presence of weapons of mass destruction in Iraq, and a link between Saddam Hussein and Al-Qaeda. While the ploy worked to win domestic support for the war and get US forces into Iraq, there was nothing that could be done after that but watch as American forces sank deeper and deeper into the Iraqi quagmire. The American insistence on pursuing its project of global hegemony in the guise of the war on terror was ultimately detrimental to both causes. Hundreds of thousands of innocent Iraqis have been killed, the US and Iraq have been sapped of enormous resources, and terrorism has become more widespread. The war has created the biggest exodus of people in the Middle East since the creation of the State of Israel in 1948. One of the many lessons learned from Iraq: Terrorism can be created where there was none. Another is that it is dangerous for a single nation, however powerful, to monopolize the international decision-making process, especially on matters that concern war.
The US went to Iraq saying it wanted to put down a "threat" to its security. The Bush administration now seems to be seeking to legitimize its entry and gains by way of a security deal. But what is in the interest of Washington may not be in the interest of the Iraqi people. It may be even detrimental to their interests if the leaked details of the terms of the pact are true. The US also needs to think whether the best way of helping the Baghdad government to win legitimacy and acceptability by the Iraqi people is to impose on that government a treaty the Iraqis consider very unfavorable to them.
Must Central Bankers Undermine Financial Markets?
Must Central Bankers Undermine Financial Markets?
The Federal Reserve Bank helped obtain a buyer for Merrill Lynch and in so doing may have undermined rival investment bank Lehman Brothers. Do double standards create uncertainties that weaken the integrity of the financial system? If so, why does the bailout bill expand, rather than reduce, the discretionary powers of U.S. financial regulators? Were he alive today, Walter Bagehot, the esteemed early editor of The Economist magazine, would be crying to the heavens!
Bagehot's bête noire was the Bank of England, which he said created problems for the economy by dispensing special favors to select banks during financial crises. If England's central bank couldn't be abolished, he argued, the next best alternative would be for it to stop playing favorites. Bagehot recommended that the Bank of England offer loans to all troubled banks, but only at penalty interest rates and only if the borrowers put up good collateral to secure those loans. This advice is just as valid today, according to Independent Institute Research Fellow George Selgin, author of Good Money. (No less an authority than the late Milton Friedman called the book "a splendid piece of historical analysis" of how private enterprise solved a monetary problem that threatened seriously to retard the Industrial Revolution.)
Bagehot's advice is helpful even if we don't know exactly what "good" collateral looks like. That's because we often recognize inadequate collateral when we see it. Selgin writes in a new op-ed: "While no one may precisely be able to define good collateral, and one can debate whether the rate at which banks offer to lend unsecured funds to other banks, known as the London Interbank Offered Rate, plus 8 percent constitutes a 'penalty' rate, who even pretends that recent central bank lending has been based on good collateral?"
Wasn't the relaxation of loan requirements a key factor that got us into this mess in the first place?
Independent Institute Research Fellow Jeffrey A. Miron also notes that the bailout creates uncertainty in the banking system. "Government ownership means that political forces will determine who wins and who loses in the banking sector," he writes in a piece published on CNN's website.
"The government, for example, will push banks to aid borrowers with poor credit histories, to subsidize politically connected industries, and to lend in the districts of powerful members of Congress," he continues. "All of this is horrible for economic efficiency. Government pressure will be difficult for banks to resist, since the government can both threaten its ownership stake or promise further injections whenever it wants to modify bank behavior. Banks will respond by accommodating government objectives in exchange for continued financial support."
"Central Bankers Still Don't Get It," by George Selgin (Modesto Bee, 10/14/08)
http://www.independent.org/newsroom/article.asp?id=2345
"Why This Bailout Is as Bad as the Last One," by Jeffrey A. Miron (CNN.com, 10/14/08)
http://www.independent.org/newsroom/article.asp?id=2346
Purchase Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775–1821, by George Selgin.
http://www.independent.org/store/book_detail.asp?bookID=75
For an analysis of the U.S. government's leading role in weakening mortgage lending standards, see "Anatomy of a Train Wreck: Causes of the Mortgage Meltdown," by Stan J. Liebowitz (10/3/08)http://www.independent.org/publications/policy_reports/detail.asp?type=full&id=30
The Federal Reserve Bank helped obtain a buyer for Merrill Lynch and in so doing may have undermined rival investment bank Lehman Brothers. Do double standards create uncertainties that weaken the integrity of the financial system? If so, why does the bailout bill expand, rather than reduce, the discretionary powers of U.S. financial regulators? Were he alive today, Walter Bagehot, the esteemed early editor of The Economist magazine, would be crying to the heavens!
Bagehot's bête noire was the Bank of England, which he said created problems for the economy by dispensing special favors to select banks during financial crises. If England's central bank couldn't be abolished, he argued, the next best alternative would be for it to stop playing favorites. Bagehot recommended that the Bank of England offer loans to all troubled banks, but only at penalty interest rates and only if the borrowers put up good collateral to secure those loans. This advice is just as valid today, according to Independent Institute Research Fellow George Selgin, author of Good Money. (No less an authority than the late Milton Friedman called the book "a splendid piece of historical analysis" of how private enterprise solved a monetary problem that threatened seriously to retard the Industrial Revolution.)
Bagehot's advice is helpful even if we don't know exactly what "good" collateral looks like. That's because we often recognize inadequate collateral when we see it. Selgin writes in a new op-ed: "While no one may precisely be able to define good collateral, and one can debate whether the rate at which banks offer to lend unsecured funds to other banks, known as the London Interbank Offered Rate, plus 8 percent constitutes a 'penalty' rate, who even pretends that recent central bank lending has been based on good collateral?"
Wasn't the relaxation of loan requirements a key factor that got us into this mess in the first place?
Independent Institute Research Fellow Jeffrey A. Miron also notes that the bailout creates uncertainty in the banking system. "Government ownership means that political forces will determine who wins and who loses in the banking sector," he writes in a piece published on CNN's website.
"The government, for example, will push banks to aid borrowers with poor credit histories, to subsidize politically connected industries, and to lend in the districts of powerful members of Congress," he continues. "All of this is horrible for economic efficiency. Government pressure will be difficult for banks to resist, since the government can both threaten its ownership stake or promise further injections whenever it wants to modify bank behavior. Banks will respond by accommodating government objectives in exchange for continued financial support."
"Central Bankers Still Don't Get It," by George Selgin (Modesto Bee, 10/14/08)
http://www.independent.org/newsroom/article.asp?id=2345
"Why This Bailout Is as Bad as the Last One," by Jeffrey A. Miron (CNN.com, 10/14/08)
http://www.independent.org/newsroom/article.asp?id=2346
Purchase Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775–1821, by George Selgin.
http://www.independent.org/store/book_detail.asp?bookID=75
For an analysis of the U.S. government's leading role in weakening mortgage lending standards, see "Anatomy of a Train Wreck: Causes of the Mortgage Meltdown," by Stan J. Liebowitz (10/3/08)http://www.independent.org/publications/policy_reports/detail.asp?type=full&id=30
Licensed Kleptocracy for Years to Come
Licensed Kleptocracy for Years to Come
The ABCs of Paulson's Bailout
By MICHAEL HUDSON
Treasury Secretary Paulson’s bailout speech on Monday, October 13, poses some fundamental economic questions: What is the impact on the economy at large of this autumn’s unprecedented creation and giveaway of financial wealth to the wealthiest layer of the population? How long can the Treasury’s bailout of Wall Street (but not the rest of the economy!) sustain a debt overhead that is growing exponentially? Is there any limit to the amount of U.S. Treasury debt that the government can create and turn over to its major political campaign contributors?
In times past, national debt typically was run up by borrowing money from private lenders and spent on goods and services. The tendency was to absorb loanable funds and bid up interest rates on the one hand, while spending led to inflationary price increases for goods and services. But the present giveaway is different. Instead of money being borrowed or spent, interest-yielding bonds are simply being printed and turned over to the banks and other financial institutions. The hope is that they will lend out more credit (which will become more debt on the part of their customers), lowering interest rates while the money is used to bid up asset prices – real estate, stocks and bonds. Little commodity price inflation is expected from this behavior.
The main impact will be to reinforce the concentration of wealth in the hands of creditors (the wealthiest 10 percent of the population) rather than wiping out financial assets (and debts) through the bankruptcies that were occurring as a result of “market forces.” Is it too much to say that we are seeing the end of economic democracy and the emergence of a financial oligarchy – a self-serving class whose actions threaten to polarize society and, in the process, stifle economic growth and lead to the very bankruptcy that the bailout was supposed to prevent?
Everything that I have read in economic history leads me to believe that we are entering a nightmare transition era. The business cycle is essentially a financial cycle. Upswings tend to become economy-wide Ponzi schemes as banks and other creditors, savers and investors receive interest and plow it back into new loans, accruing yet more interest as debt levels rise. This is the “magic of compound interest” in a nutshell. No “real” economy in history has grown at a rate able to keep up with this financial dynamic. Indeed, payment of this interest by households and businesses leaves less to spend on goods and services, causing markets to shrink and investment and employment to be cut back.
Banks cannot make money ad infinitum by selling more and more credit – that is, indebting the non-financial economy more and more. Government officials such as Treasury Secretary Paulson or Federal Reserve Chairman Bernanke are professionally unable to acknowledge this problem, and it does not appear in most neoclassical or monetarist textbooks. But the underlying mathematics of compound interest are rediscovered in each generation, often prompted by the force majeur of financial crisis.
A generation ago, for instance, Hyman Minsky gained a following by describing what he aptly called the Ponzi stage of the business cycle. It was the phase in which debtors no longer were able to pay off their loans out of current income (as in Stage #1, where they earned enough to cover their interest and amortization charges), and indeed did not even earn enough to pay the interest charges (as in Stage #2), but had to borrow the money to pay the interest owed to their bankers and other creditors. In this Stage #3 the interest was simply added onto the debt, growing at a compound rate. It ends in a crash.
This was the flip side of the magic of compound interest – the belief that people can get rich by “putting money to work.” Money doesn’t really work, of course. When lent out, it extracts interest from the “real” production and consumption economy, that is, from the labor and industry that actually do the work. It is much like a tax, a monopoly rent levied by the financial sector. Yet this quasi-tax, this extractive financial rent (as Alfred Marshall explained over a century ago) is the dynamic that is supposed to enable corporate, state and local pension funds to pay for retirement simply out of stock market gains and bond investments – purely financially and hence at the expense of the economy at large whose employees are supposed to be gainers. This is the essence of “pension-fund capitalism,” a Ponzi-scheme variant of finance capitalism. Unfortunately, it is grounded in purely mathematical relationships that have little grounding in the “real” economy in which families and companies produce and consume.
Paulson’s bailout plan reflects a state of denial with regard to this dynamic. The debt overhead is self-aggravating, becoming less and less “solvable” and hence more of a quandary, that is, a problem with no visible solution. At least, no solution acceptable to Wall Street, and hence to Paulson and the Democratic and Republican congressional leaders. The banks and large swaths of the financial sector are broke from having made bad gambles in the belief that money could be made to “work” under conditions that shrink the underlying industrial economy and stifle wage gains, eroding the market for consumer goods. Debt deflation reduces sales and business activity in general, and hence corporate earnings. This depresses stock market and real estate prices, and hence the value of collateral pledged to back the economy’s debt overhead. Negative equity leads to bankruptcy and foreclosures.
By increasing America’s national debt from $5 trillion earlier this year to $13 trillion in almost a single swoop by taking on junk loans and other bad investments rather than letting them to under as traditionally has occurred in the “cleansing” culmination of business crashes (“cleansing” in the sense of clean slates for debts that cannot reasonably be paid), Paulson’s bailout actions increase the interest payments that the government must pay out of taxes or by borrowing (ore printing) yet more money. Someone must pay for bad debts and junk loans that are not wiped off the books. The government is now to take on the roll of debt collector to “make a profit for taxpayers” by going around and kneecapping the economy – which of course is comprised primarily of the “taxpayers” ostensibly being helped.
It is a con game. Financial gains have soared since 1980, but banks and institutional investors have not used them to finance tangible capital formation. They simply have recycled their receipt of interest (and credit-card fees and penalties that often amount to as much as interest) into yet new loans, extracting yet more interest and so on. This financial extraction leaves less personal and business income to spend on consumer goods, capital goods and services. Sales shrink, causing defaults as the economy is less able to pay its stipulated interest charges.
This phenomenon of debt deflation has occurred throughout history, not only over the modern business cycle but for centuries at a time. The most self-destructive example of financial short-termism is the decline and fall of the Roman Empire into debt bondage and ultimately into a Dark Age. The political turning point was the violent takeover of the Senate by oligarchic creditors who murdered the debtor-oriented reformers led by the Gracchi brothers in 133 BC, picking up benches and using them as rams to push the reformers over the cliff on which the political assembly was located. A similar violent overthrow occurred in Sparta a century earlier when its kings Agis and Cleomenes sought to annul debts so as to reverse the city-state’s economic polarization. The creditor oligarchy exiled and killed the kings, as Plutarch described in his Parallel Lives of the Illustrious Greeks and Romans. This used to be basic reading among educated people, but today these events have all but disappeared from most people’s historical memory. A knowledge of the evolution of economic structures has been replaced by a mere series of political personalities and military conquests.
The moral of ancient and modern history alike is that a critical point inevitably arrives at which economies either adopt hard creditor-oriented laws that impoverish the population and plunge downward socially and militarily, or save themselves by alleviating the debt burden. What is remarkable today is the almost total failure of political leaders to provide an alternative to Paulson’s bailout of Wall Street from the Bear Stearns bankruptcy down through the government takeover of Fannie Mae and Freddie Mac to last week’s giveaway to the banks. Nobody is even warning where this destructive decision is leading. Governments ostensibly representing “free market” philosophy are acting as the lender of last resort – not to households and business non-financial debtors, and not to wipe out the debt overhang in a Clean Slate, but to subsidize the excess of financial claims over and above the economy’s ability to pay and the market value of assets pledged as collateral.
This attempt is necessarily in vain. No amount of money can sustain the exponential growth of debt, not to mention the freely created credit and mutual gambles on derivatives and other financial claims whose volume has exploded in recent years. The government is committed to “bailing out” banks and other creditors whose loans and swaps have gone bad. It remains in denial with regard to the debt deflation that must be imposed on the rest of the economy to “make good” on these financial trends.
Here’s why the plan for the government to recover the money is whistling in the dark: It calls for banks to “earn their way out of debt” by selling more of their product – credit, that is, debt. Homeowners and other consumers, students and car buyers, credit card users and their employers – the “taxpayers” supposed to be helped – are to pay the repayment money to the banks, instead of using it to purchase goods and services. If they charge only 6 per cent per year, they will extract $93 billion in interest charges – $42 billion to pay the Treasury for its $700 billion, and another $51 billion for the Federal Reserve’s $850 billion in “cash for trash” loans.
If you are going to rob the government, I suppose the best strategy is simply to brazen it out. To listen to the mass media, there seemed no alternative but for Congress to ram the plan through just as Wall Street lobbyists had written, to “save the market from imminent meltdown,” refusing to hold hearings or take testimony from critics or listen to the hundreds of economists who have denounced the giveaway.
Hubris has reached a level of deception hardly seen since the 19th century’s giveaways to the railroad barons. “We didn’t want to be punitive,” Paulson explained in a Financial Times interview, as if the only alternative was an enormous gift. Europe did not engage in any such giveaway, yet he claimed that England and other European countries forced his hand by bailing out their banks, and that the Treasury simply wanted to keep U.S. banks competitive. Wringing his hands melodramatically, he assured the public on Monday that “We regret having to take these actions.” Banks went along with the pretense that the bailout was a worrisome socialist intrusion into the “free market,” not a giveaway to Wall Street in the plan drawn up by their own industry lobbyists. “Today’s actions are not what we ever wanted to do,” Paulson went on, “but today’s actions are what we must do to restore confidence to our financial system.” The confidence in question was a classic exercise in disinformation – a well-crafted con game.
Paulson depicted the government’s purchase of special non-voting stock as a European-style nationalization. But government’s appointed public representatives to the boards of European banks being bailed out. This has not happened in America. Bank lobbyists are reported to have approached Treasury to express their worry that their shareholdings might be diluted. But the Treasury-Democratic Party plan invests $250 billion in government credit in non-voting shares. If a recipient of this credit goes broke, the government is left the end of the line behind other creditors. Its “shares” are not real loans, but “preferred stock.” As Paulson explained on Monday: “Government owning a stake in any private U.S. company is objectionable to most Americans – me included.” So the government’s shares are not even real stock, but a special “non-voting” issue. The public stock investment will not even have voting power! So the government gets the worst of both worlds: Its “preferred stock” issue lacks the voting power that common stock has, while also lacking the standing for repayment in case of bankruptcy that bondholders enjoy. Instead of leading to more public oversight and regulation, the crisis thus has the opposite effect here: a capitulation to Wall Street, along lines that pave the ground for a much deeper debt crisis to come as the banks “earn their way out of debt” at the expense of the rest of the economy, which is receiving no debt relief!
Paulson shed the appropriate crocodile tears on behalf of homeowners and the middle class, whose interest he depicted as lying in ever-rising housing and stock market prices. “In recent weeks, the American people have felt the effects of a frozen financial system,” he explained. “They have seen reduced values in their retirement and investment accounts. They have worried about meeting payrolls and they have worried about losing their jobs.” He almost seemed about to use the timeworn widows and orphans cover story and beg Americans please not to unplug Granny from her life support system in the nursing home. We need to preserve the value of her stocks, and help everyone retire happily by restoring normal Wall Street financial engineering to make voters rich again.
European executives who steered their banks into the debt iceberg have been fired. England wiped out shareholders in Northern Rock last summer, and more recently Bradford and Bingley. But in America the culprits get to stay on. No bank stockholders are being wiped out here, despite the negative equity into which the worst risk-taking banks have fallen or the prosecutions brought against them for predatory lending, consumer fraud and related wrongdoing.
Government aid will be used to pay exorbitant salaries to the executives who drove these banks into insolvency. “Institutions that sell shares to the government will accept restrictions on executive compensation, including a clawback provision and a ban on golden parachutes,” Paulson pretended – only to qualify it by saying that the rule would apply only “during the period that Treasury holds equity issued through this program.” The executives can stay on and give themselves the usual retirement gifts after all, prompting Democratic Congressman Barney Frank to complain about how weak the Treasury restrictions are. “Compensation experts say that the provisions, though politically prudent to appease public anger, will probably have little real impact on how financial executives are paid in coming years. They predict banks will simply pay higher taxes and will find other creative ways of paying their executives as they see fit. Some say there could even be a sudden surge in compensation as soon as the government program ends, in a few years, leading to eye-popping numbers down the road. … When Congress limited the tax deductibility of cash salaries to $1 million, for example, it simply led to an explosion in stock options used as compensation and even higher total payouts.”
And speaking of stock options, the government shortchanged itself here too, despite its promises to ensure that it will shares in the gains when banks recover. Senator Schumer went so far as to assure voters that “under any capital injection plan that Treasury pursues, dividends must be eliminated, executive compensation must be constrained, and normal banking activities must be emphasized.” This was mostly hot air. England and other countries have insisted that banks not pay dividends until the government is reimbursed. The idea is to avoid using public money to pay dividends to existing shareholders and continued exorbitant salaries to their mismanagers! But the terms of the U.S. bailout is made simply call for banks not increase their dividend payouts – a policy they most likely would follow in any case in view of their earnings crunch.
Schumer verged on the ridiculous when he proclaimed: “We must operate in the same way any significant investor operates in these situations – when Warren Buffett invested in Goldman Sachs and General Electric in recent weeks, he demanded strict, but not onerous terms. The government must be similarly protective of taxpayer interests.” But Buffett obtained a much better deal for his $5 billion investment in Goldman Sachs, including warrants to buy its stock at a price below the going price when he helped rescue the company. Likewise in England, the government took stock ownership at low prices before the bailout, not at higher prices after it! But instead of exercising its warrants at the depressed prices where bank stocks stood at the time Paulson detailed the bailout terms, the U.S. Treasury would be able to exercise its warrants (equal to 15 percent of its investment) only at prices that were to be set after the banks had time to recover with the Treasury’s aid. Existing stockholders thus will benefit more than the government – which is why bank stocks soared on news of the bailout’s terms. So the government does not appear to be a good bargainer in the public interest. In fact, Paulson may be guilty of deliberate scuttling of the public interest that, as Treasury Secretary, he is supposed to defend.
Given his financial experience, Paulson had to know how deceptive his promise was in placing such emphasis on the government’s stock options, the sweetener that has made so many executives fabulously wealthy: “taxpayers will not only own shares that should be paid back with a reasonable return, but also will receive warrants for common shares in participating institutions,” he explained. But the “reasonable return” is only 5 per cent annually, just above what the government typically has to pay, not a rate reflecting anything like what the “free market” now charges Wall Street firms with negative equity. The government’s $250 billion in preferred stock will carry a dividend that rises to 9 per cent after five years, with no limit on how long the loan may be outstanding.
All I can say is, Wow! If only homeowners could get a similar break: a reduction in their interest rate to just 5 per cent, rising to a penalty rate of just 9 per cent – without the heavy penalties and late fees that Countrywide/Bank of America charges! By contrast, German banks that receive a public rescue will pay “a fee of at least 2 per cent annually of the amount guaranteed. The U.K. will charge 0.50 per cent plus the cost of default insurance on a bank's debt.”A British banker wrote to me that “the government offers 12 per cent preference shares, and ordinary shares at an absolutely huge discount to asset value to provide the cash.” But the U.S. Government agreed to exercise its stock options at the post-bailout price, not the price prior to rescue. It even gives up most of these options if the banks do repay the Treasury’s loan. On the excuse of encouraging private Wall Street investors to replace government “ownership” and “intrusion” into the marketplace, banks can “cut in half the number of common shares the government will eventually be able to purchase. That can be done if a bank sells stock by the end of 2009, and raises at least as much cash as the government is investing.”
These bailout terms suggest that what Wall Street wants is pretty much what colonialist Britain achieved for so many years in India and Africa: puppet leaders with an imperial political advisor, in America’s case a Secretary of the Treasury and a vice-regent as head of the Federal Reserve System. But what the rest of the economy needs is a genuinely free leader able to impose better and more equitable laws to write down debt, not build it up and bail out more bad loans. Within the present administration itself, Sheila Bair, head of the Federal Deposit Insurance Corporation, complained in a Wall Street Journal interview that she didn’t understand “Why there’s been such a political focus on making sure we’re not unduly helping borrowers but then we’re providing all this massive assistance at the institutional level.” She “described painstaking efforts made by lawmakers in crafting the federal Hope for Homeowners program to make sure it limited resale profits for borrowers who received affordable home loans,” by giving the government a share of the rising sales price.
The imbalance between creditor demands and debtors’ ability to pay is indeed the problem. Paulson claimed in his Monday address that he needed to get to the root of the economic problem. But in his view it is simply that the banks “are not positioned to lend as widely as is necessary to support our economy. Our goal is to see … that they can make more loans to businesses and consumers across the nation.” As he explained in his Financial Times interview, “for the first time you have seen an action that is systematic, that is getting at the root causes” of the financial crisis. But his perspective is remarkably narrow. It denies that the problem is debt above and beyond the ability of the economy at large to pay, and higher than the market price of property and assets pledged as collateral.
Creating a system for the banks to “earn their way out of debt” means creating yet more interest-bearing debt for the economy at large. Mortgage loans are what is supposed to restore high housing prices and office costs – precisely what caused the debt meltdown in the first place. Despite Paulson’s and Ms. Bair’s characterization of the present crisis as merely a liquidity problem, it is really a debt problem. The volume of real estate debt, auto debt, student loans, bank debt, pension debts by municipalities and states as well as private companies exceed their ability to pay.
Shortly after Paulson’s Monday speech a Dutch economics professor, Dirk Bezemer, wrote me that: “In my thinking I liken it to a Ponzi game where in the final stages the only way to keep things going a bit longer is to pump in more liquidity. That is a solution in the sense that it restores calm, but only in the short run. This is what we now see happening and – despite the 10 per cent stock market rally today – I am still bracing myself for the inevitable end of the Ponzi game – suddenly or as a long drawn out debt deflation.” He went on to explain what he and other associates of mine have been saying for many years now: “The actual solution is to separate the Ponzi from the non-Ponzi economy and let the pain be suffered in the first part so as to salvage what we can from the second. This means bailing out homeowners but not investment banks, etc. The qualification to this general approach is that those Ponzi game players whose demise is a real ‘system threat’ need support, but only with punitive conditionalities attached. And just like Third World countries, they won’t have a choice.
The problem of “debt pollution” is being “solved” by creating yet more debt, not by reducing its volume. Neither the Treasury nor Congress is helping to resolve this problem. The working assumption is that giving newly created government debt to the banks and Wall Street will lead to more lending to re-inflate the real estate and stock markets. But who will lend more to the one-sixth of U.S. homes already said to have fallen into negative equity territory? As debt deflation eats into the domestic market for goods and services, corporate sales and earnings will shrink, dragging down stock prices. Wall Street is in control, but its policies are so shortsighted that they are eroding the underlying economy – which is passing from democracy to oligarchy, and indeed it seems to a bipartisan financial kleptocracy.
Michael Hudson is a former Wall Street economist He was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com
http://www.counterpunch.org/hudson10202008.html
The ABCs of Paulson's Bailout
By MICHAEL HUDSON
Treasury Secretary Paulson’s bailout speech on Monday, October 13, poses some fundamental economic questions: What is the impact on the economy at large of this autumn’s unprecedented creation and giveaway of financial wealth to the wealthiest layer of the population? How long can the Treasury’s bailout of Wall Street (but not the rest of the economy!) sustain a debt overhead that is growing exponentially? Is there any limit to the amount of U.S. Treasury debt that the government can create and turn over to its major political campaign contributors?
In times past, national debt typically was run up by borrowing money from private lenders and spent on goods and services. The tendency was to absorb loanable funds and bid up interest rates on the one hand, while spending led to inflationary price increases for goods and services. But the present giveaway is different. Instead of money being borrowed or spent, interest-yielding bonds are simply being printed and turned over to the banks and other financial institutions. The hope is that they will lend out more credit (which will become more debt on the part of their customers), lowering interest rates while the money is used to bid up asset prices – real estate, stocks and bonds. Little commodity price inflation is expected from this behavior.
The main impact will be to reinforce the concentration of wealth in the hands of creditors (the wealthiest 10 percent of the population) rather than wiping out financial assets (and debts) through the bankruptcies that were occurring as a result of “market forces.” Is it too much to say that we are seeing the end of economic democracy and the emergence of a financial oligarchy – a self-serving class whose actions threaten to polarize society and, in the process, stifle economic growth and lead to the very bankruptcy that the bailout was supposed to prevent?
Everything that I have read in economic history leads me to believe that we are entering a nightmare transition era. The business cycle is essentially a financial cycle. Upswings tend to become economy-wide Ponzi schemes as banks and other creditors, savers and investors receive interest and plow it back into new loans, accruing yet more interest as debt levels rise. This is the “magic of compound interest” in a nutshell. No “real” economy in history has grown at a rate able to keep up with this financial dynamic. Indeed, payment of this interest by households and businesses leaves less to spend on goods and services, causing markets to shrink and investment and employment to be cut back.
Banks cannot make money ad infinitum by selling more and more credit – that is, indebting the non-financial economy more and more. Government officials such as Treasury Secretary Paulson or Federal Reserve Chairman Bernanke are professionally unable to acknowledge this problem, and it does not appear in most neoclassical or monetarist textbooks. But the underlying mathematics of compound interest are rediscovered in each generation, often prompted by the force majeur of financial crisis.
A generation ago, for instance, Hyman Minsky gained a following by describing what he aptly called the Ponzi stage of the business cycle. It was the phase in which debtors no longer were able to pay off their loans out of current income (as in Stage #1, where they earned enough to cover their interest and amortization charges), and indeed did not even earn enough to pay the interest charges (as in Stage #2), but had to borrow the money to pay the interest owed to their bankers and other creditors. In this Stage #3 the interest was simply added onto the debt, growing at a compound rate. It ends in a crash.
This was the flip side of the magic of compound interest – the belief that people can get rich by “putting money to work.” Money doesn’t really work, of course. When lent out, it extracts interest from the “real” production and consumption economy, that is, from the labor and industry that actually do the work. It is much like a tax, a monopoly rent levied by the financial sector. Yet this quasi-tax, this extractive financial rent (as Alfred Marshall explained over a century ago) is the dynamic that is supposed to enable corporate, state and local pension funds to pay for retirement simply out of stock market gains and bond investments – purely financially and hence at the expense of the economy at large whose employees are supposed to be gainers. This is the essence of “pension-fund capitalism,” a Ponzi-scheme variant of finance capitalism. Unfortunately, it is grounded in purely mathematical relationships that have little grounding in the “real” economy in which families and companies produce and consume.
Paulson’s bailout plan reflects a state of denial with regard to this dynamic. The debt overhead is self-aggravating, becoming less and less “solvable” and hence more of a quandary, that is, a problem with no visible solution. At least, no solution acceptable to Wall Street, and hence to Paulson and the Democratic and Republican congressional leaders. The banks and large swaths of the financial sector are broke from having made bad gambles in the belief that money could be made to “work” under conditions that shrink the underlying industrial economy and stifle wage gains, eroding the market for consumer goods. Debt deflation reduces sales and business activity in general, and hence corporate earnings. This depresses stock market and real estate prices, and hence the value of collateral pledged to back the economy’s debt overhead. Negative equity leads to bankruptcy and foreclosures.
By increasing America’s national debt from $5 trillion earlier this year to $13 trillion in almost a single swoop by taking on junk loans and other bad investments rather than letting them to under as traditionally has occurred in the “cleansing” culmination of business crashes (“cleansing” in the sense of clean slates for debts that cannot reasonably be paid), Paulson’s bailout actions increase the interest payments that the government must pay out of taxes or by borrowing (ore printing) yet more money. Someone must pay for bad debts and junk loans that are not wiped off the books. The government is now to take on the roll of debt collector to “make a profit for taxpayers” by going around and kneecapping the economy – which of course is comprised primarily of the “taxpayers” ostensibly being helped.
It is a con game. Financial gains have soared since 1980, but banks and institutional investors have not used them to finance tangible capital formation. They simply have recycled their receipt of interest (and credit-card fees and penalties that often amount to as much as interest) into yet new loans, extracting yet more interest and so on. This financial extraction leaves less personal and business income to spend on consumer goods, capital goods and services. Sales shrink, causing defaults as the economy is less able to pay its stipulated interest charges.
This phenomenon of debt deflation has occurred throughout history, not only over the modern business cycle but for centuries at a time. The most self-destructive example of financial short-termism is the decline and fall of the Roman Empire into debt bondage and ultimately into a Dark Age. The political turning point was the violent takeover of the Senate by oligarchic creditors who murdered the debtor-oriented reformers led by the Gracchi brothers in 133 BC, picking up benches and using them as rams to push the reformers over the cliff on which the political assembly was located. A similar violent overthrow occurred in Sparta a century earlier when its kings Agis and Cleomenes sought to annul debts so as to reverse the city-state’s economic polarization. The creditor oligarchy exiled and killed the kings, as Plutarch described in his Parallel Lives of the Illustrious Greeks and Romans. This used to be basic reading among educated people, but today these events have all but disappeared from most people’s historical memory. A knowledge of the evolution of economic structures has been replaced by a mere series of political personalities and military conquests.
The moral of ancient and modern history alike is that a critical point inevitably arrives at which economies either adopt hard creditor-oriented laws that impoverish the population and plunge downward socially and militarily, or save themselves by alleviating the debt burden. What is remarkable today is the almost total failure of political leaders to provide an alternative to Paulson’s bailout of Wall Street from the Bear Stearns bankruptcy down through the government takeover of Fannie Mae and Freddie Mac to last week’s giveaway to the banks. Nobody is even warning where this destructive decision is leading. Governments ostensibly representing “free market” philosophy are acting as the lender of last resort – not to households and business non-financial debtors, and not to wipe out the debt overhang in a Clean Slate, but to subsidize the excess of financial claims over and above the economy’s ability to pay and the market value of assets pledged as collateral.
This attempt is necessarily in vain. No amount of money can sustain the exponential growth of debt, not to mention the freely created credit and mutual gambles on derivatives and other financial claims whose volume has exploded in recent years. The government is committed to “bailing out” banks and other creditors whose loans and swaps have gone bad. It remains in denial with regard to the debt deflation that must be imposed on the rest of the economy to “make good” on these financial trends.
Here’s why the plan for the government to recover the money is whistling in the dark: It calls for banks to “earn their way out of debt” by selling more of their product – credit, that is, debt. Homeowners and other consumers, students and car buyers, credit card users and their employers – the “taxpayers” supposed to be helped – are to pay the repayment money to the banks, instead of using it to purchase goods and services. If they charge only 6 per cent per year, they will extract $93 billion in interest charges – $42 billion to pay the Treasury for its $700 billion, and another $51 billion for the Federal Reserve’s $850 billion in “cash for trash” loans.
If you are going to rob the government, I suppose the best strategy is simply to brazen it out. To listen to the mass media, there seemed no alternative but for Congress to ram the plan through just as Wall Street lobbyists had written, to “save the market from imminent meltdown,” refusing to hold hearings or take testimony from critics or listen to the hundreds of economists who have denounced the giveaway.
Hubris has reached a level of deception hardly seen since the 19th century’s giveaways to the railroad barons. “We didn’t want to be punitive,” Paulson explained in a Financial Times interview, as if the only alternative was an enormous gift. Europe did not engage in any such giveaway, yet he claimed that England and other European countries forced his hand by bailing out their banks, and that the Treasury simply wanted to keep U.S. banks competitive. Wringing his hands melodramatically, he assured the public on Monday that “We regret having to take these actions.” Banks went along with the pretense that the bailout was a worrisome socialist intrusion into the “free market,” not a giveaway to Wall Street in the plan drawn up by their own industry lobbyists. “Today’s actions are not what we ever wanted to do,” Paulson went on, “but today’s actions are what we must do to restore confidence to our financial system.” The confidence in question was a classic exercise in disinformation – a well-crafted con game.
Paulson depicted the government’s purchase of special non-voting stock as a European-style nationalization. But government’s appointed public representatives to the boards of European banks being bailed out. This has not happened in America. Bank lobbyists are reported to have approached Treasury to express their worry that their shareholdings might be diluted. But the Treasury-Democratic Party plan invests $250 billion in government credit in non-voting shares. If a recipient of this credit goes broke, the government is left the end of the line behind other creditors. Its “shares” are not real loans, but “preferred stock.” As Paulson explained on Monday: “Government owning a stake in any private U.S. company is objectionable to most Americans – me included.” So the government’s shares are not even real stock, but a special “non-voting” issue. The public stock investment will not even have voting power! So the government gets the worst of both worlds: Its “preferred stock” issue lacks the voting power that common stock has, while also lacking the standing for repayment in case of bankruptcy that bondholders enjoy. Instead of leading to more public oversight and regulation, the crisis thus has the opposite effect here: a capitulation to Wall Street, along lines that pave the ground for a much deeper debt crisis to come as the banks “earn their way out of debt” at the expense of the rest of the economy, which is receiving no debt relief!
Paulson shed the appropriate crocodile tears on behalf of homeowners and the middle class, whose interest he depicted as lying in ever-rising housing and stock market prices. “In recent weeks, the American people have felt the effects of a frozen financial system,” he explained. “They have seen reduced values in their retirement and investment accounts. They have worried about meeting payrolls and they have worried about losing their jobs.” He almost seemed about to use the timeworn widows and orphans cover story and beg Americans please not to unplug Granny from her life support system in the nursing home. We need to preserve the value of her stocks, and help everyone retire happily by restoring normal Wall Street financial engineering to make voters rich again.
European executives who steered their banks into the debt iceberg have been fired. England wiped out shareholders in Northern Rock last summer, and more recently Bradford and Bingley. But in America the culprits get to stay on. No bank stockholders are being wiped out here, despite the negative equity into which the worst risk-taking banks have fallen or the prosecutions brought against them for predatory lending, consumer fraud and related wrongdoing.
Government aid will be used to pay exorbitant salaries to the executives who drove these banks into insolvency. “Institutions that sell shares to the government will accept restrictions on executive compensation, including a clawback provision and a ban on golden parachutes,” Paulson pretended – only to qualify it by saying that the rule would apply only “during the period that Treasury holds equity issued through this program.” The executives can stay on and give themselves the usual retirement gifts after all, prompting Democratic Congressman Barney Frank to complain about how weak the Treasury restrictions are. “Compensation experts say that the provisions, though politically prudent to appease public anger, will probably have little real impact on how financial executives are paid in coming years. They predict banks will simply pay higher taxes and will find other creative ways of paying their executives as they see fit. Some say there could even be a sudden surge in compensation as soon as the government program ends, in a few years, leading to eye-popping numbers down the road. … When Congress limited the tax deductibility of cash salaries to $1 million, for example, it simply led to an explosion in stock options used as compensation and even higher total payouts.”
And speaking of stock options, the government shortchanged itself here too, despite its promises to ensure that it will shares in the gains when banks recover. Senator Schumer went so far as to assure voters that “under any capital injection plan that Treasury pursues, dividends must be eliminated, executive compensation must be constrained, and normal banking activities must be emphasized.” This was mostly hot air. England and other countries have insisted that banks not pay dividends until the government is reimbursed. The idea is to avoid using public money to pay dividends to existing shareholders and continued exorbitant salaries to their mismanagers! But the terms of the U.S. bailout is made simply call for banks not increase their dividend payouts – a policy they most likely would follow in any case in view of their earnings crunch.
Schumer verged on the ridiculous when he proclaimed: “We must operate in the same way any significant investor operates in these situations – when Warren Buffett invested in Goldman Sachs and General Electric in recent weeks, he demanded strict, but not onerous terms. The government must be similarly protective of taxpayer interests.” But Buffett obtained a much better deal for his $5 billion investment in Goldman Sachs, including warrants to buy its stock at a price below the going price when he helped rescue the company. Likewise in England, the government took stock ownership at low prices before the bailout, not at higher prices after it! But instead of exercising its warrants at the depressed prices where bank stocks stood at the time Paulson detailed the bailout terms, the U.S. Treasury would be able to exercise its warrants (equal to 15 percent of its investment) only at prices that were to be set after the banks had time to recover with the Treasury’s aid. Existing stockholders thus will benefit more than the government – which is why bank stocks soared on news of the bailout’s terms. So the government does not appear to be a good bargainer in the public interest. In fact, Paulson may be guilty of deliberate scuttling of the public interest that, as Treasury Secretary, he is supposed to defend.
Given his financial experience, Paulson had to know how deceptive his promise was in placing such emphasis on the government’s stock options, the sweetener that has made so many executives fabulously wealthy: “taxpayers will not only own shares that should be paid back with a reasonable return, but also will receive warrants for common shares in participating institutions,” he explained. But the “reasonable return” is only 5 per cent annually, just above what the government typically has to pay, not a rate reflecting anything like what the “free market” now charges Wall Street firms with negative equity. The government’s $250 billion in preferred stock will carry a dividend that rises to 9 per cent after five years, with no limit on how long the loan may be outstanding.
All I can say is, Wow! If only homeowners could get a similar break: a reduction in their interest rate to just 5 per cent, rising to a penalty rate of just 9 per cent – without the heavy penalties and late fees that Countrywide/Bank of America charges! By contrast, German banks that receive a public rescue will pay “a fee of at least 2 per cent annually of the amount guaranteed. The U.K. will charge 0.50 per cent plus the cost of default insurance on a bank's debt.”A British banker wrote to me that “the government offers 12 per cent preference shares, and ordinary shares at an absolutely huge discount to asset value to provide the cash.” But the U.S. Government agreed to exercise its stock options at the post-bailout price, not the price prior to rescue. It even gives up most of these options if the banks do repay the Treasury’s loan. On the excuse of encouraging private Wall Street investors to replace government “ownership” and “intrusion” into the marketplace, banks can “cut in half the number of common shares the government will eventually be able to purchase. That can be done if a bank sells stock by the end of 2009, and raises at least as much cash as the government is investing.”
These bailout terms suggest that what Wall Street wants is pretty much what colonialist Britain achieved for so many years in India and Africa: puppet leaders with an imperial political advisor, in America’s case a Secretary of the Treasury and a vice-regent as head of the Federal Reserve System. But what the rest of the economy needs is a genuinely free leader able to impose better and more equitable laws to write down debt, not build it up and bail out more bad loans. Within the present administration itself, Sheila Bair, head of the Federal Deposit Insurance Corporation, complained in a Wall Street Journal interview that she didn’t understand “Why there’s been such a political focus on making sure we’re not unduly helping borrowers but then we’re providing all this massive assistance at the institutional level.” She “described painstaking efforts made by lawmakers in crafting the federal Hope for Homeowners program to make sure it limited resale profits for borrowers who received affordable home loans,” by giving the government a share of the rising sales price.
The imbalance between creditor demands and debtors’ ability to pay is indeed the problem. Paulson claimed in his Monday address that he needed to get to the root of the economic problem. But in his view it is simply that the banks “are not positioned to lend as widely as is necessary to support our economy. Our goal is to see … that they can make more loans to businesses and consumers across the nation.” As he explained in his Financial Times interview, “for the first time you have seen an action that is systematic, that is getting at the root causes” of the financial crisis. But his perspective is remarkably narrow. It denies that the problem is debt above and beyond the ability of the economy at large to pay, and higher than the market price of property and assets pledged as collateral.
Creating a system for the banks to “earn their way out of debt” means creating yet more interest-bearing debt for the economy at large. Mortgage loans are what is supposed to restore high housing prices and office costs – precisely what caused the debt meltdown in the first place. Despite Paulson’s and Ms. Bair’s characterization of the present crisis as merely a liquidity problem, it is really a debt problem. The volume of real estate debt, auto debt, student loans, bank debt, pension debts by municipalities and states as well as private companies exceed their ability to pay.
Shortly after Paulson’s Monday speech a Dutch economics professor, Dirk Bezemer, wrote me that: “In my thinking I liken it to a Ponzi game where in the final stages the only way to keep things going a bit longer is to pump in more liquidity. That is a solution in the sense that it restores calm, but only in the short run. This is what we now see happening and – despite the 10 per cent stock market rally today – I am still bracing myself for the inevitable end of the Ponzi game – suddenly or as a long drawn out debt deflation.” He went on to explain what he and other associates of mine have been saying for many years now: “The actual solution is to separate the Ponzi from the non-Ponzi economy and let the pain be suffered in the first part so as to salvage what we can from the second. This means bailing out homeowners but not investment banks, etc. The qualification to this general approach is that those Ponzi game players whose demise is a real ‘system threat’ need support, but only with punitive conditionalities attached. And just like Third World countries, they won’t have a choice.
The problem of “debt pollution” is being “solved” by creating yet more debt, not by reducing its volume. Neither the Treasury nor Congress is helping to resolve this problem. The working assumption is that giving newly created government debt to the banks and Wall Street will lead to more lending to re-inflate the real estate and stock markets. But who will lend more to the one-sixth of U.S. homes already said to have fallen into negative equity territory? As debt deflation eats into the domestic market for goods and services, corporate sales and earnings will shrink, dragging down stock prices. Wall Street is in control, but its policies are so shortsighted that they are eroding the underlying economy – which is passing from democracy to oligarchy, and indeed it seems to a bipartisan financial kleptocracy.
Michael Hudson is a former Wall Street economist He was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com
http://www.counterpunch.org/hudson10202008.html
Sunday, October 19, 2008
Foreign Poll Favours Democrat But Shows Hostility to US International survey says people worldwide pinning hopes on Obama in next month's presidential
Foreign Poll Favours Democrat But Shows Hostility to US
International survey says people worldwide pinning hopes on Obama in next month's presidential election
People around the world are pinning their hopes on Barack Obama in next month's presidential election, according to an international survey published today. It shows that America can no longer count on the friendship even of its closest neighbors and allies after eight years of the Bush presidency. Only a minority in the countries surveyed describe relations with the US as friendly.
The research, carried out by eight leading newspapers including the Guardian, finds overwhelming support for the Democratic candidate. He would win by a landslide in every country surveyed, including Britain, where he is ahead of the Republican candidate John McCain by 64% to 15%.
Support for Obama is stronger than backing for John Kerry in 2004, when the Guardian participated in a similar polling exercise. Then, the Democrat was the preferred candidate of 50% of British people.
The poll, conducted by papers including France's Le Monde, Japan's Yomiuri Shimbun, Canada's La Presse and Mexico's Reforma, also shows that opinion of America has dropped sharply since the start of the decade. In France 75% say their view of the US has got worse or much worse since President George Bush replaced Bill Clinton in 2001; in Canada 77%; in Switzerland 86% and in Japan 62%.
People everywhere have turned to Obama. He would win by a simple majority in six of the eight countries surveyed, including Canada, where he leads McCain by 70%-14%, and Japan, where the margin is 61%-13%.
French voters are even more hostile to the Republican candidate, who gets the backing of only 5%, against 68% who hope Obama will win.
In British results, from ICM/Guardian polling, 67% of voters say their opinion of the US is worse than it was before the Bush presidency began. Only 21% say it has improved.
But the special relationship endures. People in Britain are more likely than in any of the other seven countries surveyed to say relations are friendly: 49% think this is the case, against 18% who say relations are tense and 30% who say they are neutral.
Support for an Obama presidency is strong among all types of voters in Britain - 64% want him to win. He is most popular among more prosperous voters, where he has 71% backing, and least popular among people at the bottom of the socio-economic scale, 54% of whom want him to become president.
Elsewhere, only in Poland and Mexico, both emerging democracies, is there any hesitation about the prospect of an Obama victory. In Poland he leads by 43% to 26% and in Mexico by 46% to 13%.
Many people now fear rather than warm to America. In France 25% of voters say relations with the US are tense, against 38% who say they are friendly and 39% who think they are neutral. In Japan only 16% say friendship and 19% tension, with 62% neutral. In no country does a majority think relations should be described as friendly.
Even America's two neighboring states are skeptical of US intentions. Only 23% of Mexicans describe relations as friendly and 28% say they are tense. In Canada, which has just re-elected a Conservative minority government, voters are strongly supportive of a Democratic presidency; 43% say relations with the US are friendly and 14% tense.
The survey also finds strong opposition to any attack on Iran and - in the six countries questioned on the issue - majority support for a rapid withdrawal of US forces from Iraq.
The possibility of military intervention in Iran is opposed by a majority everywhere except in Poland and Britain.
In Britain 47% say the next president should specifically rule out an attack, against 42% who say options should be left open.
Each newspaper involved in the survey used professional polling organizations, including ICM for the Guardian in Britain. Research was carried out this month, except in Poland, where polling took place in September.
Although the methodologies used differ - which may affect exact comparisons - the scale of Obama's lead everywhere outweighs any variation in results.
Research was carried out by: La Presse, Canada (1,500 telephone sample); the Guardian, UK (1,007 telephone, October 10-12 2008); Le Temps, Switzerland (600 telephone); Le Monde, France (1,000 face to face); Yomiuri Shimbun, Japan (3,000 face to face); Reforma, Mexico (850 telephone); Le Soir, Belgium (1,007 telephone); Gazeta Wyborcza, Poland, (1,000 telephone)
© Guardian News & Media 2008
International survey says people worldwide pinning hopes on Obama in next month's presidential election
People around the world are pinning their hopes on Barack Obama in next month's presidential election, according to an international survey published today. It shows that America can no longer count on the friendship even of its closest neighbors and allies after eight years of the Bush presidency. Only a minority in the countries surveyed describe relations with the US as friendly.
The research, carried out by eight leading newspapers including the Guardian, finds overwhelming support for the Democratic candidate. He would win by a landslide in every country surveyed, including Britain, where he is ahead of the Republican candidate John McCain by 64% to 15%.
Support for Obama is stronger than backing for John Kerry in 2004, when the Guardian participated in a similar polling exercise. Then, the Democrat was the preferred candidate of 50% of British people.
The poll, conducted by papers including France's Le Monde, Japan's Yomiuri Shimbun, Canada's La Presse and Mexico's Reforma, also shows that opinion of America has dropped sharply since the start of the decade. In France 75% say their view of the US has got worse or much worse since President George Bush replaced Bill Clinton in 2001; in Canada 77%; in Switzerland 86% and in Japan 62%.
People everywhere have turned to Obama. He would win by a simple majority in six of the eight countries surveyed, including Canada, where he leads McCain by 70%-14%, and Japan, where the margin is 61%-13%.
French voters are even more hostile to the Republican candidate, who gets the backing of only 5%, against 68% who hope Obama will win.
In British results, from ICM/Guardian polling, 67% of voters say their opinion of the US is worse than it was before the Bush presidency began. Only 21% say it has improved.
But the special relationship endures. People in Britain are more likely than in any of the other seven countries surveyed to say relations are friendly: 49% think this is the case, against 18% who say relations are tense and 30% who say they are neutral.
Support for an Obama presidency is strong among all types of voters in Britain - 64% want him to win. He is most popular among more prosperous voters, where he has 71% backing, and least popular among people at the bottom of the socio-economic scale, 54% of whom want him to become president.
Elsewhere, only in Poland and Mexico, both emerging democracies, is there any hesitation about the prospect of an Obama victory. In Poland he leads by 43% to 26% and in Mexico by 46% to 13%.
Many people now fear rather than warm to America. In France 25% of voters say relations with the US are tense, against 38% who say they are friendly and 39% who think they are neutral. In Japan only 16% say friendship and 19% tension, with 62% neutral. In no country does a majority think relations should be described as friendly.
Even America's two neighboring states are skeptical of US intentions. Only 23% of Mexicans describe relations as friendly and 28% say they are tense. In Canada, which has just re-elected a Conservative minority government, voters are strongly supportive of a Democratic presidency; 43% say relations with the US are friendly and 14% tense.
The survey also finds strong opposition to any attack on Iran and - in the six countries questioned on the issue - majority support for a rapid withdrawal of US forces from Iraq.
The possibility of military intervention in Iran is opposed by a majority everywhere except in Poland and Britain.
In Britain 47% say the next president should specifically rule out an attack, against 42% who say options should be left open.
Each newspaper involved in the survey used professional polling organizations, including ICM for the Guardian in Britain. Research was carried out this month, except in Poland, where polling took place in September.
Although the methodologies used differ - which may affect exact comparisons - the scale of Obama's lead everywhere outweighs any variation in results.
Research was carried out by: La Presse, Canada (1,500 telephone sample); the Guardian, UK (1,007 telephone, October 10-12 2008); Le Temps, Switzerland (600 telephone); Le Monde, France (1,000 face to face); Yomiuri Shimbun, Japan (3,000 face to face); Reforma, Mexico (850 telephone); Le Soir, Belgium (1,007 telephone); Gazeta Wyborcza, Poland, (1,000 telephone)
© Guardian News & Media 2008
Saturday, October 18, 2008
Europe Takes the Western Crisis Lead by William Pfaff
Europe Takes the Western Crisis Lead
William Pfaff
Paris, October 16, 2008 – Events since the beginning of August have made a deep impression on West European perceptions of European possibilities and European-American relations, now and in the future.
Accustomed to sixty years of deference to Washington's leadership (and sometimes its intimidation), Europeans justified this to themselves by the overall success of the American economic system, into which they were drawn by the Marshall Plan following the second world war, the immense development of transatlantic trade and financial integration, and since the 1990s, by globalization.
Their political subordination also had a wartime and postwar origin, reinforced by American patronage of the European Union, the insecurities of the cold war, NATO, and by simple political inertia and fear of destabilizing change.
Most important has undoubtedly been the profound loss of self-confidence and the crippled ambition inflicted upon European civilization ever since the uncontrollable blood-letting of the first world war. Americans, isolated from all that, perhaps knew better how to run the world.
The United States, as Richard Holbrook observed several years ago, became and has remained in certain respects "a European power" ever since the second world war. Europeans have often grumbled, and Charles DeGaulle during his 1950s presidency successfully reestablished French political and strategic autonomy. But France's critical position versus the U.S. has had relatively little serious consequence except by de-legitimating, so to speak, the Bush Administration's invasion of Iraq in 2003, forcing Washington to give up the attempt to win UN Security Council approval for that war.
That was six years ago, and Nicolas Sarkozy, when elected France's president in 2007, proclaimed his admiration for the U.S. and his intention to restore France to full NATO membership. But since then, much political and financial drama has occurred.
Europeans and European governments alienated from America's Iraq and Palestine-Israel policies, its use of torture and illegal imprisonment, and now being drawn by NATO towards the intractable Afghanistan-Pakistan tragedy, have become increasingly hostile to military involvements at America's side. Whatever their doubts, though, America's best friends in Europe this year mostly convinced themselves that Barack Obama was sure to be elected president, and that as Americans once sang of the Democratic presidential candidacy of the unlucky Alfred E. Smith in 1928, "Happy Days Will Be Here Again."
The Georgia fiasco in August, resolutely but unconvincingly rationalized as unprovoked Russian aggression by American supporters of further NATO expansion, confirmed doubts about American foreign policy judgement. While George Bush stayed at the Olympic Games, Nicolas Sarkozy, current president of the European Union, immediately flew back to negotiate with Russia a ceasefire in Georgia, European Union observers, and the outlines of a lasting settlement.
But political mistrust proved easier to discount than mounting signs of American government and financial community incompetence, precipitating the still unstaunched American and global credit crisis. No end seem near to the international crisis, since bank bankruptcies and emergency government financial interventions continue, whose ultimate success and costs are unforeseeable. But in these circumstances foreigners could see little in Washington but confusion and incompetence.
Treasury Secretary Henry Paulson, recently of Goldman Sachs, appeared to have been placed in charge of the U.S. government. He first recommended that the financiers who created the crisis be given $700 billion in public money to write off their own companies' bad debts. Congressional insurrection stopped that.
A new plan was offered, stuffed with electoral "earmarks" for Congressmen. Paulson named a young Goldman protégé, a recent business school graduate, to take charge of who would receive the rescue funds. The Federal Reserve Chairman seemed out of the loop. President Bush (I believe it was Gail Collins of the New York Times who said this first) popped out of the White House once a day, as from a cuckoo-clock, to make an announcement no one paid attention to.
In these circumstances, some Europeans seem to have decided that the postwar era of American leadership is over. British Prime Minister Gordon Brown temporarily nationalized British banks, took control of them, fired some of their executives, and refinanced them. Nicolas
Sarkozy immediately invited Brown (not a member of the Eurogroup), Angela Merkel, and the other European chiefs who are Eurogroup members, to Paris to agree to more or less the same policy, thus creating the framework for a (hitherto unthinkable) European economic government.
Washington then tried to copy the European program, but on free-market principles (no socialism in America!), calling in the top American banks and giving them money for preferred shares, with results as yet unknown.
The factor of uncertainty in Europe is that in January the Czech Republic takes over the EU presidency, and the Czech president and prime minister dislike the European Union.
Some have suggested that the EU somehow contrive to keep Sarkozy on, with him and Merkel in charge. Perhaps the Irish could be persuaded to take back their veto of a European constitution so that a permanent president could be elected before January. But that is unlikely. At least a year of leaderless Euro-American drift seems ahead.
© Copyright 2008 by Tribune Media Services International. All Rights Reserved.
This article comes from William PFAFF
http://www.williampfaff.com
The URL for this article is:
http://www.williampfaff.com/article.php?storyid=348
William Pfaff
Paris, October 16, 2008 – Events since the beginning of August have made a deep impression on West European perceptions of European possibilities and European-American relations, now and in the future.
Accustomed to sixty years of deference to Washington's leadership (and sometimes its intimidation), Europeans justified this to themselves by the overall success of the American economic system, into which they were drawn by the Marshall Plan following the second world war, the immense development of transatlantic trade and financial integration, and since the 1990s, by globalization.
Their political subordination also had a wartime and postwar origin, reinforced by American patronage of the European Union, the insecurities of the cold war, NATO, and by simple political inertia and fear of destabilizing change.
Most important has undoubtedly been the profound loss of self-confidence and the crippled ambition inflicted upon European civilization ever since the uncontrollable blood-letting of the first world war. Americans, isolated from all that, perhaps knew better how to run the world.
The United States, as Richard Holbrook observed several years ago, became and has remained in certain respects "a European power" ever since the second world war. Europeans have often grumbled, and Charles DeGaulle during his 1950s presidency successfully reestablished French political and strategic autonomy. But France's critical position versus the U.S. has had relatively little serious consequence except by de-legitimating, so to speak, the Bush Administration's invasion of Iraq in 2003, forcing Washington to give up the attempt to win UN Security Council approval for that war.
That was six years ago, and Nicolas Sarkozy, when elected France's president in 2007, proclaimed his admiration for the U.S. and his intention to restore France to full NATO membership. But since then, much political and financial drama has occurred.
Europeans and European governments alienated from America's Iraq and Palestine-Israel policies, its use of torture and illegal imprisonment, and now being drawn by NATO towards the intractable Afghanistan-Pakistan tragedy, have become increasingly hostile to military involvements at America's side. Whatever their doubts, though, America's best friends in Europe this year mostly convinced themselves that Barack Obama was sure to be elected president, and that as Americans once sang of the Democratic presidential candidacy of the unlucky Alfred E. Smith in 1928, "Happy Days Will Be Here Again."
The Georgia fiasco in August, resolutely but unconvincingly rationalized as unprovoked Russian aggression by American supporters of further NATO expansion, confirmed doubts about American foreign policy judgement. While George Bush stayed at the Olympic Games, Nicolas Sarkozy, current president of the European Union, immediately flew back to negotiate with Russia a ceasefire in Georgia, European Union observers, and the outlines of a lasting settlement.
But political mistrust proved easier to discount than mounting signs of American government and financial community incompetence, precipitating the still unstaunched American and global credit crisis. No end seem near to the international crisis, since bank bankruptcies and emergency government financial interventions continue, whose ultimate success and costs are unforeseeable. But in these circumstances foreigners could see little in Washington but confusion and incompetence.
Treasury Secretary Henry Paulson, recently of Goldman Sachs, appeared to have been placed in charge of the U.S. government. He first recommended that the financiers who created the crisis be given $700 billion in public money to write off their own companies' bad debts. Congressional insurrection stopped that.
A new plan was offered, stuffed with electoral "earmarks" for Congressmen. Paulson named a young Goldman protégé, a recent business school graduate, to take charge of who would receive the rescue funds. The Federal Reserve Chairman seemed out of the loop. President Bush (I believe it was Gail Collins of the New York Times who said this first) popped out of the White House once a day, as from a cuckoo-clock, to make an announcement no one paid attention to.
In these circumstances, some Europeans seem to have decided that the postwar era of American leadership is over. British Prime Minister Gordon Brown temporarily nationalized British banks, took control of them, fired some of their executives, and refinanced them. Nicolas
Sarkozy immediately invited Brown (not a member of the Eurogroup), Angela Merkel, and the other European chiefs who are Eurogroup members, to Paris to agree to more or less the same policy, thus creating the framework for a (hitherto unthinkable) European economic government.
Washington then tried to copy the European program, but on free-market principles (no socialism in America!), calling in the top American banks and giving them money for preferred shares, with results as yet unknown.
The factor of uncertainty in Europe is that in January the Czech Republic takes over the EU presidency, and the Czech president and prime minister dislike the European Union.
Some have suggested that the EU somehow contrive to keep Sarkozy on, with him and Merkel in charge. Perhaps the Irish could be persuaded to take back their veto of a European constitution so that a permanent president could be elected before January. But that is unlikely. At least a year of leaderless Euro-American drift seems ahead.
© Copyright 2008 by Tribune Media Services International. All Rights Reserved.
This article comes from William PFAFF
http://www.williampfaff.com
The URL for this article is:
http://www.williampfaff.com/article.php?storyid=348
Friday, October 17, 2008
Where Are We Now? Norman Birnbaum
Published in Europe, well noticed here
Where Are We Now? Norman Birnbaum
16 October 2008
Washington
Voting has begun. By election day on 4 November three of ten voters will have already chosen. Confronted with Obama's excellent organization, the Republicans have recurred to the strategy of the stolen election of 2000 and the ambiguous victory of 2004: systematically blocking electoral access to citizens likely to vote Democratic. The Ohio state government (Democratic) is already in a judicial conflict on the issue. In a contest which may be very close, these matters are as important as the clash of personalities, interest groups and ideas.
If we credit the polls, Senator Obama is ahead by a considerable margin nationally —and is doing well in the formerly Republican states. The difficulty is that the polls cannot be trusted. Each poll employs different methods, we cannot know who will actually vote, and the eight percent of the electorate who report they are "undecided" may indeed have decided (perhaps not to vote for Obama because he is half-black, too educated, or otherwise threatening .) Obama and his advisers are certainly not complacent, and McCain and his staff consider, rightly, that they might still win, despite his unconvincing performance in the final debate. .
The economic crisis has given Obama an advantage, by rendering McCain's (utterly dubious) credentials in foreign and military policy irrelevant. Despite a half-century of continuous Republican counter-attack on the New Deal, accompanied by the Democrats' denial of their social democracy legacy, despite the erasure of public historical memory of the New Deal's achievements---a majority of Americans think of the state as their recourse against impoverishment, as indispensable to their procuring access to education and health care. The unrelenting acceleration of the crisis has reminded many voters not only of the prosperity they are in danger of loosing, but of the decades of slow decline in their living standard that preceded it. Franklin Roosevelt won in 1932 after three years of depression, Obama may win because of a very condensed period of anxiety..
There are, however, three great differences between 1932 and 2008.
The first is that the US, a debtor nation, does not dispose of economic sovereignty. Should the Asians, Arabs and Europeans, together or separately, use their US Treasury bonds as means of economic and political pressure, any US government would comply upon pain of national bankruptcy.
The second is that our recklessly irresponsible imperial elite has burdened the nation with a colossal arms budget. (Congress, shortly before debating the 750 billion dollar bank salvation package sought by President Bush and Treasury Secretary and former Goldman Sachs head Paulson passed without question a Pentagon appropriation of nearly that much.---which did not include the extraordinary expenses of the Iraq catastrophe and the Afghan debacle. Reducing our armed forces to pay for useful social expenditures is not thought of as a plausible or even respectable proposition.).
The third is that the suspicion of many Americans that they have been lied to and cheated by our economic masters is unconnected to a coherent view of alternative economic and social arrangements. Those who depend on Federal old age pensions (Social Security) and medical insurance for seniors (Medicare), or student loans, are intellectually unable to generalize from these programs to the need for a larger welfare state. The Republicans have falsely depicted Senator Obama as a "leftist." He is a highly intelligent and cautious technocrat whose idea of "change" is of an America worthy of Harvard University's efforts on its behalf. That is much much better than McCain's increasingly convoluted befuddlement. It is entirely unclear, however, that it will suffice as the crisis deepens. A President Obama will have to learn as he goes along, and might even do so. As for a President McCain, I am reminded of Dante's words at the gates of Purgatory: lasciate ogni speranze.
It is time for the Europeans to think of themselves as possessing the capacity to act not only independently of the US but to influence it.
France and Germany have made a beginning in refusing to regard Georgia as an innocent victim of Russian rapacity, and in opposing the inclusion of Ukraine in NATO. The termination of the self- defeating western military presence in Afghanistan, European pressure to end the occupation of Iraq, decoupling Europe from the geopolitical dysfunctions and moral liabilities of the American-Israel alliance would constrain a President Obama to listen to those of his advisers who think in these terms.but who do not dare to say so. As for a President McCain, European initiatives of this kind would reduce him to impotent fury---but it would in fact be impotent.
There may be, indeed, a more immediate problem: suppose Bush, Cheney et al despite the obvious divisions in the imperial elite (with Defense Secretary Gates and even Secretary of State Rice seized by occasional attacks of rationality) decide to help McCain by initiating military action somewhere, Iran, for instance ? The Europeans could make their opposition known in ways that might stiffen Obama's spine. That is speculation. What is not speculative is that a revivification of the European social model in the context of the construction of new international economic institutions would have considerable impact upon American domestic debate. Indeed, the fascination with which the Europeans regard our election suggest that they have grasped what many Americans have been slow to learn: the old demarcations between domestic policies and international relations no longer make sense. It remains to be seen if the immediate electoral result and the subsequent course of American politics make a new sort of Transatlantic relationship possible----or terminally deepen the existing divisions.
Where Are We Now? Norman Birnbaum
16 October 2008
Washington
Voting has begun. By election day on 4 November three of ten voters will have already chosen. Confronted with Obama's excellent organization, the Republicans have recurred to the strategy of the stolen election of 2000 and the ambiguous victory of 2004: systematically blocking electoral access to citizens likely to vote Democratic. The Ohio state government (Democratic) is already in a judicial conflict on the issue. In a contest which may be very close, these matters are as important as the clash of personalities, interest groups and ideas.
If we credit the polls, Senator Obama is ahead by a considerable margin nationally —and is doing well in the formerly Republican states. The difficulty is that the polls cannot be trusted. Each poll employs different methods, we cannot know who will actually vote, and the eight percent of the electorate who report they are "undecided" may indeed have decided (perhaps not to vote for Obama because he is half-black, too educated, or otherwise threatening .) Obama and his advisers are certainly not complacent, and McCain and his staff consider, rightly, that they might still win, despite his unconvincing performance in the final debate. .
The economic crisis has given Obama an advantage, by rendering McCain's (utterly dubious) credentials in foreign and military policy irrelevant. Despite a half-century of continuous Republican counter-attack on the New Deal, accompanied by the Democrats' denial of their social democracy legacy, despite the erasure of public historical memory of the New Deal's achievements---a majority of Americans think of the state as their recourse against impoverishment, as indispensable to their procuring access to education and health care. The unrelenting acceleration of the crisis has reminded many voters not only of the prosperity they are in danger of loosing, but of the decades of slow decline in their living standard that preceded it. Franklin Roosevelt won in 1932 after three years of depression, Obama may win because of a very condensed period of anxiety..
There are, however, three great differences between 1932 and 2008.
The first is that the US, a debtor nation, does not dispose of economic sovereignty. Should the Asians, Arabs and Europeans, together or separately, use their US Treasury bonds as means of economic and political pressure, any US government would comply upon pain of national bankruptcy.
The second is that our recklessly irresponsible imperial elite has burdened the nation with a colossal arms budget. (Congress, shortly before debating the 750 billion dollar bank salvation package sought by President Bush and Treasury Secretary and former Goldman Sachs head Paulson passed without question a Pentagon appropriation of nearly that much.---which did not include the extraordinary expenses of the Iraq catastrophe and the Afghan debacle. Reducing our armed forces to pay for useful social expenditures is not thought of as a plausible or even respectable proposition.).
The third is that the suspicion of many Americans that they have been lied to and cheated by our economic masters is unconnected to a coherent view of alternative economic and social arrangements. Those who depend on Federal old age pensions (Social Security) and medical insurance for seniors (Medicare), or student loans, are intellectually unable to generalize from these programs to the need for a larger welfare state. The Republicans have falsely depicted Senator Obama as a "leftist." He is a highly intelligent and cautious technocrat whose idea of "change" is of an America worthy of Harvard University's efforts on its behalf. That is much much better than McCain's increasingly convoluted befuddlement. It is entirely unclear, however, that it will suffice as the crisis deepens. A President Obama will have to learn as he goes along, and might even do so. As for a President McCain, I am reminded of Dante's words at the gates of Purgatory: lasciate ogni speranze.
It is time for the Europeans to think of themselves as possessing the capacity to act not only independently of the US but to influence it.
France and Germany have made a beginning in refusing to regard Georgia as an innocent victim of Russian rapacity, and in opposing the inclusion of Ukraine in NATO. The termination of the self- defeating western military presence in Afghanistan, European pressure to end the occupation of Iraq, decoupling Europe from the geopolitical dysfunctions and moral liabilities of the American-Israel alliance would constrain a President Obama to listen to those of his advisers who think in these terms.but who do not dare to say so. As for a President McCain, European initiatives of this kind would reduce him to impotent fury---but it would in fact be impotent.
There may be, indeed, a more immediate problem: suppose Bush, Cheney et al despite the obvious divisions in the imperial elite (with Defense Secretary Gates and even Secretary of State Rice seized by occasional attacks of rationality) decide to help McCain by initiating military action somewhere, Iran, for instance ? The Europeans could make their opposition known in ways that might stiffen Obama's spine. That is speculation. What is not speculative is that a revivification of the European social model in the context of the construction of new international economic institutions would have considerable impact upon American domestic debate. Indeed, the fascination with which the Europeans regard our election suggest that they have grasped what many Americans have been slow to learn: the old demarcations between domestic policies and international relations no longer make sense. It remains to be seen if the immediate electoral result and the subsequent course of American politics make a new sort of Transatlantic relationship possible----or terminally deepen the existing divisions.
How the Recession Could End the Iraq War Tony Karon
TIME
10/17/08
How the Recession Could End the Iraq War
Tony Karon
John McCain has made a point throughout his campaign of pooh-poohing Barack Obama's promise to withdraw all U.S. combat forces from Iraq within 16 months of assuming office. McCain has steadfastly refused to set a withdrawal date, suggesting that to do so would be defeatist and vowing instead to bring the troops back when they've won. During Wednesday's debate, McCain saw progress in the fact that U.S. and Iraqi negotiators are close to reaching a Status of Forces agreement governing the future presence of U.S. troops there. But the agreement they're reportedly close to concluding does, in fact, set a withdrawal date: At the insistence of the Iraqis, it requires that all U.S. forces leave Iraq by the end of 2011. The schedule may be longer than Obama's, but the Iraqis appear to have walked the Bush Administration back to accept the principle of setting a departure date. The plan reportedly also requires U.S. troops to withdraw from Iraq's cities by next summer, and removes their right to continue the practice of open-ended detention of Iraqi citizens.
The agreement is not yet complete, of course. There are still points of contention over immunity for U.S. forces, and over the Iraqis' demand for the right to inspect weapons and military equipment being brought into the country "to ensure they are suitable for the security mission", as Prime Minister Nouri al-Maliki put it in an interview with The Times — i.e. to ensure that Iraq's territory is not being used as a staging ground for any U.S. action against Iran. The pact will have to be approved by Iraq's cabinet and parliament, where it could still encounter opposition. Iraqi government officials have also suggested that a new agreement could be negotiated in 2011 if conditions required it.
Still, the deal leaves little doubt that the Iraq war is being drawn to a close —and not necessarily because the U.S. has achieved its benchmarks on the ground. A new U.S. National Intelligence Estimate on Iraq, intended to guide the next U.S. president on the situation there, is reportedly near completion. Reflecting the consensus among the 16 U.S. intelligence agencies, the new NIE will reportedly warn that, contrary to the rosy picture of progress stressed by McCain on the campaign trail, the situation in Iraq remains precarious. Although violence has been reduced to its lowest levels since early 2004, U.S. intelligence officials believe that the surge involving an extra 30,000 U.S. combat troops was only one contributing factor. Other key factors in tamping down violence may yet be the cause of further violence and instability; these include the truce declared by the radical Shi'ite cleric Moqtada al-Sadr, and the anti-Qaeda alliance the U.S. forged with the Sunni insurgents of the Awakening Movement. Deep distrust remains between the Awakening Movement, many of whose members were aligned with the Saddam regime, and the Shi'ite dominated Maliki government. The recent move by the U.S. to transfer control, and responsibility for paying the wages, of the Awakening militias to Maliki's central government is likely to exacerbate those tensions.
Meanwhile, intra-Shi'ite political competition between Sadr, Maliki and the Supreme Iraqi Islamic Council — all of them backed to some degree by Iran — continues, and may intensify in local elections scheduled for early next year. Relations between Baghdad and the Kurdish autonomous region in the north remain troubled, with tension rising over the future status of the oil-rich city of Kirkuk. Indeed, General David Petraeus, the man most quoted by McCain in making his case on Iraq, has warned that the gains achieved in Iraq over the past year are "fragile" and "reversible." While the security situation has improved dramatically, progress has been limited on the political reconciliation that the military surge was intended to foster.
That assessment could back up McCain's case against a hasty withdrawal from Iraq, although the fact that the Iraqi government has demanded it makes that a more complicated argument. Then again, if the intra-Iraqi power struggle creates a new security breakdown, various Iraqi political leaders may yet see considerable value in a continued U.S. presence, if directed against their foes.
But it may not be the situation on the ground in Iraq that determines the future of the U.S. military mission there. For one thing, the fragile calm in Iraq coincides with an increasingly perilous Taliban resurgence in Afghanistan, raising pressure on the U.S. to divert more combat resources from its over-stretched military into that theater — an expanded military commitment favored by both John McCain and Barack Obama. Sending more troops to Afghanistan will require drawing down in Iraq.
Then, there's the financial crisis and looming global recession that will inevitably impose a far greater austerity on Washington. America's military deployments in Iraq and Afghanistan are expected to cost close to $200 billion for 2008 alone, and maintaining that commitment will become considerably more burdensome as Washington is forced to funnel many hundreds of billions of dollars into simply averting financial collapse. The looming global economic recession will further slash tax revenues available to the U.S. government.
A year ago, the Congressional Budget Office estimated the cost of funding the Iraq and Afghanistan wars from 2001-2017 to be around $2 trillion, or more — factoring in some $705 billion in interest payments in recognition of the fact that the war is being funded with borrowed money. (Nations typically increase taxes in order to finance protracted military conflicts; the Bush Administration, having cut taxes, has had to rely on the credit of others to wage its wars.) The current credit crisis and economic slowdown will considerably raise the pressure on the U.S. national debt, which had already grown from around $6 trillion in 2001 to near $10 trillion today.
Financial pressure is not, in itself, sufficiently strong right now to hasten a pullout from Iraq. But the fact that it coincides with a gloomy intelligence assessment of that country's political prospects, growing demands for U.S. reinforcements in Afghanistan, and the elected Iraqi government's insistence on a withdrawal deadline, suggests that the end of the U.S. mission in Iraq may be coming into view — and that its terms may fall short of victory as defined by the war's authors.
10/17/08
How the Recession Could End the Iraq War
Tony Karon
John McCain has made a point throughout his campaign of pooh-poohing Barack Obama's promise to withdraw all U.S. combat forces from Iraq within 16 months of assuming office. McCain has steadfastly refused to set a withdrawal date, suggesting that to do so would be defeatist and vowing instead to bring the troops back when they've won. During Wednesday's debate, McCain saw progress in the fact that U.S. and Iraqi negotiators are close to reaching a Status of Forces agreement governing the future presence of U.S. troops there. But the agreement they're reportedly close to concluding does, in fact, set a withdrawal date: At the insistence of the Iraqis, it requires that all U.S. forces leave Iraq by the end of 2011. The schedule may be longer than Obama's, but the Iraqis appear to have walked the Bush Administration back to accept the principle of setting a departure date. The plan reportedly also requires U.S. troops to withdraw from Iraq's cities by next summer, and removes their right to continue the practice of open-ended detention of Iraqi citizens.
The agreement is not yet complete, of course. There are still points of contention over immunity for U.S. forces, and over the Iraqis' demand for the right to inspect weapons and military equipment being brought into the country "to ensure they are suitable for the security mission", as Prime Minister Nouri al-Maliki put it in an interview with The Times — i.e. to ensure that Iraq's territory is not being used as a staging ground for any U.S. action against Iran. The pact will have to be approved by Iraq's cabinet and parliament, where it could still encounter opposition. Iraqi government officials have also suggested that a new agreement could be negotiated in 2011 if conditions required it.
Still, the deal leaves little doubt that the Iraq war is being drawn to a close —and not necessarily because the U.S. has achieved its benchmarks on the ground. A new U.S. National Intelligence Estimate on Iraq, intended to guide the next U.S. president on the situation there, is reportedly near completion. Reflecting the consensus among the 16 U.S. intelligence agencies, the new NIE will reportedly warn that, contrary to the rosy picture of progress stressed by McCain on the campaign trail, the situation in Iraq remains precarious. Although violence has been reduced to its lowest levels since early 2004, U.S. intelligence officials believe that the surge involving an extra 30,000 U.S. combat troops was only one contributing factor. Other key factors in tamping down violence may yet be the cause of further violence and instability; these include the truce declared by the radical Shi'ite cleric Moqtada al-Sadr, and the anti-Qaeda alliance the U.S. forged with the Sunni insurgents of the Awakening Movement. Deep distrust remains between the Awakening Movement, many of whose members were aligned with the Saddam regime, and the Shi'ite dominated Maliki government. The recent move by the U.S. to transfer control, and responsibility for paying the wages, of the Awakening militias to Maliki's central government is likely to exacerbate those tensions.
Meanwhile, intra-Shi'ite political competition between Sadr, Maliki and the Supreme Iraqi Islamic Council — all of them backed to some degree by Iran — continues, and may intensify in local elections scheduled for early next year. Relations between Baghdad and the Kurdish autonomous region in the north remain troubled, with tension rising over the future status of the oil-rich city of Kirkuk. Indeed, General David Petraeus, the man most quoted by McCain in making his case on Iraq, has warned that the gains achieved in Iraq over the past year are "fragile" and "reversible." While the security situation has improved dramatically, progress has been limited on the political reconciliation that the military surge was intended to foster.
That assessment could back up McCain's case against a hasty withdrawal from Iraq, although the fact that the Iraqi government has demanded it makes that a more complicated argument. Then again, if the intra-Iraqi power struggle creates a new security breakdown, various Iraqi political leaders may yet see considerable value in a continued U.S. presence, if directed against their foes.
But it may not be the situation on the ground in Iraq that determines the future of the U.S. military mission there. For one thing, the fragile calm in Iraq coincides with an increasingly perilous Taliban resurgence in Afghanistan, raising pressure on the U.S. to divert more combat resources from its over-stretched military into that theater — an expanded military commitment favored by both John McCain and Barack Obama. Sending more troops to Afghanistan will require drawing down in Iraq.
Then, there's the financial crisis and looming global recession that will inevitably impose a far greater austerity on Washington. America's military deployments in Iraq and Afghanistan are expected to cost close to $200 billion for 2008 alone, and maintaining that commitment will become considerably more burdensome as Washington is forced to funnel many hundreds of billions of dollars into simply averting financial collapse. The looming global economic recession will further slash tax revenues available to the U.S. government.
A year ago, the Congressional Budget Office estimated the cost of funding the Iraq and Afghanistan wars from 2001-2017 to be around $2 trillion, or more — factoring in some $705 billion in interest payments in recognition of the fact that the war is being funded with borrowed money. (Nations typically increase taxes in order to finance protracted military conflicts; the Bush Administration, having cut taxes, has had to rely on the credit of others to wage its wars.) The current credit crisis and economic slowdown will considerably raise the pressure on the U.S. national debt, which had already grown from around $6 trillion in 2001 to near $10 trillion today.
Financial pressure is not, in itself, sufficiently strong right now to hasten a pullout from Iraq. But the fact that it coincides with a gloomy intelligence assessment of that country's political prospects, growing demands for U.S. reinforcements in Afghanistan, and the elected Iraqi government's insistence on a withdrawal deadline, suggests that the end of the U.S. mission in Iraq may be coming into view — and that its terms may fall short of victory as defined by the war's authors.
Global crisis unlikely to hit al-Qaeda funds
PHILADELPHIA ENQUIRER
10/17/08
Global crisis unlikely to hit al-Qaeda funds
Sebastian Abbot
Associated Press -- CAIRO, Egypt - Al-Qaeda, which gets its money from the drug trade in Afghanistan and sympathizers in the oil-rich Gulf states, is likely to escape the effects of the global financial crisis.
One reason is that al-Qaeda and other Islamic extremists have been forced to avoid using banks, relying instead on less-efficient ways to move their cash around the world, analysts said.
Those methods include hand-carrying money and using informal transfer networks called hawalas.
While escaping official scrutiny, those networks also are slower and less efficient - and thus could hamper efforts to finance attacks.
"It would be inconceivable that large amounts of [extremist-linked] money would transit through the formal financial system, because of all the controls," said Ibrahim Warde, an expert on extremist financing at the Fletcher School at Tufts University.
The question of where al-Qaeda and its sympathizers get their money has long been crucial to efforts to prevent attacks. A 2004 U.S. investigation found that banks in the United Arab Emirates had unwittingly handled most of the $400,000 spent on the 9/11 attacks.
After the attacks, the United States made an aggressive push to use law-enforcement techniques to disrupt extremist financing networks and worked with allies to improve their own financial and regulatory institutions.
Al-Qaeda and the Taliban have benefited from the drug trade's growth in Afghanistan after the U.S.-led invasion in 2001, and the booming business likely will not be affected by the global slowdown.
Opium cultivation has fallen slightly this year but is still about 20 times higher than in 2001, according to the U.N. Office on Drugs and Crime.
Gen. Barry McCaffrey, the former U.S. drug czar who recently consulted with U.S. and NATO officials in Afghanistan, issued a report in July saying that al-Qaeda and the Taliban "are principally funded by what some estimate as $800 million a year derived from the huge $4 billion annual illegal production and export of opium/heroin and cannabis."
In addition, wealthy donors and Islamic charities in the oil-rich Gulf, especially Saudi Arabia, continue to be "one of the most significant sources of illicit financing for terrorism," said Matthew Levitt, a former Treasury Department terrorism expert now with the Washington Institute for Near East Policy.
The Saudis have long insisted they are doing all they can to rein in extremist financing, and U.S. officials have praised their efforts.
But, under a system known as zakat, wealthy Muslims are required to give a portion of their money to the poor. Much of that is given to Islamic charities, and U.S. officials say at least some of that money continues to be channeled to al-Qaeda and other groups.
Saudi Arabia and other Gulf countries have benefited in the last two years from a surge in oil prices from about $60 per barrel at the beginning of 2007 to more than $145 per barrel in the middle of this year. Prices have fallen almost 50 percent in the last few months in response to the global financial crisis, but not before generating hundreds of billions of dollars to oil producers.
Levitt said the covert nature of extremist financing makes it difficult to determine a direct correlation between rising oil revenues and the amount of cash al-Qaeda has on hand.
But, he said, "it stands to reason that if there is more oil revenue, there will be more revenue for all kinds of things licit and illicit."
10/17/08
Global crisis unlikely to hit al-Qaeda funds
Sebastian Abbot
Associated Press -- CAIRO, Egypt - Al-Qaeda, which gets its money from the drug trade in Afghanistan and sympathizers in the oil-rich Gulf states, is likely to escape the effects of the global financial crisis.
One reason is that al-Qaeda and other Islamic extremists have been forced to avoid using banks, relying instead on less-efficient ways to move their cash around the world, analysts said.
Those methods include hand-carrying money and using informal transfer networks called hawalas.
While escaping official scrutiny, those networks also are slower and less efficient - and thus could hamper efforts to finance attacks.
"It would be inconceivable that large amounts of [extremist-linked] money would transit through the formal financial system, because of all the controls," said Ibrahim Warde, an expert on extremist financing at the Fletcher School at Tufts University.
The question of where al-Qaeda and its sympathizers get their money has long been crucial to efforts to prevent attacks. A 2004 U.S. investigation found that banks in the United Arab Emirates had unwittingly handled most of the $400,000 spent on the 9/11 attacks.
After the attacks, the United States made an aggressive push to use law-enforcement techniques to disrupt extremist financing networks and worked with allies to improve their own financial and regulatory institutions.
Al-Qaeda and the Taliban have benefited from the drug trade's growth in Afghanistan after the U.S.-led invasion in 2001, and the booming business likely will not be affected by the global slowdown.
Opium cultivation has fallen slightly this year but is still about 20 times higher than in 2001, according to the U.N. Office on Drugs and Crime.
Gen. Barry McCaffrey, the former U.S. drug czar who recently consulted with U.S. and NATO officials in Afghanistan, issued a report in July saying that al-Qaeda and the Taliban "are principally funded by what some estimate as $800 million a year derived from the huge $4 billion annual illegal production and export of opium/heroin and cannabis."
In addition, wealthy donors and Islamic charities in the oil-rich Gulf, especially Saudi Arabia, continue to be "one of the most significant sources of illicit financing for terrorism," said Matthew Levitt, a former Treasury Department terrorism expert now with the Washington Institute for Near East Policy.
The Saudis have long insisted they are doing all they can to rein in extremist financing, and U.S. officials have praised their efforts.
But, under a system known as zakat, wealthy Muslims are required to give a portion of their money to the poor. Much of that is given to Islamic charities, and U.S. officials say at least some of that money continues to be channeled to al-Qaeda and other groups.
Saudi Arabia and other Gulf countries have benefited in the last two years from a surge in oil prices from about $60 per barrel at the beginning of 2007 to more than $145 per barrel in the middle of this year. Prices have fallen almost 50 percent in the last few months in response to the global financial crisis, but not before generating hundreds of billions of dollars to oil producers.
Levitt said the covert nature of extremist financing makes it difficult to determine a direct correlation between rising oil revenues and the amount of cash al-Qaeda has on hand.
But, he said, "it stands to reason that if there is more oil revenue, there will be more revenue for all kinds of things licit and illicit."
Georgia: The Ignored History By Robert English
The New York Review of Books
Volume 55, Number 17 · November 6, 2008
Georgia: The Ignored History
By Robert English
Zviad Gamsakhurdia, Georgia's first post-Soviet president, from 1991 to 1992, has been dead for fifteen years. But in view of his responsibility for initially provoking the South Ossetian campaign to secede from Georgia—the conflict that set off last month's war with Russia—his brief but tumultuous reign merits some fresh scrutiny. Trying to understand the Ossetian, Abkhazian, and other minorities' alienation from Georgia without reference to the extreme nationalism of Gamsakhurdia is like trying to explain Yugoslavia's collapse and Kosovo's secession from Serbia while ignoring the nationalist policies of Slobodan Milosevic. Yet in all the debate over the causes of the Russian–Georgian war, Gamsakhurdia is rarely even mentioned.
Instead, when those responsible are cited, Vladimir Putin invariably comes first. As Russian prime minister he ordered Moscow's brutal offensive into Georgia, and earlier, as president, he tacitly supported both the South Ossetian and Abkhazian secessionists. Next comes Mikheil Saakashvili, the impetuous and vocally pro-American Georgian president who gambled on a lightning strike to retake South Ossetia under pressure of escalating artillery fire from the separatists there.
Others fault President George W. Bush for championing the further expansion of NATO—already viewed by Moscow as hostile, as well as a violation of an implicit promise made at the end of the cold war—to include its strategically vital neighbors Georgia and Ukraine. And then there is Josef Stalin, the Soviet dictator who as nationalities commissar in the early 1920s laid the foundation for post-Soviet conflicts by pitting subject peoples against one another ("planting mines," as Georgians say) to strengthen the Kremlin's control.
But lying between the immediate and the distant past is the Gamsakhurdia era, beginning in the late 1980s, the years of Soviet liberalization and the rise of assertive nationalism that did much to shape subsequent Georgian politics—right up to the present. Gamsakhurdia, then mainly known in the West as a scholar and dissident, was also a fiery Georgian nationalist who, like Serbia's Milosevic, rode to power on a wave of chauvinist passions. Both were demagogues who manipulated justified popular grievances and crude popular prejudices to demonize "enemies"—a tactic that soon became a self-fulfilling prophecy.
While Milosevic's "Greater Serbia" was to be built with territory seized from neighbors Croatia and Bosnia, where Serb minorities were supposedly in mortal danger, Gamsakhurdia's "Georgia for the Georgians" would be established by curtailing the rights and autonomies enjoyed by Georgia's internal minorities, privileges he saw as divisive vestiges of the Soviet system.[1] And as he acted on that program—rising between 1988 and 1991 from opposition leader to parliamentarian to president, Georgian relations with the republic's Abkhazian and Ossetian enclaves went from being strained to being violent.
Gamsakhurdia's rhetoric provoked fear among all Georgian minorities—Adjars, Armenians, Azeris, Greeks, Russians, Abkhazians, and Ossetians. The latter two were especially concerned to protect their cultural rights and self-rule by means of the new opportunities offered by Mikhail Gorbachev's perestroika. These included free speech, multiparty elections, the devolution of power to local parliaments, and in 1991 an invitation to redraw the USSR's constitutional basis in a new union treaty.
Gamsakhurdia and his allies responded with fury. Large rallies in the Georgian capital of Tbilisi denounced the Abkhazians and Ossetians as "traitors" and "pawns of the Kremlin" while groups of angry Georgians took their protests directly to the Abkhazian and Ossetian capitals of Sukhumi and Tskhinvali. The resulting confrontations often turned violent. A 1989 move by officials in Tbilisi to shut down part of the university in Sukhumi and replace it with a branch of the Georgian State University set off more bloodshed. In response to this clash—and the Abkhazians' declaration of sovereignty—Georgian nationalists began an anti-Abkhazian rally that grew into a weeklong protest in downtown Tbilisi. That demonstration was violently suppressed by Soviet troops in April 1989 at a cost of twenty Georgian lives, further fanning Georgian passions and prompting a series of fateful steps by the Georgian parliament.
First, it passed a law making Georgian the sole official language, a measure blatantly discriminatory toward the republic's non-Georgian minorities.[2] Later in 1989, it banned parties that operated only "regionally" from participating in general elections in the Georgian republic, a transparent ploy to disenfranchise Abkhazian and South Ossetian voters.[3] In 1990, as the Ossetians moved toward secession from the soon-to-be-independent republic of Georgia, a newly elected Georgian parliament, led by Gamsakhurdia, simply revoked their autonomous status altogether. In March 1991, Gamsakhurdia banned Georgians from voting in Gorbachev's USSR-wide referendum on preserving the Soviet Union. The Abkhazians defied this ban and organized their own balloting for the referendum, while Gamsakhurdia held a separate vote on Georgia's secession from the USSR.
Some 90 percent of Georgians voted for independence, and the Abkhazians voted even more overwhelmingly to preserve the union—which they saw as the only guarantor of their autonomous rights—and, notably, were joined by large majorities of all the region's other non-Georgian peoples as well. A month later, Gamsakhurdia was elected president—he received 86 percent of the vote on a turnout of 82 percent. Almost immediately he dispatched handpicked "prefects" to take over the authority of locally appointed officials, a blow to democracy criticized even by many of his Western admirers. Large-scale interethnic violence was not far behind.
All this is a matter of record, though still little known in the West. Even less understood is the intensity of Georgian nationalism at that time. Escape from the USSR was the primary goal, accompanied by a romanticized idea of a unitary "Georgian national state." The dark side of this vision was a desire to settle scores with minorities, chiefly the Abkhazians and Ossetians, who were seen to have benefited at Georgia's expense from a Kremlin policy of "divide and rule." These groups were scorned by Gamsakhurdia as "ungrateful guests in the Georgian home." His nationalist ally, Giorgi Chan- turia, called for creation of a "theo- democracy" under which one house of parliament would be composed of the Holy Synod of the Georgian Orthodox Church. The Church's patriarch, Catholicos Ilya II, was given to incendiary rhetoric such as his claim that the 1990 flooding that devastated another minority region, Adjaria, in the southwest of the country, was God's revenge for their ancestors' conversion to Islam.[4] Gamsakhurdia, for his part, slandered Georgia's Muslim communities as "Tatardom" and also criticized Georgians' intermarriage with non-Georgians.
The Abkhazians and Ossetians, predominantly Orthodox Christians, were increasingly reviled for their defiance of Georgia's efforts to unify the country under a strong nationalist regime. The Ossetians were even accused of "bringing Bolshevism to Georgia" in the first place.[5] Russian critics of Gamsakhurdia—among them the human rights activist and Nobel Peace Prize laureate Andrei Sakharov—were savaged as "agents of Moscow." (Sakharov, who supported independence movements from the Baltics to Armenia, saw something different in Georgia. There the Soviet empire was being replaced, under Gamsakhurdia, by a "Georgian empire.") As Gamsakhurdia's megalomania grew, journalists who dared criticize him were subject to intimidation or even arrest (and their newspapers subject to censorship or closure), while Georgian state television fostered a cult of Gamsakhurdia as the national savior. And as ethnic tensions worsened and secessionist forces became stronger with each new incident of violence—for which most Georgians blindly believed their side was entirely blameless—Gamsakhurdia ranted that subversive minorities
should be chopped up, they should be burned out with a red-hot iron from the Georgian nation.... We will deal with all the traitors, hold all of them to proper account, and drive [out] all the evil enemies and non-Georgians...!"[6]
In 1990 my wife, a Newsweek correspondent, was declared "an enemy of the Georgian people" for an article critical of Gamsakhurdia. Meanwhile, as an academic working in Tbilisi, I followed the denunciations and ostracism that hounded my host—the eminent Georgian philosopher Merab Mamardashvili—to a premature death later that year. Merab's "sins" included criticism of hysterical Georgian chauvinism and also of the insulting, one-sided portrayal of Russia (and of the reformist Soviet leader Mikhail Gorbachev) in the Georgian press.[7]
As a student of Yugoslavia as well as Georgia, I was struck by Gamsakhurdia's autocratic behavior and his crackdown on liberal dissent at precisely the same moment that Serbia's Milosevic was repressing the liberal, antiwar Serbian opposition. Both Milosevic and Gamsakhurdia soon alienated many urban-educated voters and came to rely on angry rural mobs (Milosevic had his slivovitz-fueled "rent-a-crowds"; Gamsakhurdia had his so-called "black stockings," legions of adoring, middle-aged women). Both demagogues persecuted their domestic critics and blamed minority conflicts on foreign "enemies" (for Milosevic it was Germany and the Vatican, for Gamsakhurdia it was Russia).
Certainly Gamsakhurdia was nowhere near as vicious as his Serbian counterpart. Nor was he anywhere near as competent. While Milosevic effectively managed the "socialist" system for the benefit of himself and his cronies, Gamsakhurdia proved ineffective at managing even the most basic tasks of government. While Milosevic organized a corrupt economy and employed paramilitary warlords for his own nefarious purposes, Gamsakhurdia quickly lost control of both a collapsing economy and Georgia's increasingly powerful mafiosi-warlords (such as Jaba Ioseliani, a convicted bank robber and murderer). In search of both pride and plunder, the paramilitary groups of the warlords—including Ioseliani's Mkhedrioni, or "Horsemen," the Society of White George, and several others—instigated numerous clashes with Georgian minorities. Even the official Georgian National Guard (led by Gamsakhurdia ally Tengiz Kitovani, a professional artist) proved an undisciplined force that engaged in wanton destruction and civilian killings during a bloody but unsuccessful effort to suppress the South Ossetian separatists.
Kitovani and Ioseliani soon rebelled against Gamsakhurdia himself, deposing their president in a coup in January 1992. That summer, in the shadow of a gathering effort by Gamsakhurdia loyalists to regain power, the two warlords launched a violent assault on Abkhazia that backfired utterly. After a swift and devastating initial advance the invasion bogged down, distracted by Gamsakhurdia's growing insurgency. Meanwhile, with Russia now providing large-scale aid to the outgunned Abkhazian fighters, the latter quickly routed the Georgian National Guard—along with the Mkhedrioni and other Georgian paramilitary marauders—and eventually forced over 200,000 ethnic Georgians from their homes in Abkhazia.[8]
It hardly mattered that Eduard Shevardnadze, internationally admired as Gorbachev's liberal foreign minister, had returned from Moscow in March of 1992 to head a provisional Georgian government. It took many months before he was able to gain some measure of control—struggling simultaneously with an inherited war in Abkhazia, a renegade army and warlords, and Gamsakhurdia's attempted revanche. By the time of Shevardnadze's own election as Georgian president in 1995, Abkhazia and South Ossetia had long since achieved de facto independence.[9]
All this is especially tragic because it could have been avoided. Many Russians, including then-president Boris Yeltsin, were sympathetic to the non-Russian republics' desire for independence from the USSR. And many Abkhazians and Ossetians were initially hopeful of their prospects in a free, democratic Georgia. "We could have left the [Soviet] Union together, as brothers," one Ossetian leader told us in Tskhinvali in 1991. But Gamsakhurdia's aggressive nationalism and strident denunciations of "devil Russia" and its "traitorous" allies within Georgia pushed moderate Abkhazians and Ossetians into support of outright secession and of an unholy alliance with reactionary elements in the Russian military (who began arming them behind Gorbachev's and Yeltsin's backs as they struggled with their own hardliners between 1991 and 1993).[10] By the time of Putin's rise in 1999, Gamsakhurdia's rhetoric had long since become a self-fulfilling prophecy—both the Abkhazians and Ossetians had voted overwhelmingly for secession.[11] And by 1999, of course, Russian policy toward Georgia, and the broader Caucasian-Caspian region, had also become part of a larger contest for influence with the West.
None of this is to defend Moscow's manipulation of post-Soviet conflicts to dominate its neighbors—though it is vital to discern the difference in motives behind an offensive, "neo-imperial" strategy and a defensive, "anti-NATO" tactic. Nor is it to justify the devastating attack on Georgia—though Moscow was also clearly lashing out at the West, with pent-up fury for what it sees as an American strategy of isolating and encircling Russia (the attack was also, in effect, a preventive strike against two NATO bases-in-the-making in Georgia). What is important, however, is to highlight the Georgians' own initial victimization of others in a tragedy in which they ultimately became victims themselves.
Of course it is "unfair" that Georgians today reap the bitter fruits of what Gamsakhurdia sowed in years past—just as it is unfair that today's Serbs still pay for the sins of Milosevic. And certainly Gamsakhurdia was far from the coldblooded killer that Milosevic was. Yet consider the roughly one thousand South Ossetians who died resisting efforts to impose central Georgian control in 1991 and 1992; for a population of under 100,000 this represents a per capita death toll over twice as high as that which Milosevic inflicted on Kosovo. (Milosevic's Kosovo savagery took some 10,000 lives, out of a Kosovo Albanian population of nearly 2,000,000.)
Consider, too, that one of Saakashvili's first acts as president in 2004 was to ceremoniously rehabilitate Gamsakhurdia, hailing him as a "great statesman and patriot." Many in the West criticized Saakashvili's 2007 crackdown on opposition politicians and the press, but few noted this earlier insult to Georgia's restive minorities. Nor are most aware of the continuing tensions between the Tbilisi government and the country's Armenian, Azeri, and other non-Georgian peoples—many of whom sympathized with the Ossetians, not the Georgians, in the recent war—over ongoing linguistic, economic, and even religious discrimination. Certainly Saakashvili is not the extreme nationalist that Gamsakhurdia was. And along with some provocative steps, he has also made notable efforts toward reconciliation. But his purge of senior Georgian officials from the previous government, and his replacement of them by ministers and ambassadors who in some cases were barely in their teens during the Gamsakhurdia era, seems also to have purged valuable assets of experience, caution, humility, and even recent memory.
We must hope that urgent diplomatic and economic support from abroad, together with some self-critical reflection by Georgians at home, will yet help this proud, long-suffering people escape the humiliation and the debilitating cult of "innocent martyrdom" that has plagued post-Kosovo Serbia. But the Western media that blindly follow the Georgian nationalist line in discounting Ossetian and Abkhazian grievances—viewing their separatist aspirations as largely illegitimate or a Russian invention and casting the entire conflict as the Georgian David vs. Russian Goliath—serve neither the cause of truth nor reconciliation. And American officials who embrace this simplistic narrative—and who reflexively call for Georgia's rapid rearming and accelerated accession to NATO—risk further inflaming confrontation with Russia to the grave detriment of both Western and Georgian interests.
—October 8, 2008
Notes
[1]Georgian nationalists such as Gamsakhurdia simply denied the Ossetians' right to autonomous status, viewing them as recent interlopers in a historically Georgian region whose real homeland was across the border in Russia. And the Abkhazians, they noted, hardly deserved special privileges in a region where they made up barely 18 percent of the population. "That's just it," countered Abkhaz leaders. After the Georgian tyrant Stalin decimated them in the 1930s and 1940s, subsequent policies encouraging Georgians, Russians, and Armenians to emigrate to Abkhazia had reduced the Abkhazians to such a precarious position in their homeland that they required special status and cultural protections. The parallels here with polemics between Serbs and ethnic Albanians over the history and demographics of Kosovo are worth noting.
[2]The Abkhazians and Ossetians naturally used their native languages first and Russian, the Soviet lingua franca, second; only a modest percentage spoke Georgian well enough to use it as the official language.
[3]As a result of this ban, and also thanks to the minorities' growing boycott of official Tbilisi, the new Georgian parliament elected in October 1990 seated only nine non-Georgians out of a total of 245 deputies—and this in a republic where minorities made up some 30 percent of the population.
[4]On Ilya II see Fairy von Lilienfeld, "Reflections on the Current State of the Georgian Church and Nation," in Seeking God, edited by Stephen K. Batalden (Northern Illinois University Press, 1993), p. 227.
[5]For more detail on this period see Robert English, "'Internal Enemies, External Enemies': Elites, Identity, and the Tragedy of Post-Soviet Georgia," in Russia and Eastern Europe After Communism, edited by Michael Kraus and Ronald D. Liebowitz (Westview, 1996).
[6]Stuart J. Kaufman, Modern Hatreds: The Symbolic Politics of Ethnic War (Cornell University Press, 2001), p. 110.
[7]Gorbachev was widely blamed for the 1989 "Tbilisi massacre." In fact, while guilty of fumbling the investigation that followed, Gorbachev was not responsible for the crackdown. He was traveling abroad when hard-line Politburo rivals acceded to the Georgian Communist Party's request for Interior Ministry troops to "restore order," and the actual decision to use force was taken by the local commander in consultation with the Georgian Communist Party boss.
[8]Thus the fate of these Georgian refugees is very similar to that of the Serbian refugees from Croatia and Kosovo—the victims of savage wars launched ostensibly to protect them.
[9]For further detail see Alexei Zverev, "Ethnic Conflicts in the Caucasus, 1988–1994," and Ghia Nodia, "Political Turmoil in Georgia and the Ethnic Policies of Zviad Gamsakhurdia," in Contested Borders in the Caucasus, edited by Bruno Coppieters (Brussels: VUB University Press, 1996).
[10]By and large, the Soviet military's initial role was a fairly evenhanded one—acting as peacekeepers between Georgian forces and Ossetian/Abkhazian militias—and only tilted strongly in the secessionists' favor after the Georgian side's major assaults of 1991–1992. It also seems that this change resulted not from a considered decision of Gorbachev or Yeltsin, but from commanders taking advantage of the chaos that attended the Soviet collapse to punish their Georgian antagonists. By 1994, support for the Abkhazians and South Ossetians—who had repeatedly begged Moscow for support—hardened into a consistent Russian policy. On Russian policy see Svante E. Cornell, Autonomy and Conflict: Ethnoterritoriality and Separatism in the South Caucasus-Cases in Georgia (Uppsala University, 2002), pp. 182–183.
[11]The Georgian nationalist view ignores the confusion and fluidity of Soviet/Russian policy over the period of the USSR's collapse, and sees instead an early, consistent strategy of support for secession in order to cripple Georgia. In this selective and self-serving interpretation, Tbilisi's inflammatory rhetoric and discriminatory policies are absolved of blame for subsequent conflict because it was all orchestrated by Moscow from the outset.
Volume 55, Number 17 · November 6, 2008
Georgia: The Ignored History
By Robert English
Zviad Gamsakhurdia, Georgia's first post-Soviet president, from 1991 to 1992, has been dead for fifteen years. But in view of his responsibility for initially provoking the South Ossetian campaign to secede from Georgia—the conflict that set off last month's war with Russia—his brief but tumultuous reign merits some fresh scrutiny. Trying to understand the Ossetian, Abkhazian, and other minorities' alienation from Georgia without reference to the extreme nationalism of Gamsakhurdia is like trying to explain Yugoslavia's collapse and Kosovo's secession from Serbia while ignoring the nationalist policies of Slobodan Milosevic. Yet in all the debate over the causes of the Russian–Georgian war, Gamsakhurdia is rarely even mentioned.
Instead, when those responsible are cited, Vladimir Putin invariably comes first. As Russian prime minister he ordered Moscow's brutal offensive into Georgia, and earlier, as president, he tacitly supported both the South Ossetian and Abkhazian secessionists. Next comes Mikheil Saakashvili, the impetuous and vocally pro-American Georgian president who gambled on a lightning strike to retake South Ossetia under pressure of escalating artillery fire from the separatists there.
Others fault President George W. Bush for championing the further expansion of NATO—already viewed by Moscow as hostile, as well as a violation of an implicit promise made at the end of the cold war—to include its strategically vital neighbors Georgia and Ukraine. And then there is Josef Stalin, the Soviet dictator who as nationalities commissar in the early 1920s laid the foundation for post-Soviet conflicts by pitting subject peoples against one another ("planting mines," as Georgians say) to strengthen the Kremlin's control.
But lying between the immediate and the distant past is the Gamsakhurdia era, beginning in the late 1980s, the years of Soviet liberalization and the rise of assertive nationalism that did much to shape subsequent Georgian politics—right up to the present. Gamsakhurdia, then mainly known in the West as a scholar and dissident, was also a fiery Georgian nationalist who, like Serbia's Milosevic, rode to power on a wave of chauvinist passions. Both were demagogues who manipulated justified popular grievances and crude popular prejudices to demonize "enemies"—a tactic that soon became a self-fulfilling prophecy.
While Milosevic's "Greater Serbia" was to be built with territory seized from neighbors Croatia and Bosnia, where Serb minorities were supposedly in mortal danger, Gamsakhurdia's "Georgia for the Georgians" would be established by curtailing the rights and autonomies enjoyed by Georgia's internal minorities, privileges he saw as divisive vestiges of the Soviet system.[1] And as he acted on that program—rising between 1988 and 1991 from opposition leader to parliamentarian to president, Georgian relations with the republic's Abkhazian and Ossetian enclaves went from being strained to being violent.
Gamsakhurdia's rhetoric provoked fear among all Georgian minorities—Adjars, Armenians, Azeris, Greeks, Russians, Abkhazians, and Ossetians. The latter two were especially concerned to protect their cultural rights and self-rule by means of the new opportunities offered by Mikhail Gorbachev's perestroika. These included free speech, multiparty elections, the devolution of power to local parliaments, and in 1991 an invitation to redraw the USSR's constitutional basis in a new union treaty.
Gamsakhurdia and his allies responded with fury. Large rallies in the Georgian capital of Tbilisi denounced the Abkhazians and Ossetians as "traitors" and "pawns of the Kremlin" while groups of angry Georgians took their protests directly to the Abkhazian and Ossetian capitals of Sukhumi and Tskhinvali. The resulting confrontations often turned violent. A 1989 move by officials in Tbilisi to shut down part of the university in Sukhumi and replace it with a branch of the Georgian State University set off more bloodshed. In response to this clash—and the Abkhazians' declaration of sovereignty—Georgian nationalists began an anti-Abkhazian rally that grew into a weeklong protest in downtown Tbilisi. That demonstration was violently suppressed by Soviet troops in April 1989 at a cost of twenty Georgian lives, further fanning Georgian passions and prompting a series of fateful steps by the Georgian parliament.
First, it passed a law making Georgian the sole official language, a measure blatantly discriminatory toward the republic's non-Georgian minorities.[2] Later in 1989, it banned parties that operated only "regionally" from participating in general elections in the Georgian republic, a transparent ploy to disenfranchise Abkhazian and South Ossetian voters.[3] In 1990, as the Ossetians moved toward secession from the soon-to-be-independent republic of Georgia, a newly elected Georgian parliament, led by Gamsakhurdia, simply revoked their autonomous status altogether. In March 1991, Gamsakhurdia banned Georgians from voting in Gorbachev's USSR-wide referendum on preserving the Soviet Union. The Abkhazians defied this ban and organized their own balloting for the referendum, while Gamsakhurdia held a separate vote on Georgia's secession from the USSR.
Some 90 percent of Georgians voted for independence, and the Abkhazians voted even more overwhelmingly to preserve the union—which they saw as the only guarantor of their autonomous rights—and, notably, were joined by large majorities of all the region's other non-Georgian peoples as well. A month later, Gamsakhurdia was elected president—he received 86 percent of the vote on a turnout of 82 percent. Almost immediately he dispatched handpicked "prefects" to take over the authority of locally appointed officials, a blow to democracy criticized even by many of his Western admirers. Large-scale interethnic violence was not far behind.
All this is a matter of record, though still little known in the West. Even less understood is the intensity of Georgian nationalism at that time. Escape from the USSR was the primary goal, accompanied by a romanticized idea of a unitary "Georgian national state." The dark side of this vision was a desire to settle scores with minorities, chiefly the Abkhazians and Ossetians, who were seen to have benefited at Georgia's expense from a Kremlin policy of "divide and rule." These groups were scorned by Gamsakhurdia as "ungrateful guests in the Georgian home." His nationalist ally, Giorgi Chan- turia, called for creation of a "theo- democracy" under which one house of parliament would be composed of the Holy Synod of the Georgian Orthodox Church. The Church's patriarch, Catholicos Ilya II, was given to incendiary rhetoric such as his claim that the 1990 flooding that devastated another minority region, Adjaria, in the southwest of the country, was God's revenge for their ancestors' conversion to Islam.[4] Gamsakhurdia, for his part, slandered Georgia's Muslim communities as "Tatardom" and also criticized Georgians' intermarriage with non-Georgians.
The Abkhazians and Ossetians, predominantly Orthodox Christians, were increasingly reviled for their defiance of Georgia's efforts to unify the country under a strong nationalist regime. The Ossetians were even accused of "bringing Bolshevism to Georgia" in the first place.[5] Russian critics of Gamsakhurdia—among them the human rights activist and Nobel Peace Prize laureate Andrei Sakharov—were savaged as "agents of Moscow." (Sakharov, who supported independence movements from the Baltics to Armenia, saw something different in Georgia. There the Soviet empire was being replaced, under Gamsakhurdia, by a "Georgian empire.") As Gamsakhurdia's megalomania grew, journalists who dared criticize him were subject to intimidation or even arrest (and their newspapers subject to censorship or closure), while Georgian state television fostered a cult of Gamsakhurdia as the national savior. And as ethnic tensions worsened and secessionist forces became stronger with each new incident of violence—for which most Georgians blindly believed their side was entirely blameless—Gamsakhurdia ranted that subversive minorities
should be chopped up, they should be burned out with a red-hot iron from the Georgian nation.... We will deal with all the traitors, hold all of them to proper account, and drive [out] all the evil enemies and non-Georgians...!"[6]
In 1990 my wife, a Newsweek correspondent, was declared "an enemy of the Georgian people" for an article critical of Gamsakhurdia. Meanwhile, as an academic working in Tbilisi, I followed the denunciations and ostracism that hounded my host—the eminent Georgian philosopher Merab Mamardashvili—to a premature death later that year. Merab's "sins" included criticism of hysterical Georgian chauvinism and also of the insulting, one-sided portrayal of Russia (and of the reformist Soviet leader Mikhail Gorbachev) in the Georgian press.[7]
As a student of Yugoslavia as well as Georgia, I was struck by Gamsakhurdia's autocratic behavior and his crackdown on liberal dissent at precisely the same moment that Serbia's Milosevic was repressing the liberal, antiwar Serbian opposition. Both Milosevic and Gamsakhurdia soon alienated many urban-educated voters and came to rely on angry rural mobs (Milosevic had his slivovitz-fueled "rent-a-crowds"; Gamsakhurdia had his so-called "black stockings," legions of adoring, middle-aged women). Both demagogues persecuted their domestic critics and blamed minority conflicts on foreign "enemies" (for Milosevic it was Germany and the Vatican, for Gamsakhurdia it was Russia).
Certainly Gamsakhurdia was nowhere near as vicious as his Serbian counterpart. Nor was he anywhere near as competent. While Milosevic effectively managed the "socialist" system for the benefit of himself and his cronies, Gamsakhurdia proved ineffective at managing even the most basic tasks of government. While Milosevic organized a corrupt economy and employed paramilitary warlords for his own nefarious purposes, Gamsakhurdia quickly lost control of both a collapsing economy and Georgia's increasingly powerful mafiosi-warlords (such as Jaba Ioseliani, a convicted bank robber and murderer). In search of both pride and plunder, the paramilitary groups of the warlords—including Ioseliani's Mkhedrioni, or "Horsemen," the Society of White George, and several others—instigated numerous clashes with Georgian minorities. Even the official Georgian National Guard (led by Gamsakhurdia ally Tengiz Kitovani, a professional artist) proved an undisciplined force that engaged in wanton destruction and civilian killings during a bloody but unsuccessful effort to suppress the South Ossetian separatists.
Kitovani and Ioseliani soon rebelled against Gamsakhurdia himself, deposing their president in a coup in January 1992. That summer, in the shadow of a gathering effort by Gamsakhurdia loyalists to regain power, the two warlords launched a violent assault on Abkhazia that backfired utterly. After a swift and devastating initial advance the invasion bogged down, distracted by Gamsakhurdia's growing insurgency. Meanwhile, with Russia now providing large-scale aid to the outgunned Abkhazian fighters, the latter quickly routed the Georgian National Guard—along with the Mkhedrioni and other Georgian paramilitary marauders—and eventually forced over 200,000 ethnic Georgians from their homes in Abkhazia.[8]
It hardly mattered that Eduard Shevardnadze, internationally admired as Gorbachev's liberal foreign minister, had returned from Moscow in March of 1992 to head a provisional Georgian government. It took many months before he was able to gain some measure of control—struggling simultaneously with an inherited war in Abkhazia, a renegade army and warlords, and Gamsakhurdia's attempted revanche. By the time of Shevardnadze's own election as Georgian president in 1995, Abkhazia and South Ossetia had long since achieved de facto independence.[9]
All this is especially tragic because it could have been avoided. Many Russians, including then-president Boris Yeltsin, were sympathetic to the non-Russian republics' desire for independence from the USSR. And many Abkhazians and Ossetians were initially hopeful of their prospects in a free, democratic Georgia. "We could have left the [Soviet] Union together, as brothers," one Ossetian leader told us in Tskhinvali in 1991. But Gamsakhurdia's aggressive nationalism and strident denunciations of "devil Russia" and its "traitorous" allies within Georgia pushed moderate Abkhazians and Ossetians into support of outright secession and of an unholy alliance with reactionary elements in the Russian military (who began arming them behind Gorbachev's and Yeltsin's backs as they struggled with their own hardliners between 1991 and 1993).[10] By the time of Putin's rise in 1999, Gamsakhurdia's rhetoric had long since become a self-fulfilling prophecy—both the Abkhazians and Ossetians had voted overwhelmingly for secession.[11] And by 1999, of course, Russian policy toward Georgia, and the broader Caucasian-Caspian region, had also become part of a larger contest for influence with the West.
None of this is to defend Moscow's manipulation of post-Soviet conflicts to dominate its neighbors—though it is vital to discern the difference in motives behind an offensive, "neo-imperial" strategy and a defensive, "anti-NATO" tactic. Nor is it to justify the devastating attack on Georgia—though Moscow was also clearly lashing out at the West, with pent-up fury for what it sees as an American strategy of isolating and encircling Russia (the attack was also, in effect, a preventive strike against two NATO bases-in-the-making in Georgia). What is important, however, is to highlight the Georgians' own initial victimization of others in a tragedy in which they ultimately became victims themselves.
Of course it is "unfair" that Georgians today reap the bitter fruits of what Gamsakhurdia sowed in years past—just as it is unfair that today's Serbs still pay for the sins of Milosevic. And certainly Gamsakhurdia was far from the coldblooded killer that Milosevic was. Yet consider the roughly one thousand South Ossetians who died resisting efforts to impose central Georgian control in 1991 and 1992; for a population of under 100,000 this represents a per capita death toll over twice as high as that which Milosevic inflicted on Kosovo. (Milosevic's Kosovo savagery took some 10,000 lives, out of a Kosovo Albanian population of nearly 2,000,000.)
Consider, too, that one of Saakashvili's first acts as president in 2004 was to ceremoniously rehabilitate Gamsakhurdia, hailing him as a "great statesman and patriot." Many in the West criticized Saakashvili's 2007 crackdown on opposition politicians and the press, but few noted this earlier insult to Georgia's restive minorities. Nor are most aware of the continuing tensions between the Tbilisi government and the country's Armenian, Azeri, and other non-Georgian peoples—many of whom sympathized with the Ossetians, not the Georgians, in the recent war—over ongoing linguistic, economic, and even religious discrimination. Certainly Saakashvili is not the extreme nationalist that Gamsakhurdia was. And along with some provocative steps, he has also made notable efforts toward reconciliation. But his purge of senior Georgian officials from the previous government, and his replacement of them by ministers and ambassadors who in some cases were barely in their teens during the Gamsakhurdia era, seems also to have purged valuable assets of experience, caution, humility, and even recent memory.
We must hope that urgent diplomatic and economic support from abroad, together with some self-critical reflection by Georgians at home, will yet help this proud, long-suffering people escape the humiliation and the debilitating cult of "innocent martyrdom" that has plagued post-Kosovo Serbia. But the Western media that blindly follow the Georgian nationalist line in discounting Ossetian and Abkhazian grievances—viewing their separatist aspirations as largely illegitimate or a Russian invention and casting the entire conflict as the Georgian David vs. Russian Goliath—serve neither the cause of truth nor reconciliation. And American officials who embrace this simplistic narrative—and who reflexively call for Georgia's rapid rearming and accelerated accession to NATO—risk further inflaming confrontation with Russia to the grave detriment of both Western and Georgian interests.
—October 8, 2008
Notes
[1]Georgian nationalists such as Gamsakhurdia simply denied the Ossetians' right to autonomous status, viewing them as recent interlopers in a historically Georgian region whose real homeland was across the border in Russia. And the Abkhazians, they noted, hardly deserved special privileges in a region where they made up barely 18 percent of the population. "That's just it," countered Abkhaz leaders. After the Georgian tyrant Stalin decimated them in the 1930s and 1940s, subsequent policies encouraging Georgians, Russians, and Armenians to emigrate to Abkhazia had reduced the Abkhazians to such a precarious position in their homeland that they required special status and cultural protections. The parallels here with polemics between Serbs and ethnic Albanians over the history and demographics of Kosovo are worth noting.
[2]The Abkhazians and Ossetians naturally used their native languages first and Russian, the Soviet lingua franca, second; only a modest percentage spoke Georgian well enough to use it as the official language.
[3]As a result of this ban, and also thanks to the minorities' growing boycott of official Tbilisi, the new Georgian parliament elected in October 1990 seated only nine non-Georgians out of a total of 245 deputies—and this in a republic where minorities made up some 30 percent of the population.
[4]On Ilya II see Fairy von Lilienfeld, "Reflections on the Current State of the Georgian Church and Nation," in Seeking God, edited by Stephen K. Batalden (Northern Illinois University Press, 1993), p. 227.
[5]For more detail on this period see Robert English, "'Internal Enemies, External Enemies': Elites, Identity, and the Tragedy of Post-Soviet Georgia," in Russia and Eastern Europe After Communism, edited by Michael Kraus and Ronald D. Liebowitz (Westview, 1996).
[6]Stuart J. Kaufman, Modern Hatreds: The Symbolic Politics of Ethnic War (Cornell University Press, 2001), p. 110.
[7]Gorbachev was widely blamed for the 1989 "Tbilisi massacre." In fact, while guilty of fumbling the investigation that followed, Gorbachev was not responsible for the crackdown. He was traveling abroad when hard-line Politburo rivals acceded to the Georgian Communist Party's request for Interior Ministry troops to "restore order," and the actual decision to use force was taken by the local commander in consultation with the Georgian Communist Party boss.
[8]Thus the fate of these Georgian refugees is very similar to that of the Serbian refugees from Croatia and Kosovo—the victims of savage wars launched ostensibly to protect them.
[9]For further detail see Alexei Zverev, "Ethnic Conflicts in the Caucasus, 1988–1994," and Ghia Nodia, "Political Turmoil in Georgia and the Ethnic Policies of Zviad Gamsakhurdia," in Contested Borders in the Caucasus, edited by Bruno Coppieters (Brussels: VUB University Press, 1996).
[10]By and large, the Soviet military's initial role was a fairly evenhanded one—acting as peacekeepers between Georgian forces and Ossetian/Abkhazian militias—and only tilted strongly in the secessionists' favor after the Georgian side's major assaults of 1991–1992. It also seems that this change resulted not from a considered decision of Gorbachev or Yeltsin, but from commanders taking advantage of the chaos that attended the Soviet collapse to punish their Georgian antagonists. By 1994, support for the Abkhazians and South Ossetians—who had repeatedly begged Moscow for support—hardened into a consistent Russian policy. On Russian policy see Svante E. Cornell, Autonomy and Conflict: Ethnoterritoriality and Separatism in the South Caucasus-Cases in Georgia (Uppsala University, 2002), pp. 182–183.
[11]The Georgian nationalist view ignores the confusion and fluidity of Soviet/Russian policy over the period of the USSR's collapse, and sees instead an early, consistent strategy of support for secession in order to cripple Georgia. In this selective and self-serving interpretation, Tbilisi's inflammatory rhetoric and discriminatory policies are absolved of blame for subsequent conflict because it was all orchestrated by Moscow from the outset.
NATO's Afghan war of barbarity Seumas Milne
The Middle East's Leading English Language Daily
Friday 17 October 2008 (18 Shawwal 1429)
NATO's Afghan war of barbarity
Seumas Milne | The Guardian —
While the eyes of the Western world have been fixed on the global financial crisis, the military campaign that launched the war on terror has been spinning out of control. Seven years after the US and Britain began their onslaught on Afghanistan to oust the Taleban and capture Osama Bin Laden, the Taleban surround the capital, Al-Qaeda is flourishing in Pakistan and the war's sponsors have publicly fallen out about whether it has already been lost.
As the US Joint Chiefs of Staff Chairman Adm. Mike Mullen concedes that the country is locked into a "downward spiral" of corruption, lawlessness and insurgency, Britain's ambassador in Kabul, Sir Sherard Cowper-Coles, is quoted in a leaked briefing as declaring that "American strategy is destined to fail". The same diplomat who told us last year that British forces would be in Afghanistan for decades now believes foreign troops are "part of the problem, not the solution". The British commander Brig. Mark Carleton-Smith was last week even blunter. "We're not going to win this war," he said, adding that if the Taleban were prepared to "talk about a political settlement", that was "precisely the sort of progress that concludes insurgencies like this". The double-barreled duo were duly slapped down by US Defense Secretary Robert Gates for defeatism. But even Gates now publicly backs talks with the Taleban, which are in fact already taking place.
This is the conflict Western politicians and media continue to urge their reluctant populations to support as a war for civilization. In reality, it is a war of barbarity, whose contempt for the value of Afghan life has fueled the very resistance that Western military and political leaders are now unable to contain. In this year alone, for every occupation soldier killed, at least three Afghan civilians have died at the hands of occupation forces. They include the 95 people, 60 of them children, killed by a US air assault in Azizabad in August; the 47 wedding guests dismembered by US bombardment in Nangarhar in July — US forces have a particular habit of attacking weddings; and the four women and children killed in a British rocket barrage six weeks ago in Sangin.
By far the most comprehensive research into Afghan casualties over the past seven years has been carried out by Marc Herold, a US professor at the University of New Hampshire. In his latest findings, Herold estimates that the number of civilians directly killed by the US and other NATO forces since 2006, up to 3,273, is already higher than the toll exacted by the devastating three-month bombardment that ousted the Taleban regime in 2001. And over the past year civilian deaths at the hands of NATO forces have tripled, despite changes in rules of engagement.
But most telling is the political and military calculation that underlies the Afghan civilian bloodletting. "Close air support" bomb attacks called in by ground forces — which rose from 176 in 2005 to 2,926 in 2007 and are now the US tactic of choice — are between four and 10 times as deadly for Afghan civilians as ground attacks, the figures show, and airstrikes now account for 80 percent of those killed by the occupation forces.
But while 242 US and NATO ground troops have died in the war with the Taleban this year, not a single pilot has been killed in action. The trade-off could not be clearer. With troops thin on the ground and the US military up to their necks in Iraq and elsewhere, US and NATO reliance on air attacks minimizes their own casualties while guaranteeing that Afghan civilians will die in far larger numbers. It is that equation that makes a nonsense of US and British claims that their civilian victims are accidental "collateral damage", while the Taleban's use of roadside bombs, suicide attacks and classic guerrilla operations from civilian areas are a sign of their moral depravity. In real life, the escalating civilian death toll is not a mistake, but the result of a clear decision to put the lives of occupation troops before civilians; Westerners before Afghans. Given that the US government spent 10 times more on every sea otter affected by the Exxon Valdez oil spill than it does in "condolence payments" to Afghans for the killing of a family member, perhaps that shouldn't come as a surprise. But nor should it be that the occupation's cruelty is a recruiting sergeant for the Taleban. As Aga Lalai, who lost both grandparents, his wife, father, three brothers and four sisters in a US bombing in Helmand last summer, put it: "So long as there is just one 40-day-old boy remaining alive, Afghans will fight against the people who do this to us."
That doesn't just go for Afghanistan. Gordon Brown recently told British troops in Helmand: "What you are doing here prevents terrorism coming to the streets of Britain." The opposite is the case. The occupations of Afghanistan and Iraq — and the atrocities carried out against their people — are a crucial motivation for those planning terror attacks in Britain, as case after case has shown. Now the US is launching attacks inside Pakistan, the risks of further terror and destabilization can only grow. Eventually there is bound to be some sort of negotiated withdrawal as part of a wider regional and domestic settlement. But many thousands of Afghans — as well as occupying troops — look certain to be sacrificed in the meantime.
Copyright: Arab News © 2003 All rights reserved. Site designed by: arabix
Friday 17 October 2008 (18 Shawwal 1429)
NATO's Afghan war of barbarity
Seumas Milne | The Guardian —
While the eyes of the Western world have been fixed on the global financial crisis, the military campaign that launched the war on terror has been spinning out of control. Seven years after the US and Britain began their onslaught on Afghanistan to oust the Taleban and capture Osama Bin Laden, the Taleban surround the capital, Al-Qaeda is flourishing in Pakistan and the war's sponsors have publicly fallen out about whether it has already been lost.
As the US Joint Chiefs of Staff Chairman Adm. Mike Mullen concedes that the country is locked into a "downward spiral" of corruption, lawlessness and insurgency, Britain's ambassador in Kabul, Sir Sherard Cowper-Coles, is quoted in a leaked briefing as declaring that "American strategy is destined to fail". The same diplomat who told us last year that British forces would be in Afghanistan for decades now believes foreign troops are "part of the problem, not the solution". The British commander Brig. Mark Carleton-Smith was last week even blunter. "We're not going to win this war," he said, adding that if the Taleban were prepared to "talk about a political settlement", that was "precisely the sort of progress that concludes insurgencies like this". The double-barreled duo were duly slapped down by US Defense Secretary Robert Gates for defeatism. But even Gates now publicly backs talks with the Taleban, which are in fact already taking place.
This is the conflict Western politicians and media continue to urge their reluctant populations to support as a war for civilization. In reality, it is a war of barbarity, whose contempt for the value of Afghan life has fueled the very resistance that Western military and political leaders are now unable to contain. In this year alone, for every occupation soldier killed, at least three Afghan civilians have died at the hands of occupation forces. They include the 95 people, 60 of them children, killed by a US air assault in Azizabad in August; the 47 wedding guests dismembered by US bombardment in Nangarhar in July — US forces have a particular habit of attacking weddings; and the four women and children killed in a British rocket barrage six weeks ago in Sangin.
By far the most comprehensive research into Afghan casualties over the past seven years has been carried out by Marc Herold, a US professor at the University of New Hampshire. In his latest findings, Herold estimates that the number of civilians directly killed by the US and other NATO forces since 2006, up to 3,273, is already higher than the toll exacted by the devastating three-month bombardment that ousted the Taleban regime in 2001. And over the past year civilian deaths at the hands of NATO forces have tripled, despite changes in rules of engagement.
But most telling is the political and military calculation that underlies the Afghan civilian bloodletting. "Close air support" bomb attacks called in by ground forces — which rose from 176 in 2005 to 2,926 in 2007 and are now the US tactic of choice — are between four and 10 times as deadly for Afghan civilians as ground attacks, the figures show, and airstrikes now account for 80 percent of those killed by the occupation forces.
But while 242 US and NATO ground troops have died in the war with the Taleban this year, not a single pilot has been killed in action. The trade-off could not be clearer. With troops thin on the ground and the US military up to their necks in Iraq and elsewhere, US and NATO reliance on air attacks minimizes their own casualties while guaranteeing that Afghan civilians will die in far larger numbers. It is that equation that makes a nonsense of US and British claims that their civilian victims are accidental "collateral damage", while the Taleban's use of roadside bombs, suicide attacks and classic guerrilla operations from civilian areas are a sign of their moral depravity. In real life, the escalating civilian death toll is not a mistake, but the result of a clear decision to put the lives of occupation troops before civilians; Westerners before Afghans. Given that the US government spent 10 times more on every sea otter affected by the Exxon Valdez oil spill than it does in "condolence payments" to Afghans for the killing of a family member, perhaps that shouldn't come as a surprise. But nor should it be that the occupation's cruelty is a recruiting sergeant for the Taleban. As Aga Lalai, who lost both grandparents, his wife, father, three brothers and four sisters in a US bombing in Helmand last summer, put it: "So long as there is just one 40-day-old boy remaining alive, Afghans will fight against the people who do this to us."
That doesn't just go for Afghanistan. Gordon Brown recently told British troops in Helmand: "What you are doing here prevents terrorism coming to the streets of Britain." The opposite is the case. The occupations of Afghanistan and Iraq — and the atrocities carried out against their people — are a crucial motivation for those planning terror attacks in Britain, as case after case has shown. Now the US is launching attacks inside Pakistan, the risks of further terror and destabilization can only grow. Eventually there is bound to be some sort of negotiated withdrawal as part of a wider regional and domestic settlement. But many thousands of Afghans — as well as occupying troops — look certain to be sacrificed in the meantime.
Copyright: Arab News © 2003 All rights reserved. Site designed by: arabix
Thursday, October 16, 2008
The $58 Trillion Elephant in the Room by Jesse Eisinger
Credit Derivatives: The $58 Trillion in the Room
- Jesse Eisinger, Portfolio
http://www.portfolio.com/views/columns/wall-street/2008/10/15/Credit-Derivatives-Role-in-Crash
Wall Street
The $58 Trillion Elephant in the Room
by Jesse Eisinger |
The roots of this year’s financial crisis go back to a small team of bankers at J.P. Morgan in New York. Now, their invention—credit derivatives—has helped bring down Wall Street and has left Morgan with its biggest exposure of all.
At a time when the reputation of bankers has been shredded, Bill Demchak is a throwback. The day I meet him, the financial world is once again poised on the brink of destruction. The Dow Jones Industrial Average lost 358 points the day before and is already down another 150 this morning. Yet the green-eyed Demchak, in pleated khakis hiked up unfashionably high onhis waist, seems preternaturally calm—especially for a man who, unwittingly, has had a hand in bringing Wall Street to its knees.
Demchak, now the vice chairman of PNC Financial in Pittsburgh, returned to his hometown in 2002 to help rescue the bank after it became mired in an accounting scandal. Under Demchak and the rest of its new management team, PNC has avoided most of the terrible mistakes of its Wall Street peers by spurning bad mortgages, dubious off-balance-sheet deals, and questionable corporate loans. It’s now one of the best-performing banks in the country.
But before he had this life, Demchak had another, as the leader of a small group at J.P. Morgan in New York that pioneered the kind of financial instruments that eventually led to this autumn’s wreckage on Wall Street. The J.P. Morgan team created and then industrialized credit derivatives, which have enveloped the global markets, growing to a mind-numbing $58 trillion worth of credit contracts. They have spread and morphed in ways that Demchak never intended but always feared.
Long celebrated as a way for banks to diffuse their risks, the credit derivatives invented by Demchak’s team have instead multiplied them. The new credit vehicles encouraged banks and other financial firms to take on riskier loans than they should have; helped increase leverage in the global financial system; and exposed a much wider array of financial firms to the risk of default. (View an interactive timeline of derivatives.)
Credit derivatives aren’t, of course, solely to blame for the pandemic that has helped bring down Wall Street. They didn’t single-handedly force Bear Stearns and Lehman Brothers to bulk up on toxic debt, dooming them to collapse. But they made the financial world more complex and more opaque. Ultimately, they have exacerbated the market panic, as financial firms and regulators have belatedly come to grips with the enormity of the problems. Merrill Lynch ultimately capitulated to a sale because investors had no confidence that the firm had a handle on what its problems were. When the federal government took over A.I.G. in September, it was largely because of the insurance behemoth’s exposure to credit-default swaps, a type of derivative that flourished in the wake of Demchak and his team’s creations. By mid-September, Treasury Secretary Hank Paulson was forced into proposing the largest bailout in U.S. history. Securities and Exchange Commission chairman Christopher Cox (S.E.C. No Evil, October) called for regulating credit derivatives.
Morgan’s derivatives project began in the wake of the Asian financial crisis in 1997 as an attempt to protect the bank from bad loans. Demchak’s innovations worked—for his bank. Morgan came to dominate this corner of the financial world while preserving a culture of prudence. Morgan—deemed to be so safe that it snagged two of the victims of the financial-system collapse, Bear Stearns and Washington Mutual—is still swimming in credit derivatives, far more than any other firm on Wall Street, though the bank says it’s hedged. As of the second quarter of 2008, the bank had written derivatives contracts backing credit valued at $10.2 trillion, roughly three-quarters the size of the U.S. economy.
But Demchak’s innovation has a more troubling legacy. J.P. Morgan, rather than being inoculated, was actually becoming the Patient Zero of Wall Street, eventually carrying the credit virus to the far corners of the global financial system. The structure of the first derivatives deal wasn’t as solid as Demchak’s team had intended. That initial, flawed financial instrument was later replicated thousands of times by J.P. Morgan and other banks, with the same defects repeated and magnified over and over again.
The creation of credit derivatives, only a decade ago, is more responsible than anything else for binding the global financial world together more closely. Now some of the trailblazers are puzzling over what has been wrought. “How can we have a financial system so precariously balanced after such an extraordinarily profitable period?” asks Andrew Donaldson, a former colleague of Demchak’s who runs an asset management firm in London.
Demchak spends his days in an unassuming office in PNC’s headquarters, situated amid a slightly seedy collection of streets in downtown Pittsburgh. Demchak warned for years about excesses in lending and is now baffled by, and even somewhat contemptuous of, his peers’ disastrous mistakes: “At the end of the day, I’m never going to be—knock on wood—a guy you see in the paper and say, ‘Look at this stupid, self-serving decision.’ ”
Later, as he thinks back to 1997 and the days in New York when his team helped get the derivatives market off the ground, he lights up. “Oh, God,” Demchak says. “It was absolutely the best time ever in my life.”
In the mid-1990s, Demchak, along with his boss, Peter Hancock, an effervescent Briton, became converts to the closest thing the banking industry has had to a religious reformation. Back then, relationships drove the commercial-banking business. Glad-handing bankers with tight connections to corporate boardrooms made the rain.
These guys never met a loan from a corporate client they would turn down, even if they weren’t sure it would be profitable in the long run.
Hancock and Demchak’s creed was simple: Banks should know whether their loans were going to make money. The pair insisted that loans be priced to their current value in the market. Because of the legacy of the old relationship bankers, J.P. Morgan was struggling. The problem, in the view of the stock market, was that the bank had the wrong clients. They were sleepy American icons, some of whom John Pierpont Morgan himself had lent to and even helped build. Though bank officials were promising Wall Street that it could generate returns of 20 percent, the return on many of its loans was much lower, forcing the bank to run the race while dragging lead weights on its ankles.
The Asian financial crisis highlighted the problem. Morgan lost money on loans to Asian companies. That prompted the bank to take a look at all of its corporate lending practices, abroad as well as at home. When it did, top executives came to a sobering realization: Not only was J.P. Morgan not making nearly enough profit on these blue-chip corporate loans, the bank had also made far too many of them. Most weren’t loans at all but lines of credit promising funds at some later date. Hancock and Demchak realized that in a crisis, many of these companies would probably ask J.P. Morgan for access to the money they were promised. Worse, they wouldn’t do it unless they were on the brink of collapse—exactly the wrong time for a banker to make a loan. The bankers who made those loans thought the odds of that happening were too small to even consider. “The old banking mentality viewed them as riskless,” Demchak says. But the mentality was wrong.
Morgan realized it needed to act quickly to reduce its exposure. It had to free up capital for more profitable business. But it couldn’t sell the loans without alienating its longtime, blue-chip customers.
Demchak put the new religion into action. “Demchak was the first person I know of who had the vision that the credit-derivatives market could be anything like it is today,” says Charles Pardue, who worked for Demchak at J.P. Morgan before moving to a hedge fund in London.
Over the coming months, Demchak would put his assault team of math whizzes and marketers to work on fixing the problem. Within the bank, the project was called the Credit Transformation.
Demchak received crucial help from his lieutenant, Blythe Masters, a rising star and formidable presence at the bank. She interned at Morgan while still in college at Cambridge, in Britain, and joined the bank after graduating. Ultracompetitive and driven with a passion for debate, she would give talks and seminars proselytizing about the promise and power of credit derivatives, ultimately becoming their “poster child,” according to credit-markets consultant Eileen Murphy.
“When you are doing something new, it gets done only by imposing your force of will,” says a former colleague of Masters’. “She was that person.”
Wall Street likes to call its innovations “technologies” to convey a weighty sense of importance. What Demchak and Masters did was combine two of these technologies—securitization and credit derivatives—for the first time.
Securitization has been around since the 1970s. In such a transaction, a group of loans—for example, mortgage, credit card, or corporate loans—is bundled together and sliced up into pieces called tranches. The lowest portion, called the equity, is exposed to the first losses. The next slice up is exposed to the following losses, and so on, until you get to the top. The slices are usually rated by the rating agencies. (Often, the media and even some on Wall Street colloquially refer to tranches of securitizations as derivatives; they aren’t. Tranches are securities backed by a pool of cash-producing assets.)
The Demchak group’s breakthrough was to inject a little magic into standard securitizations. Instead of putting a particular loan into the sliced-up instrument—say, a 30-year loan to I.B.M.—it put a piece of J.P. Morgan’s exposure to I.B.M. into it. For this, the team used credit-default swaps, a burgeoning form of credit derivative. In a C.D.S. transaction, the buyer is protected against a default. These contracts had been floating around in small, experimental form for several years, having been created by Bankers Trust, a scrappy cowboy investment bank.
Demchak’s team was the first to take them wholesale, using credit-default swaps in a huge deal. They mashed up J.P. Morgan’s exposure to more than 300 giant corporations, created an off-balance-sheet vehicle, then sold slices of that to investors. The vehicle then protected J.P. Morgan from defaults. In effect, Morgan was paying insurance premiums to investors who now were on the hook if one of Morgan’s clients went belly-up. “The innovation of not being tied to specific loans or bonds is what made the credit-derivatives market what it is today,” says Romita Shetty, who was part of Demchak’s team at J.P. Morgan.
Development on the project continued slowly through the second half of 1997, involving painstaking and tedious legal and accounting work, quantitative analysis, and hand-holding and persuasion of banking regulators and credit-rating agencies. Demchak and Masters wanted their first deal to hit the market by the end of the year so that Morgan could get credit for it when the bank reported its earnings. The period was so intense that Masters, an avid equestrienne, at one point took a conference call from atop her horse.
Finally, in December 1997, Demchak’s team closed on this first big credit-derivatives deal, the Broad Indexed Secured Trust Offering, or Bistro for short. Insurance companies and banks, the initial customers, were enthusiastic, snapping it up in just two weeks. The deal was enormous for the time, off-loading more than $9.7 billion of J.P. Morgan’s exposure. Morgan had succeeded in reducing its balance-sheet risk and was able to free up capital to buy its stock back.
J.P. Morgan would go on to launch a credit-derivatives assembly line, becoming the Henry Ford of the new financial market. Throughout the 1990s, the bank was a major player in persuading lawmakers to allow the derivatives markets to remain unregulated—a move regulators are now reevaluating. Bistro helped J.P. Morgan traders in London kick-start the expansion of the “single-name” C.D.S. market, where individual contracts that cover just one company or entity trade hands. This market became liquid and deep by the early 2000s. “We had 100 people,” Demchak recalls. “We helped create the regulatory framework, the legal and accounting framework, and we did billions. We industrialized the product.”
J.P. Morgan continues to dominate the world of derivatives. It has derivatives contracts tied to $90 trillion of underlying securities. Of that, $10.2 trillion are credit-derivatives contracts. Those mind-boggling totals are somewhat misleading. They reflect what is called the “notional” amount in the world of derivatives, based on the underlying amount of the contract, not its current value. When offsetting contracts are taken into account, that figure is whittled down to a much smaller—though still enormous—$109 billion of derivatives, of which $26 billion are credit derivatives. That’s the amount the bank could lose if all its trading partners went out of business, an extremely remote event. But the exposure is climbing, up 17.4 percent from the end of 2007. That’s equal to 20 percent of the bank’s net worth.
Bistro “was the most sublime piece of financial engineering that was ever developed. It was breathtaking in terms of beauty and elegance,” says Satyajit Das, a risk consultant and the author of Traders, Guns, and Money, a financial history. But “in many ways,” Das adds, “J.P. Morgan created Frankenstein’s monster.”
For J.P. Morgan, Bistro worked wonderfully. But even in that first deal, the weaknesses in structured finance and credit derivatives that would come to the fore in the 2007 credit-market crash were already there.
Despite its blue-chip assets, Bistro didn’t perform pristinely. The initial slice, the equity layer that Morgan retained as a cushion against trouble, was so thin that it couldn’t weather even one default from one of the bigger companies in the bundle. That ultimately happened, wiping the slice out entirely. The investors who were one notch up, in what’s called the mezzanine layer, lost money as well. Even the buyers of the top-rated tranches, which were thought to be rock solid, had to endure bumpy periods before they got their money back.
During that first major deal, the credit-rating agencies, which were supposed to be impartial, were already deeply enmeshed in the give-and-take of the process. A former Morgan banker who helped create Bistro recalls that Standard & Poor’s was giving the bank a tough time. The rating firm would run the deal through its models, and “each time, it came up with disastrous results. We did some tinkering and all of a sudden, it could rate the deal,” the banker says.
The pattern was set. The rating agencies would become integral to the creation of the structures. Standard & Poor’s says questioning that first deal was appropriate and stands by its original rating. It further says it doesn’t get involved in structuring deals. But the close relationships between the rating agencies and the Wall Street firms were heavily criticized following widespread mortgage-related securities failures after the housing bubble burst.
After Bistro, investors and regulators embraced derivatives as ways to free up capital to make more loans. Banks around the world used the structures to off-load their own credit risk. Competitors rushed to copy Morgan and Bistro.
The knockoffs and followups were even more flawed than the original model. The second Bistro deal, in 1998, suffered credit downgrades. One of the big deals that followed fast on Bistro’s heels was York Funding, a Credit Suisse structure. “They stuffed it with the worst possible credits,” recalls a former rating-agency employee who examined the deal.
One major problem was that banks had the ability to substitute loans in and out of the structure, as long as the loans had the same credit rating. This allowed managers to scour their books for a loan that looked shaky but still retained a good credit rating and swap it in for a healthier one. The tranche’s credit rating would remain the same, making the whole deal look better on paper than it actually was.
Ultimately, the game became less about reducing risk and more about fooling regulators and the rating agencies. “From 1999 to 2000, there was a lot of innovation for innovation’s sake. A lot of products game the rating agencies and game the regulatory capital requirements,” says a former J.P. Morgan banker who was involved with Bistro.
Warning signs piled up. After the tech bubble burst in 2000, myriad similar deals performed terribly. Some were backed by corporate loans. Many were Bistro-like constructs with credit derivatives. As a class, they hadn’t made it through a cycle of corporate defaults profitably, the acid test of any stable credit product. In his recounting of the period, Das writes, “The credit models failed miserably.”
Despite the obvious failure of the first round of this wizardry, Wall Street was at it again by 2003, this time with mortgages. Investment banks sold billions of structured securities, made up mostly of housing loans to subprime customers with shaky credit. As the market got going, Wall Street bundled leveraged loans made to companies that had junk ratings from the credit-rating agencies. At the peak in 2006, Wall Street issued $89 billion worth of Bistro-like structures called synthetic collateralized-debt obligations. Many of the $415 billion worth of the main type of C.D.O. carried embedded credit derivatives as well.
It’s not surprising that they failed again. Investors and financial firms lost hundreds of billions of dollars as part of the housing and corporate loan meltdown. Only then did the credit-rating agencies come under assault for being too closely involved in helping Wall Street create the complex structures. It took until this year for the structured-finance market to come to a screeching halt.
Today, the financial markets are living in the slipstream of the Bistro deal. “People like to talk about what a shambles the banking system is. But it’s a shambles by design. You are taking on capital, reserving some of it, and lending it out. The whole system is levered,” says a former J.P. Morgan banker. After Bistro, it became more so.
The practice of crafting loans that banks had no intention of keeping on their own balance sheets wasn’t invented by J.P. Morgan, nor was the credit-derivatives market solely responsible for making it possible. Certainly, not all the lending excesses, especially in mortgages, can be laid at the feet of the complex Wall Street structures that used derivatives. But Bistro spread the popularity of this “originate and distribute” model. This experience taught the banking industry that loans designed to be sold to investors for a quick profit performed much more poorly than loans that banks had to keep.
In addition to keeping the very small piece of Bistro’s first-loss equity slice, J.P. Morgan retained part of the very top slice. Demchak’s team christened it “supersenior.” His group knew that there were risks, though slight, in keeping exposure to these slices. A.I.G., Merrill Lynch, and bond insurers MBIA and Ambac ignored them. Knowingly or not, these firms followed the Bistro deal, retaining supersenior exposure on their books to billions of dollars’ worth of structures in recent years. These companies thought—erroneously—that the slices were so unlikely to default that they needn’t set aside much capital for that eventuality.
The problem was that the underlying assets propping these slices up weren’t blue-chip loans but rather loans to subprime borrowers and junk companies. The supersenior slices turned out to be enormously risky, exposing these companies to huge losses.
Bankers have lost their heads in the past several years. The financial system has run amok. When the federal government took control of mortgage giants Fannie Mae and Freddie Mac, the takeover was deemed a “credit event,” triggering the credit-default swaps that other companies held as insurance against such an event. A week later, Lehman filed for bankruptcy, shrouding the market in an even greater fog. And then, investors in A.I.G. panicked.
- Jesse Eisinger, Portfolio
http://www.portfolio.com/views/columns/wall-street/2008/10/15/Credit-Derivatives-Role-in-Crash
Wall Street
The $58 Trillion Elephant in the Room
by Jesse Eisinger |
The roots of this year’s financial crisis go back to a small team of bankers at J.P. Morgan in New York. Now, their invention—credit derivatives—has helped bring down Wall Street and has left Morgan with its biggest exposure of all.
At a time when the reputation of bankers has been shredded, Bill Demchak is a throwback. The day I meet him, the financial world is once again poised on the brink of destruction. The Dow Jones Industrial Average lost 358 points the day before and is already down another 150 this morning. Yet the green-eyed Demchak, in pleated khakis hiked up unfashionably high onhis waist, seems preternaturally calm—especially for a man who, unwittingly, has had a hand in bringing Wall Street to its knees.
Demchak, now the vice chairman of PNC Financial in Pittsburgh, returned to his hometown in 2002 to help rescue the bank after it became mired in an accounting scandal. Under Demchak and the rest of its new management team, PNC has avoided most of the terrible mistakes of its Wall Street peers by spurning bad mortgages, dubious off-balance-sheet deals, and questionable corporate loans. It’s now one of the best-performing banks in the country.
But before he had this life, Demchak had another, as the leader of a small group at J.P. Morgan in New York that pioneered the kind of financial instruments that eventually led to this autumn’s wreckage on Wall Street. The J.P. Morgan team created and then industrialized credit derivatives, which have enveloped the global markets, growing to a mind-numbing $58 trillion worth of credit contracts. They have spread and morphed in ways that Demchak never intended but always feared.
Long celebrated as a way for banks to diffuse their risks, the credit derivatives invented by Demchak’s team have instead multiplied them. The new credit vehicles encouraged banks and other financial firms to take on riskier loans than they should have; helped increase leverage in the global financial system; and exposed a much wider array of financial firms to the risk of default. (View an interactive timeline of derivatives.)
Credit derivatives aren’t, of course, solely to blame for the pandemic that has helped bring down Wall Street. They didn’t single-handedly force Bear Stearns and Lehman Brothers to bulk up on toxic debt, dooming them to collapse. But they made the financial world more complex and more opaque. Ultimately, they have exacerbated the market panic, as financial firms and regulators have belatedly come to grips with the enormity of the problems. Merrill Lynch ultimately capitulated to a sale because investors had no confidence that the firm had a handle on what its problems were. When the federal government took over A.I.G. in September, it was largely because of the insurance behemoth’s exposure to credit-default swaps, a type of derivative that flourished in the wake of Demchak and his team’s creations. By mid-September, Treasury Secretary Hank Paulson was forced into proposing the largest bailout in U.S. history. Securities and Exchange Commission chairman Christopher Cox (S.E.C. No Evil, October) called for regulating credit derivatives.
Morgan’s derivatives project began in the wake of the Asian financial crisis in 1997 as an attempt to protect the bank from bad loans. Demchak’s innovations worked—for his bank. Morgan came to dominate this corner of the financial world while preserving a culture of prudence. Morgan—deemed to be so safe that it snagged two of the victims of the financial-system collapse, Bear Stearns and Washington Mutual—is still swimming in credit derivatives, far more than any other firm on Wall Street, though the bank says it’s hedged. As of the second quarter of 2008, the bank had written derivatives contracts backing credit valued at $10.2 trillion, roughly three-quarters the size of the U.S. economy.
But Demchak’s innovation has a more troubling legacy. J.P. Morgan, rather than being inoculated, was actually becoming the Patient Zero of Wall Street, eventually carrying the credit virus to the far corners of the global financial system. The structure of the first derivatives deal wasn’t as solid as Demchak’s team had intended. That initial, flawed financial instrument was later replicated thousands of times by J.P. Morgan and other banks, with the same defects repeated and magnified over and over again.
The creation of credit derivatives, only a decade ago, is more responsible than anything else for binding the global financial world together more closely. Now some of the trailblazers are puzzling over what has been wrought. “How can we have a financial system so precariously balanced after such an extraordinarily profitable period?” asks Andrew Donaldson, a former colleague of Demchak’s who runs an asset management firm in London.
Demchak spends his days in an unassuming office in PNC’s headquarters, situated amid a slightly seedy collection of streets in downtown Pittsburgh. Demchak warned for years about excesses in lending and is now baffled by, and even somewhat contemptuous of, his peers’ disastrous mistakes: “At the end of the day, I’m never going to be—knock on wood—a guy you see in the paper and say, ‘Look at this stupid, self-serving decision.’ ”
Later, as he thinks back to 1997 and the days in New York when his team helped get the derivatives market off the ground, he lights up. “Oh, God,” Demchak says. “It was absolutely the best time ever in my life.”
In the mid-1990s, Demchak, along with his boss, Peter Hancock, an effervescent Briton, became converts to the closest thing the banking industry has had to a religious reformation. Back then, relationships drove the commercial-banking business. Glad-handing bankers with tight connections to corporate boardrooms made the rain.
These guys never met a loan from a corporate client they would turn down, even if they weren’t sure it would be profitable in the long run.
Hancock and Demchak’s creed was simple: Banks should know whether their loans were going to make money. The pair insisted that loans be priced to their current value in the market. Because of the legacy of the old relationship bankers, J.P. Morgan was struggling. The problem, in the view of the stock market, was that the bank had the wrong clients. They were sleepy American icons, some of whom John Pierpont Morgan himself had lent to and even helped build. Though bank officials were promising Wall Street that it could generate returns of 20 percent, the return on many of its loans was much lower, forcing the bank to run the race while dragging lead weights on its ankles.
The Asian financial crisis highlighted the problem. Morgan lost money on loans to Asian companies. That prompted the bank to take a look at all of its corporate lending practices, abroad as well as at home. When it did, top executives came to a sobering realization: Not only was J.P. Morgan not making nearly enough profit on these blue-chip corporate loans, the bank had also made far too many of them. Most weren’t loans at all but lines of credit promising funds at some later date. Hancock and Demchak realized that in a crisis, many of these companies would probably ask J.P. Morgan for access to the money they were promised. Worse, they wouldn’t do it unless they were on the brink of collapse—exactly the wrong time for a banker to make a loan. The bankers who made those loans thought the odds of that happening were too small to even consider. “The old banking mentality viewed them as riskless,” Demchak says. But the mentality was wrong.
Morgan realized it needed to act quickly to reduce its exposure. It had to free up capital for more profitable business. But it couldn’t sell the loans without alienating its longtime, blue-chip customers.
Demchak put the new religion into action. “Demchak was the first person I know of who had the vision that the credit-derivatives market could be anything like it is today,” says Charles Pardue, who worked for Demchak at J.P. Morgan before moving to a hedge fund in London.
Over the coming months, Demchak would put his assault team of math whizzes and marketers to work on fixing the problem. Within the bank, the project was called the Credit Transformation.
Demchak received crucial help from his lieutenant, Blythe Masters, a rising star and formidable presence at the bank. She interned at Morgan while still in college at Cambridge, in Britain, and joined the bank after graduating. Ultracompetitive and driven with a passion for debate, she would give talks and seminars proselytizing about the promise and power of credit derivatives, ultimately becoming their “poster child,” according to credit-markets consultant Eileen Murphy.
“When you are doing something new, it gets done only by imposing your force of will,” says a former colleague of Masters’. “She was that person.”
Wall Street likes to call its innovations “technologies” to convey a weighty sense of importance. What Demchak and Masters did was combine two of these technologies—securitization and credit derivatives—for the first time.
Securitization has been around since the 1970s. In such a transaction, a group of loans—for example, mortgage, credit card, or corporate loans—is bundled together and sliced up into pieces called tranches. The lowest portion, called the equity, is exposed to the first losses. The next slice up is exposed to the following losses, and so on, until you get to the top. The slices are usually rated by the rating agencies. (Often, the media and even some on Wall Street colloquially refer to tranches of securitizations as derivatives; they aren’t. Tranches are securities backed by a pool of cash-producing assets.)
The Demchak group’s breakthrough was to inject a little magic into standard securitizations. Instead of putting a particular loan into the sliced-up instrument—say, a 30-year loan to I.B.M.—it put a piece of J.P. Morgan’s exposure to I.B.M. into it. For this, the team used credit-default swaps, a burgeoning form of credit derivative. In a C.D.S. transaction, the buyer is protected against a default. These contracts had been floating around in small, experimental form for several years, having been created by Bankers Trust, a scrappy cowboy investment bank.
Demchak’s team was the first to take them wholesale, using credit-default swaps in a huge deal. They mashed up J.P. Morgan’s exposure to more than 300 giant corporations, created an off-balance-sheet vehicle, then sold slices of that to investors. The vehicle then protected J.P. Morgan from defaults. In effect, Morgan was paying insurance premiums to investors who now were on the hook if one of Morgan’s clients went belly-up. “The innovation of not being tied to specific loans or bonds is what made the credit-derivatives market what it is today,” says Romita Shetty, who was part of Demchak’s team at J.P. Morgan.
Development on the project continued slowly through the second half of 1997, involving painstaking and tedious legal and accounting work, quantitative analysis, and hand-holding and persuasion of banking regulators and credit-rating agencies. Demchak and Masters wanted their first deal to hit the market by the end of the year so that Morgan could get credit for it when the bank reported its earnings. The period was so intense that Masters, an avid equestrienne, at one point took a conference call from atop her horse.
Finally, in December 1997, Demchak’s team closed on this first big credit-derivatives deal, the Broad Indexed Secured Trust Offering, or Bistro for short. Insurance companies and banks, the initial customers, were enthusiastic, snapping it up in just two weeks. The deal was enormous for the time, off-loading more than $9.7 billion of J.P. Morgan’s exposure. Morgan had succeeded in reducing its balance-sheet risk and was able to free up capital to buy its stock back.
J.P. Morgan would go on to launch a credit-derivatives assembly line, becoming the Henry Ford of the new financial market. Throughout the 1990s, the bank was a major player in persuading lawmakers to allow the derivatives markets to remain unregulated—a move regulators are now reevaluating. Bistro helped J.P. Morgan traders in London kick-start the expansion of the “single-name” C.D.S. market, where individual contracts that cover just one company or entity trade hands. This market became liquid and deep by the early 2000s. “We had 100 people,” Demchak recalls. “We helped create the regulatory framework, the legal and accounting framework, and we did billions. We industrialized the product.”
J.P. Morgan continues to dominate the world of derivatives. It has derivatives contracts tied to $90 trillion of underlying securities. Of that, $10.2 trillion are credit-derivatives contracts. Those mind-boggling totals are somewhat misleading. They reflect what is called the “notional” amount in the world of derivatives, based on the underlying amount of the contract, not its current value. When offsetting contracts are taken into account, that figure is whittled down to a much smaller—though still enormous—$109 billion of derivatives, of which $26 billion are credit derivatives. That’s the amount the bank could lose if all its trading partners went out of business, an extremely remote event. But the exposure is climbing, up 17.4 percent from the end of 2007. That’s equal to 20 percent of the bank’s net worth.
Bistro “was the most sublime piece of financial engineering that was ever developed. It was breathtaking in terms of beauty and elegance,” says Satyajit Das, a risk consultant and the author of Traders, Guns, and Money, a financial history. But “in many ways,” Das adds, “J.P. Morgan created Frankenstein’s monster.”
For J.P. Morgan, Bistro worked wonderfully. But even in that first deal, the weaknesses in structured finance and credit derivatives that would come to the fore in the 2007 credit-market crash were already there.
Despite its blue-chip assets, Bistro didn’t perform pristinely. The initial slice, the equity layer that Morgan retained as a cushion against trouble, was so thin that it couldn’t weather even one default from one of the bigger companies in the bundle. That ultimately happened, wiping the slice out entirely. The investors who were one notch up, in what’s called the mezzanine layer, lost money as well. Even the buyers of the top-rated tranches, which were thought to be rock solid, had to endure bumpy periods before they got their money back.
During that first major deal, the credit-rating agencies, which were supposed to be impartial, were already deeply enmeshed in the give-and-take of the process. A former Morgan banker who helped create Bistro recalls that Standard & Poor’s was giving the bank a tough time. The rating firm would run the deal through its models, and “each time, it came up with disastrous results. We did some tinkering and all of a sudden, it could rate the deal,” the banker says.
The pattern was set. The rating agencies would become integral to the creation of the structures. Standard & Poor’s says questioning that first deal was appropriate and stands by its original rating. It further says it doesn’t get involved in structuring deals. But the close relationships between the rating agencies and the Wall Street firms were heavily criticized following widespread mortgage-related securities failures after the housing bubble burst.
After Bistro, investors and regulators embraced derivatives as ways to free up capital to make more loans. Banks around the world used the structures to off-load their own credit risk. Competitors rushed to copy Morgan and Bistro.
The knockoffs and followups were even more flawed than the original model. The second Bistro deal, in 1998, suffered credit downgrades. One of the big deals that followed fast on Bistro’s heels was York Funding, a Credit Suisse structure. “They stuffed it with the worst possible credits,” recalls a former rating-agency employee who examined the deal.
One major problem was that banks had the ability to substitute loans in and out of the structure, as long as the loans had the same credit rating. This allowed managers to scour their books for a loan that looked shaky but still retained a good credit rating and swap it in for a healthier one. The tranche’s credit rating would remain the same, making the whole deal look better on paper than it actually was.
Ultimately, the game became less about reducing risk and more about fooling regulators and the rating agencies. “From 1999 to 2000, there was a lot of innovation for innovation’s sake. A lot of products game the rating agencies and game the regulatory capital requirements,” says a former J.P. Morgan banker who was involved with Bistro.
Warning signs piled up. After the tech bubble burst in 2000, myriad similar deals performed terribly. Some were backed by corporate loans. Many were Bistro-like constructs with credit derivatives. As a class, they hadn’t made it through a cycle of corporate defaults profitably, the acid test of any stable credit product. In his recounting of the period, Das writes, “The credit models failed miserably.”
Despite the obvious failure of the first round of this wizardry, Wall Street was at it again by 2003, this time with mortgages. Investment banks sold billions of structured securities, made up mostly of housing loans to subprime customers with shaky credit. As the market got going, Wall Street bundled leveraged loans made to companies that had junk ratings from the credit-rating agencies. At the peak in 2006, Wall Street issued $89 billion worth of Bistro-like structures called synthetic collateralized-debt obligations. Many of the $415 billion worth of the main type of C.D.O. carried embedded credit derivatives as well.
It’s not surprising that they failed again. Investors and financial firms lost hundreds of billions of dollars as part of the housing and corporate loan meltdown. Only then did the credit-rating agencies come under assault for being too closely involved in helping Wall Street create the complex structures. It took until this year for the structured-finance market to come to a screeching halt.
Today, the financial markets are living in the slipstream of the Bistro deal. “People like to talk about what a shambles the banking system is. But it’s a shambles by design. You are taking on capital, reserving some of it, and lending it out. The whole system is levered,” says a former J.P. Morgan banker. After Bistro, it became more so.
The practice of crafting loans that banks had no intention of keeping on their own balance sheets wasn’t invented by J.P. Morgan, nor was the credit-derivatives market solely responsible for making it possible. Certainly, not all the lending excesses, especially in mortgages, can be laid at the feet of the complex Wall Street structures that used derivatives. But Bistro spread the popularity of this “originate and distribute” model. This experience taught the banking industry that loans designed to be sold to investors for a quick profit performed much more poorly than loans that banks had to keep.
In addition to keeping the very small piece of Bistro’s first-loss equity slice, J.P. Morgan retained part of the very top slice. Demchak’s team christened it “supersenior.” His group knew that there were risks, though slight, in keeping exposure to these slices. A.I.G., Merrill Lynch, and bond insurers MBIA and Ambac ignored them. Knowingly or not, these firms followed the Bistro deal, retaining supersenior exposure on their books to billions of dollars’ worth of structures in recent years. These companies thought—erroneously—that the slices were so unlikely to default that they needn’t set aside much capital for that eventuality.
The problem was that the underlying assets propping these slices up weren’t blue-chip loans but rather loans to subprime borrowers and junk companies. The supersenior slices turned out to be enormously risky, exposing these companies to huge losses.
Bankers have lost their heads in the past several years. The financial system has run amok. When the federal government took control of mortgage giants Fannie Mae and Freddie Mac, the takeover was deemed a “credit event,” triggering the credit-default swaps that other companies held as insurance against such an event. A week later, Lehman filed for bankruptcy, shrouding the market in an even greater fog. And then, investors in A.I.G. panicked.