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Wednesday, September 30, 2009

Is the Media Exaggerating the Iranian Nuke Threat? by Juan Cole

Is the Media Exaggerating the Iranian Nuke Threat? by Juan Cole

THE ROVING EYE It's bomb, bomb, bomb Iran time

It's bomb, bomb, bomb Iran time
Israel, sundry Sunni Arab puppet rulers and dictators, the American right and the European right, these all fear Iran's regional clout and want to castigate Tehran in Thursday's nuclear talks. Iran's nuclear dossier - and new revelations about a second, not-so-secret enrichment plant - could not be a more convenient cover story for regime change. - Pepe Escobar (Sep 30, '09)

A MANUFACTURED CRISIS, Part 2 It's sanctions or bust

It's sanctions or bust
Something about the claims by the United States and its allies that Iran's nuclear program is intended to create nuclear weapons just doesn't smell right; there's obviously more than meets the eye. Whatever it is, the Barack Obama administration - of all the options on the table - wants at a minimum to impose stringent sanctions on Iran. - Jack A Smith (Sep 30, '09)

This is the second article in a three-part report.
PART 1: The facts of the matter

If Afghanistan is its test, NATO is failing

If Afghanistan is its test, NATO is failing

As it celebrates its 60th birthday this year, the North Atlantic Treaty Organization is cracking, with its internal politics having become fractious to the point of dysfunction. What was once billed as the most powerful military alliance in history will surely outlive its failures in Afghanistan and its adjustment to new global threats. But it may survive in name alone. - John Feffer (Sep 30, '09)

Why Are We Lying to Ourselves About Our Catastrophic Economic Meltdown? Arun Gupta, AlterNet

Why Are We Lying to Ourselves About Our Catastrophic Economic Meltdown?
Arun Gupta, AlterNet
PEEK: Sorry, it's not over yet. This downturn will be severe and long-lasting, and profoundly re-shape our lives, culture, society and the world.

The U.S. and Europe Have Propped Up So Many Corrupt "Democracies" That the Word Is Losing Meaning

The U.S. and Europe Have Propped Up So Many Corrupt "Democracies" That the Word Is Losing Meaning
Arundhati Roy,
World: What's next in a world where democracy has been so hollowed out?

State of the global economy

State of the global economy:

America has passed on the baton
Jeffrey Sachs, Financial Times, September 29, 2009
The G20 is an experiment. On its makeshift scaffolding the success of the planet now rests, writes Jeffrey Sachs.

The ''New Normal'' Comes To Asia
Robyn Meredith, Forbes, September 30, 2009
A U.S. savings spree is crimping the global economy.

Global Trade Alert
Thomas F. Cooley, Forbes, September 30, 2009
The G-20 continues its hypocrisy on foreign commerce.

The G20, The IMF, And Legitimacy
Simon Johnson, The Baseline Scenario, September 29, 2009
It would be much better to have a structure in which all countries were represented, probably with some weighting according to their economic and financial importance in the world.

IMF warns of further recession risks By Chris Giles in Istanbul

IMF warns of further recession risks

By Chris Giles in Istanbul

Banks round the world have still to reveal about half of their likely losses resulting from the financial and economic crisis, the International Monetary Fund said on Wednesday, warning that there was still a “significant” risk of another downward lurch in the global recession.

Tuesday, September 29, 2009

It's the Balance of Power, Stupid! Washington Needs to Adjust to the New Global Reality by Leon Hadar

It's the Balance of Power, Stupid!

Washington Needs to Adjust to the New Global Reality

Historians agree that Britain's rise as a pre-eminent global power came as a response to changing circumstances and not as a part of a grand master plan; Britain, it has been said, stumbled into an empire. But the converse was also true: the dismantling of the British Empire wasn't a linear process involving a manageable and steady decline in its military and economic power; instead it had a haphazard muddling through quality. British leaders weren't aware that Rule Britannia was already history even after the fat lady had sung that it was over.

Indeed, Prime Minister Winston Churchill who had led his nation into an impressive military victory in World War II, confident that the defeat of Nazi Germany would help save the British Empire, failed to recognize that the enormous military and economic costs of the war had actually created the conditions for the liquidation of the empire, starting with the withdrawal from Palestine and the "loss" of India after the war.

But while the sun was setting on the British Empire, members of its political elite continued to live under the illusion that their nation had remained a paramount global power. If you traveled in a time machine to London 1949 and attended a debate in the British Parliament, browsed through the pages of the Times or listened to a BBC news program you would come across numerous references to Britain as a Great or "superpower,"; a term that was applied to the United States and the Soviet Union after World War II. And if you encountered diplomats in His and (after 1953) Her Majesty's Diplomatic Service and bankers in the City of London, you wouldn't be surprised if they continued to behave as though the world was still their domain to rule.

It was the humiliating abandonment of the Anglo-French invasion of Suez in collusion with Israel in 1956 that proved to be the turning point in Britain's retreat from empire and ensured that London would never again attempt global military action without first securing the acquiescence of Washington. The time lag between the effective end of the British Empire and the recognition that indeed it was all over, proved to be quite lengthy.

The concept of "recognition lag" is familiar to economists. It refers to the time lag between when an actual economic shock, such as a sudden boom or bust, occurs and when it is recognized by economists, central bankers and the government, like when officials signal a recession in the economy several months after it has actually begun.

And just like changes in economic conditions, changes in the global status and power of nations, are not always immediately apparent, especially to the politicians and the generals who yield that power and to the journalists who cover them. That the elites continue to share such misconceptions about their nation's ability to exert global influence has less to do with the power of inertia and more with the vested interests they have in maintaining the status-quo that could be threatened by challenges at home and abroad.

While no one is comparing the global political, economic and military status of the United States to that of Great Britain after World War II, there is an eerie resemblance between the resistance of officials, lawmakers and pundits in London 1949 and that of their contemporary counterparts in Washington 2009 to adjust their nation's foreign policies to the changing global balance of power. That may explain why so many members of the U.S. foreign policy establishment seem to be so depressed in face of the Obama Administration's current difficulties in dictating global developments, ranging from the military quagmires in Iraq and Afghanistan, Iran's nuclear aspirations and the deadlocked Israel/Palestine peace process to the stalled negotiations on global trade liberalization (the Doha Round), the efforts to reach an international agreement on climate change and the global financial imbalances between the U.S. and China. Where is U.S. leadership on this or that global policy issue? Why can't the Obama Administration "do something" to resolve this or that international crisis?

As expected, neoconservative critics depict President Barack Obama as an idealistic peacenik, if not a 1930's-style appeaser. They blame the perceived erosion in U.S.' ability to call the shots around the world on Obama's alleged failure to stand-up to Russia (by abandoning the missile shield program in Eastern Europe), to Iran (by trying to engage it), to Venezuela (by shaking hands with Hugo Chavez) and to Al Qaeda (by overturning torture practices), and on his supposed betrayal of allies (Israel, Georgia, Poland, the Czech Republic). Not to mention Obama's refusal to launch new crusades against Islamofascism, to promote the Freedom Agenda in the Greater Middle East and to annoy the commies in Beijing on a regular basis.

That's rich coming from the guys at the Weekly Standard and the American Enterprise Institute (AEI). After all, it was the mess that the Bush administration, guided by these neoconservatives, had made in the Greater Middle East -- where US military power was overstretched to the maximum, and where American policies helped strengthen Iran and its surrogates in Iraq, Lebanon and Palestine -- coupled with the dramatic loss of American financial resources, that has produced a long-term transformation in the balance of power in the Middle East and worldwide, and has significantly eroded Washington's geo-strategic and geo-economic clout. In fact, the increasing wariness of the American public regarding new US military interventions, as a consequence of the wars in Iraq and Afghanistan, and the expanding U.S. deficits would have made it difficult even for a President John McCain to promote an aggressive U.S. policy in the Middle East and elsewhere.

That Obama finds it so difficult to press Israel's Benjamin Netanyahu, Iran's Mahmoud Ahmadinejad and Afghanistan's Hamid Karzai to change their policies may have to do with the fact that unlike many of the elites in Washington, the above and other foreign leaders have succeeded in deconstructing the current geo-strategic reality and recognized that the global balance of power has been shifting and that U.S. ability to exert its diplomatic and military leverage over them has been constrained. Let's hope that these changes will also be recognized in Washington as soon as possible, and that unlike the leaders of the British Empire, those in charge of Pax Americana will have enough time to readjust to the new global reality.

Read more at:

The Neocons Make a Comeback - Bret Stephens, Wall Street Journal

The Neocons Make a Comeback - Bret Stephens, Wall Street Journal: The neocons are back because Mahmoud Ahmadinejad, Kim Jong Il and Vladimir Putin never went away. A star may have shone in the east the day Barack Obama became president. But these three kings, at least, have yet to proffer the usual gifts of gold and incense and myrrh.

Waiting for 'smart power' – Marc Lynch, Foreign Policy

Waiting for 'smart power' – Marc Lynch, Foreign Policy: "The Obama administration came in with a unique promise to transform America's public diplomacy and global engagement. Obama himself captivated international attention and created a fresh start to reconfigure American relationships. His conception of a global engagement rooted in 'mutual interest and mutual respect' beautifully captured this potential. The people around Obama really seemed to understand the appropriate role of public diplomacy and strategic communications -- from Hillary Clinton's 'smart power'

and Robert Gates's call to build State Department capacity to key actors at the NSC. Obama's personal interventions have been fantastic -- the interviews, the speeches, the key symbolic gestures (such as promising to end torture and close Gitmo). But this makes it all the more baffling that the government as a whole has so often failed to capitalize on the openings these moves have created. … I don't know why it has proven so difficult for the U.S. government to mount public diplomacy and strategic communications campaigns in support of key administration policy goals. Is it something about the organization of the government, leadership, or the allocation of the resources? Is it that deeds have not kept up with words, harming the credibility of such communications campaigns? Is it the cultural clash between traditional public diplomacy and the demands of goal-oriented strategic communications? Is it that the State Department hasn't stepped up as the Pentagon's strategic communications operations have been scaled back? Is it a backlash against the over-selling of stratetic communications in recent years? Or is it something else?"

Security Council Adopts Nuclear Weapons Resolution Glenn Kessler and Mary Beth Sheridan, The Washington Post

Security Council Adopts Nuclear Weapons Resolution
Glenn Kessler and Mary Beth Sheridan, The Washington Post
The U.N. Security Council unanimously adopted a U.S-drafted resolution Thursday morning that affirms many of the steps President Obama plans to pursue as part of his vision for an eventual "world without nuclear weapons."
Full Article

* Two First Steps on Nuclear Weapons

* UN Nuclear Talks

Can Sanctions Work Against Iran? George Perkovich, The New York Times

Can Sanctions Work Against Iran?
George Perkovich, The New York Times
President Obama and the leaders of Britain and France on Friday accused Iran of building an underground plant to manufacture nuclear fuel and hiding the operation from international weapons inspectors for years.
Full Article

What Else Is Iran Hiding? Nima Gerami and James M. Acton, Foreign Policy

What Else Is Iran Hiding?
Nima Gerami and James M. Acton, Foreign Policy
Finding himself caught in a sudden media storm while in New York last week, Iranian President Mahmoud Ahmadinejad tried to defend his government's construction of a second centrifuge facility, buried inside a mountain near the city of Qom.
Full Article

* Iran Violated International Obligations on Qom Facility

Iran Pressured Over New Plant Glenn Kessler, The Washington Post

Iran Pressured Over New Plant
Glenn Kessler, The Washington Post
AhmadinejadEditor's Note: The location of Iran's clandestine centrifuge facility, as provided by the Institute for Science and International Security (ISIS), has not been confirmed by Iran, the United States, or the International Atomic Energy Agency.

At talks scheduled for Thursday in Geneva with Iran, the United States and five other major powers will demand immediate and unfettered access to the newly exposed nuclear facility in Iran, including access to people and documents involved in its construction, and they will insist that Tehran abide by international rules to reveal such projects before construction begins, Obama administration officials said Saturday.
Full Article

* ISIS Imagery Brief: Possible Qom Enrichment Facility Sites (PDF)

* Politico Q&A: Nuclear Iran

* Washington Post Q&A: Iran's Nuclear Program



The government's assertion of the state secrets privilege in a pending lawsuit brought by a former Drug Enforcement Administration agent will not be affected by the new Attorney General policy limiting the use of the privilege, the Justice Department said last week, because it is already in compliance with the new policy.

In a September 24 appellate brief (pdf) in the case of Horn v. Huddle, Justice Department attorneys urged an appeals court to overturn a lower court ruling that would authorize the parties in the lawsuit to disclose classified information to their attorneys. The Department also defended its use of the state secrets privilege.

An August 26 ruling in the case held that the parties' counsel had a "need to know" the classified information possessed by their clients, and the court therefore directed the government to authorize the sharing of that information.

The government immediately objected. "The district court's extraordinary order -- compelling the government to grant security clearances and to authorize disclosure of classified national security information to private counsel... -- unnecessarily usurps the Executive Branch's authority and responsibility to protect from disclosure classified national security information as to which the state secrets privilege has been invoked," the government argued in its September 24 brief.

The government also declared that the Attorney General's new policy limiting the use of the state secrets privilege, which takes effect on October 1, would have no impact on the present case.

"The assertion of the privilege in this case satisfies the standards in the new policy concerning the applicable legal standards, narrow tailoring, and limitations on the assertion of the privilege. Moreover, the privilege as invoked in this case has been carefully reviewed by senior Department of Justice officials, who have determined that invocation of the privilege in this litigation is warranted," the government brief stated.

Mr. Delusional Web Exclusive by Nikolas K. Gvosdev Obama thinks Russia is going to help him denuclearize Iran. Don’t bet on it.

Mr. Delusional Web Exclusive
by Nikolas K. Gvosdev
Obama thinks Russia is going to help him denuclearize Iran. Don’t bet on it.

The End of Socialism Web Exclusive by Jacob Heilbrunn

The End of Socialism Web Exclusive
by Jacob Heilbrunn
Germany’s voters handed a big victory this weekend to conservatives and free marketeers. Is socialism finished in Europe?

AFGHANISTAN Weighing The Options

Weighing The Options

As the debate over Afghanistan intensifies, there is one thing nearly everyone in Washington agrees on: President Obama inherited a serious and deteriorating situation in Afghanistan, the result of years of inattention and neglect by the Bush administration, in addition to a refusal to send additional troops requested by previous commanders. This past Friday, Gen. Stanley McChrystal, the top U.S. commander in Afghanistan, submitted the results of his months-long strategy review, "which held that his mission would likely fail if he is not given reinforcements for his force," now more than 100,000 strong, including about 68,000 Americans. The White House "says it wants to review the entire strategy for the region before considering McChrystal's request." This Sunday on CNN, Secretary of Defense Robert Gates said that the United States has faced major difficulties in Afghanistan because the previous president did not have the same kind of "comprehensive strategy" that Obama does for the effort. Gates said that he thought "the strategy the president put forward in late March is the first real strategy we have had for Afghanistan since the early 1980s." The Washington Post's Bob Woodward reported that "Obama has scheduled at least five meetings with hi s national security team over the next weeks to reexamine the strategy for Afghanistan and Pakistan."

AN AFGHAN GOVERNING PARTNER?: The success of the troop escalation and counterinsurgency strategy proposed by McChrystal hinges on having a legitimate and effective Afghan governing partner -- something that, especially in the wake of Afghanistan's controversial recent presidential election, may be impossible. Center for American Progress policy analyst Caroline Wadhams recently wrote that the "fixation on troop levels...appears to be an example of a popular mindset that military force alone can solve our greatest foreign policy challenges" and asserted that "a look at the origins of the Afghan insurgency demands a broader conversation than mere troop levels." A lack of government legitimacy resulting from incompetent and corrupt governance continues to be a key driver of instability in Afghanistan. Center for American Progress Senior Fellow Brian Katulis wrote, "[U]ltimately a leader or a government acquires legitimacy when it delivers on the basic needs of its citizens -- something the current Afghan leadership has not succeeded in doing over the past five years."

CONSERVATIVES REPLAYING IRAQ: Hawkish conservatives have attacked the President for taking too long to make a decision, and attempting to box Obama in by supporting the greatest escalation possible. The neoconservative Foreign Policy Initiative (FPI) -- a re-branded Project for the New American Century, which laid much of the ideological groundwork for the Iraq war -- issued a letter to the President asking him to "fully resource" the Afghanistan effort. Over the weekend, Sen. Lindsey Graham (R-SC) implied that the President was endangering the troops by taking so long to make a decision. While rarely acknowledging that Obama has already doubled the number of U.S. troops in Afghanistan, these conservatives also neglect to mention the main reason that U.S. troops in Afghanistan have been under-resourced for so long: the priority given to the war in Iraq. A number of other figures, however, have voiced support for Obama taking his time. Speaking at an FPI panel, ret. Brig. Gen.Mark McKimmit, who was the Asst. Secretary of State for Political-Military Affairs during the Bush administration, defended the Obama administration's decision-making process, saying that, given the extent of the commitment hoped for, this "is going need some deliberation...we don't want to see a rush to failure." Senate Select Intelligence Committee member Dianne Feinstein (D-CA) also agreed that the President should take time to consider alternatives that would avoid "nation-building" in Afghanistan for the next decade.

THE DEBATE A DEMOCRACY DESERVES: Given the resources that will be required -- and the lives that will likely be lost -- the vigorous current debate over Afghanistan -- with some leaders strongly questioning whether continuing the U.S. military presence is even necessary -- is appropriate. In the Wall Street Journal, Sen. John Kerry (D-MA) wrote that it is the duty of Congress "to test all of the underlying assumptions in Afghanistan and make sure they are the right ones before embarking on a new strategy." Noting that Obama "was correct in calling Iraq an unnecessary war and promising to give priority to Afghanistan," CAP's Lawrence Korb wrote that the President "should not let 'troop needs' in Iraq remain a limiting factor on sending more forces to Afghanistan." Boston University professor Andrew Bacevich, a critic of open-ended U.S. military interventions, suggested that "there is an alternative to a global counterinsurgency campaign. Instead of fighting an endless hot war in a vain effort to eliminate the jihadist threat, the United States should wage a cold war to keep the threat at bay," as was done during the struggle against Soviet Communism. Richard Haass, former director of policy planning at the U.S. State Department during the invasion of Afghanistan and now president of the Council on Foreign Relations, told Germany's Der Spiegel that "we need to be more confident that doing more militarily in Afghanistan will produce more results. It is not clear that will be the case...I believe the president is right to slow down the decision process."

Anemic Job Creation During The "Schumpeterian Depression"

Anemic Job Creation During The "Schumpeterian Depression"

The Wall Street Journal is discussing some interesting trends in business creation and small business hiring. Please consider Sharp Drop in Start-Ups Bodes Ill for Jobs, Growth Outlook.

New companies will be crucial to the strength of any economic recovery. Businesses in their first 90 days of life accounted for 14% of hiring in the U.S. between 1993 and 2008, according to the Bureau of Labor Statistics.

But this recession is taking a particularly heavy toll on business creation, as sources of small-business funding dry up and would-be entrepreneurs become more risk-averse. When entrepreneurs do launch businesses, they are hiring fewer employees on average. The trends threaten to damp growth in jobs and economic output for years.

Company formation typically dips slightly in recessions, says Brian Headd, a Small Business Administration economist. Earlier this decade, business starts -- including new businesses and units of existing businesses -- fell 9% between the third quarter of 2000 and the first quarter of 2003, the BLS says.

This time, the decline has been steeper. Business starts fell 14% from the third quarter of 2007 to the third quarter of 2008; the 187,000 businesses launched in that quarter were the fewest in a quarter since 1995. The number ticked up slightly in the fourth quarter, the latest data available. But those new establishments created only 794,000 jobs, the fewest since the government began tracking the data in 1993.

To be sure, as in past recessions, some laid-off workers are starting businesses to stay afloat, or testing long-held dreams. The Kauffman Foundation, a nonprofit research group that promotes entrepreneurship, says more Americans started businesses last year than in 2007. Kauffman cites research by University of California, Santa Cruz, economist Robert Fairlie, who analyzes different BLS data.

Mr. Fairlie, says statistics suggest more businesses are being created more out of "necessity" than "opportunity." That "does not bode as well for economic growth," he says.

The number of new businesses with relatively low income potential -- such as baby-sitting and house-cleaning services -- grew last year. But compared with 2007, there were fewer new businesses with high income potential -- like law firms, medical offices and manufacturing outfits.

Sharp Drop in Start-Ups Bodes Ill for Jobs, Growth Outlook

What About Israel's Nukes? - Yasmin Alibhai-Brown, The Independent

What About Israel's Nukes?
- Yasmin Alibhai-Brown, The Independent

Afghanistan Is Not a War of Necessity - Richard Haass, Der Spiegel

Afghanistan Is Not a War of Necessity - Richard Haass, Der Spiegel,1518,651782,00.html

The View from Pakistan's Spies - David Ignatius, Washington Post

The View from Pakistan's Spies - David Ignatius, Washington Post

The End of the Pax Americana? - Michael Lind, Salon

The End of the Pax Americana? - Michael Lind, Salon

How to Press the Advantage with Iran - Flynt & Hillary Mann Leverett, NYT

How to Press the Advantage with Iran - Flynt & Hillary Mann Leverett, NYT

Juan Cole - The Most Dangerous Nuclear Facility

Juan Cole - The Most Dangerous Nuclear Facility

It is Israel's ongoing nuclear weapon production that drives the nuclear arms race in the Middle East. Saddam wanted a bomb because Israel had one. The Iranians were then worried both about an Iraqi and an Israeli bomb. Egypt, Saudi Arabia and others are annoyed at their geostrategic helplessness in the face of Israeli nukes.

A Nuclear Debate: Is Iran Designing Warheads?

A Nuclear Debate: Is Iran Designing Warheads?

US takes a radical turn on Myanmar

US takes a radical turn on Myanmar

The announcement that the United States intends to engage with Myanmar's generals is a stunning change of tack towards the "outpost of tyranny". Critics question the sense of dialogue with a reportedly rights-abusing narco-state, but the US State Department says it was the generals who sought the contact. - Brian McCartan (Sep 29, '09)

Obama looks escalation in the eye

Obama looks escalation in the eye
President Barack Obama faces a fateful choice over a Pentagon request for an additional 40,000 American troops for the war in Afghanistan - an increase of nearly 60%. Much like a turning point in the Vietnam War in 1965, the decision will be shaped by fears in the military and the White House of being blamed for defeat. - Gareth Porter (Sep 29, '09)

A MANUFACTURED CRISIS, Part 1 The facts of the matter

The facts of the matter
Iranian President Mahmud Ahmadinejad has shrugged off the fuss over Iran's construction of a second uranium-enrichment plant, saying the United States and other countries are acting in bad faith just before talks on Tehran's nuclear program. "We have done nothing wrong," Ahmadinejad said. - Jack A Smith (Sep 29, '09)
This is the first article in a three-part report.

Monday, September 28, 2009

Afghanistan Government too corrupt to consolidate US military’s efforts

Afghanistan Government too corrupt to consolidate US military’s efforts
September 28th, 2009

KABUL – Though the US commander in Afghanistan, General Stanley McChrystal, has urged the US to repeat an Iraq-style surge in Afghanistan, the Obama administration thinks all the efforts will come to nought as the Hamid Karzai Government is too corrupt.

General McChrystal has reportedly asked for another 40,000 troops, over the 21,000 troops that Obama has already sent. But, it has not garnered enough support from the Obama administration yet.

Although, the US is confident that its military has the intelligence and adaptability to fight a successful counterinsurgency in Afghanistan, it is concerned that the Afghanistan government has become so corrupt that it cannot consolidate the gains the US military makes, reports.


The Ruin of His Presidency By ALEXANDER COCKBURN

The Ruin of His Presidency


The ripest moment of absurdity last week was the spectacle of Pentagon officials berating the Washington Post for publishing the supposedly confidential assessment of the situation in Afghanistan, prepared for General McChrystal, America’s Man in Charge of that doomed adventure.
THe Pentagon asked the Post to cut certain passages on the ground they would compromise national security.

Since the document is commonly supposed to have been leaked to Woodward by either McChrystal himself or one of his retinue it’s seems very silly to start whining about the irresponsibility of the press. The record for willful indiscretion is probably held by Henry “Hap” Arnold, the only five star general holding the grades of General of the Army and later, during World War Two, General of the Air Force.

The leak was a famous one. During the war someone gave a Chicago newspaper the entire order of battle of the US Navy. The newspaper published it, in what was undoubtedly one of the most serious security breaches of the era. The identity of the leaker remained unknown for many years. Finally my brother Andrew discovered it, a few years ago. It was General Arnold, pursuing some ferocious bureaucratic struggle against the Enemy – which was of course the U.S. Navy.

Anyone wanting to understand how JFK plunged into the Vietnamese quagmire, and how LBJ got in even deeper has only to follow the current fight over Afghan policy. Insanity effortlessly trumps common sense.

By common agreement the situation is rapidly getting worse. In terms of military advantage the Taliban have been doing very well, helped by America’s bizarre policy of trying to assassinate the Taliban’s high command by drones, thus allowing vigorous young Taliban commanders to step into senor positions.

Ahmed Rashid writes in a savage and well informed piece in the New York Review that

“For much of this year the Taliban have been on the offensive in Afghanistan. Their control of just thirty out of 364 districts in 2003 expanded to 164 districts at the end of 2008, according to the military expert Anthony Cordesman, who is advising General McChrystal. Taliban attacks increased by 60 percent between October 2008 and April 2009. In August, moreover—as part of their well-planned anti-election campaign—the Taliban opened new fronts in the north and west of the country where they had little presence before. On election day in Kunduz in the far northeast of the country, considered to be one of the safest cities in Afghanistan, the Taliban fired fifty-seven rockets. The US military has acknowledged the gravity of the situation. "It is serious and it is deteriorating.... The Taliban insurgency has gotten better, more sophisticated" in their tactics, Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, told CNN on August 23.

“Yet if it is to have any chance of success, the Obama plan for Afghanistan needs a serious long-term commitment—at least for the next three years. Democratic politicians are demanding results before next year's congressional elections, which is neither realistic nor possible. Moreover, the Taliban are quite aware of the Democrats' timetable. With Obama's plan the US will be taking Afghanistan seriously for the first time since 2001; if it is to be successful it will need not only time but international and US support—both open to question.

“After Obama's injection of 21,000 troops and trainers, total Western forces in Afghanistan now number 100,000, including 68,000 US troops. It is likely that General McChrystal will soon ask for more. Obama's overall plan has been to achieve security by doubling the Afghan army's strength to 240,000 men and the police to 160,000; but these are tasks that would take at least until 2014 to complete, if indeed they can be carried out.

“Meanwhile the military operation in Afghanistan is now costing cash-strapped US taxpayers $4 billion a month.

“Across the region many people fear that the US and NATO may start to pull out of Afghanistan during the next twelve months despite their uncompleted mission. That would almost certainly result in the Taliban walking into Kabul. Al-Qaeda would be in a stronger position to launch global terrorist attacks. The Pakistani Taliban would be able to "liberate" large parts of Pakistan. The Taliban's game plan of waiting out the Americans now looks more plausible than ever.”

After months of derision about Iran’s “faked elections”, Karzai’s fakery in the recent Afghan election was too blatant to permit even pro forma denial can no longer be concealed. The corruption of Karzai’s regime is the staple of every news report. CounterPunchers should read the admirable dispatch in this site this weekend by Ehsan Azari. The oft-announced goal of training an Afghan Army and Police Force is faring no better – in fact considerably worse – that the efforts at “Vietnamization” forty years ago. Once furnished with a few square meals, some new clothes and a weapon, the recruits -- some of them having been sent by the Taliban to get some basic training -- promptly desert.

The expedition to Afghanistan is not popular, either here or in Europe. It is also very expensive. But of course it has powerful sponsors, starting with Obama who made it a campaign plank, but who now may or may not be having second thoughts – but who is showered daily with demented consels to “stay the course”, by his Secretary of States sand about 80 per cent of the permanent foreign policy establishment. So the involvement will get deeper, the disasters will mount and powerfully assist in the destruction of Obama’s presidency, starting with major reverses for the Democrats in the midterm elections next year.

Don't Israel's Nuclear Weapons Count? by Yasmin Alibhai-Brown, 9/28/2009

Don't Israel's Nuclear Weapons Count? by Yasmin Alibhai-Brown, 9/28/2009

Iran test-fires two long-range missiles

Iran test-fires two long-range missiles
Tehran (AFP) Sept 28, 2009 - Iran on Monday test-fired its two long-range missiles which it says could hit targets in arch-foe Israel, as the Revolutionary Guards staged war games for the second straight day. The exercises coincide with heightened tension with the West after the UN nuclear watchdog revealed on Friday that Tehran was building a second uranium enrichment plant. Western countries suspect Iran of seeking ... more

Keeping Iran honest by Scott Ritter

Keeping Iran honest: Iran's secret nuclear plant will spark a new round of IAEA inspections and lead to a period of even greater transparency - Scott Ritter, When Obama announced that 'Iran is breaking rules that all nations must follow', he is technically and legally wrong.

Medvedev jumps the gun on Iran

Medvedev jumps the gun on Iran

Amid the fuss over revelations of a "secret" Iranian nuclear enrichment facility, Russian President Dmitry Medvedev has veered sharply to the side of those seeking tougher action against Tehran. He may well have been premature, and Moscow will now have some dexterous backtracking to do. - M K Bhadrakumar (Sep 28, '09)

US Threatens to Attack Major Pakistan City

US Threatens to Attack Major Pakistan City

Officials mull sending ground troops to Baloch capital

September 'Surprise' The countdown to war begins, says Justin Raimondo

September 'Surprise'

The countdown to war begins, says Justin Raimondo

MI6: Saudis Will Let Israel Bomb Iran Nuclear Site

MI6: Saudis Will Let Israel Bomb Iran Nuclear Site

Clinton: Iran Can't Claim Nuclear Site Is Peaceful

Iran Vows to Stick With Low-Level Nuclear Enrichment

Iran Test-Fires Short-Range Missiles

How Detroit Went Bottom-Up Barry C. Lynn

How Detroit Went Bottom-Up
Barry C. Lynn

From our October issue:
Outsourcing has made the automotive industry so co-dependent and fragile that one company's downfall is every company's concern.

Pakistan to Allow U.S. Military Ops in Exchange for Aid Syed Saleem Shahzad, Asia Times

Pakistan to Allow U.S. Military Ops in Exchange for Aid
Syed Saleem Shahzad, Asia Times
World: It will be difficult and dangerous to take on the Taliban and al-Qaeda inside Pakistan in a struggle in which there are no guarantees of success.

Time For Iran To 'Come Clean'

Time For Iran To 'Come Clean'

Last Friday at the start of the G20 summit in Pittsburgh, President Obama -- flanked by French President Nicolas Sarkozy and British Prime Minister Gordon Brown and with the support of German Chancellor Angela Merkel -- revealed the existence of a secret Iranian uranium enrichment facility near the seminary city of Qom, 60 miles south of Tehran. Obama reportedly decided to disclose the undeclared enrichment plant after Iran discovered that Western intelligence agencies had breached the secrecy surrounding the project. Last Monday, soon after Iran learned of the Western espionage, the regime delivered a "vague, terse" letter to the International Atomic Energy Agency (IAEA). It informed the U.N. nuclear watchdog that a facility is under construction -- "one that had never been mentioned during years" of IAEA inspections at another nuclear facility in Natanz. While the Iranians argued that construction of the site is "completely legal," Obama offered harsh criticism of Iran's covert operation. "Iran's decision to build yet another nuclear facility without notifying the IAEA represents a direct challenge to the basic compact at the center of the non-proliferation regime," he said, adding, "It is time for Iran to act immediately to restore the confidence of the international community by fulfilling its international obligations."

IRAN 'IN A VERY BAD SPOT': While Iran's nuclear chief said the IAEA would be invited to visit the newly disclosed site, he did not specify a timeframe. Indeed, the Obama administration's first diplomatic encounter with Iran will take place this Thursday in Geneva, along with representatives from the United Kingdom, France, Germany, Russia, and China. Yesterday, Iran test-fired three short range missiles that "appeared to be a show of military power." Nonetheless, President Obama offered tough rhetoric ahead of the talks. "Iran is on notice that when we meet with them on Oct. 1 they are going to have to come clean and they are going to have to make a choice" between giving up nuclear aspirations or increased isolation, the President said. Refusal to give ground will lead to "a path that is going to lead to confrontation," Obama said, adding, "When we find that diplomacy does not work, we will be in a much stronger position to, for example, apply sanctions that have bite." European diplomats sounded the alarm as well. Defense Secretary Robert Gates echoed Obama's stern warnings yesterday, saying that the secret facility puts the Iranian government "in a very bad spot," raising the prospect of "severe additional sanctions." While Gates said any military option would only "buy time," other senior officials said the Obama administration plans to te ll the Iranian delegation in Geneva that it must open the new site to international inspectors "within weeks." "If Iran repeats its line on Thursday that the nuclear file is closed and that there is nothing to discuss, then we will move straight to sanctions" an unnamed senior European diplomat on Sunday. "But I don't think the Iranians will be that stupid."

WILL MOSCOW GET TOUGH?: Another unnamed European diplomat noted that "the Russians feel Iran isn't taking their expressions of concern seriously and that is clearly irritating Moscow a lot." The diplomat cautioned that "it is still unclear how far Russia, or indeed China would go down the sanctions road." But Russian President Dmitry Medvedev "hardened Russia's stance on Iran's nuclear program on Friday after the US, Britain and France revealed that Tehran" has been constructing the secret facility. Medvedev -- who Obama briefed on Thursday about the uranium enrichment site -- said, "I don't consider sanctions the best way to achieve results on Iran...but all the same, if all possibilities to influence the situation are exhausted, then we can use international sanctions." "President Obama is slowly putting Iran in a box," said Juan Cole, Professor of History at the University of Michigan. Despite denials of any quid pro quo, a more cooperative Russian tone has followed Obama's cancellation of "the useless and expensive so-called missile shield program." While China responded to the revelations of Iran's second enrichment facility "more neutrally," many Western diplomats "have long believed that if Ru ssia throws its weight behind sanctions China will follow, wishing to avoid isolation in the UN Security Council."

THE RIGHT WING'S PREDICTABLE REACTION: Conservative senators reacted to the news of Iran's secret facility in predictable fashion, echoing much of the rhetoric coming out the the Bush administration over the last eight years: "regime change." "What we're trying to do here eventually is to get a regime change with a group of people in there that are more representative of the Iranian people," Sen. John Kyl (R-AZ) said yesterday. "At a certain point, talking is counterproductive rather than productive because time is not on our side," he said, adding later that "the carrot approach does not work with these people." Sen. Kit Bond (R-MO) pushed regime change yesterday too. "We have to have strong sanctions, economic sanctions that can force either a regime change or the Ayatollahs to change their policy," he said. But it's clear now that the Bush administration's refusal to engage Iran (at least only until the waning days of Bush's tenure) and its "regime change" rhetoric served only to embolden Iran's hardliners within the country. And instead of accepting -- or even responding to -- Iran's offer of engagement in 2003, President Bush lumped the Islamic Republic into the now infamous "axis of evil." Eight years of the Bush administration's disengagement with Iran has only led to its nuclear program growing in size and scope. "The U.S. right wing accused Obama of a failure of nerve," Cole noted, "But in fact his move was shrewd and gutsy, since he predisposed Russia to increased cooperation." Jon Ward of The Washington Times writes, "Not only did the president look strong, he looked cunning."

Friday, September 25, 2009

China's Arrival: The Long March to Global Power

China's Arrival: The Long March to Global Power

September 24, 2009 - 9:00am - 11:45am
Willard InterContinental Hotel's Grand Ballroom - Washington, DC

The Center for a New American Security hosted The Honorable James B. Steinberg, U.S. Deputy Secretary of State, at an event marking the launch of CNAS' new report, China's Arrival: A Strategic Framework for a Global Relationship. The report examines the ever expanding U.S.-China relationship and proposes a strategy for future engagement.

| more |

THINK TANK Afghan Scenarios by Steve Coll From bad, but not disastrous, to holy-crap. GEORGE PACKER ON The McChrystal Report

Afghan Scenarios

by Steve Coll
From bad, but not disastrous, to holy-crap.
GEORGE PACKER ON The McChrystal Report

The Goldstone Report - Ian Williams, Foreign Policy In Focus

The Goldstone Report - Ian Williams, Foreign Policy In Focus: "Judge Richard Goldstone's report on the war in Gaza threatens the Obama administration's global public diplomacy options and its scrupulously graduated approach to whatever passes for a Middle East Peace process. State Department Spokesman Ian Kelly complained that Goldstone opted for 'cookie-cutter conclusions' about Israel's actions, while keeping 'the deplorable actions of Hamas to generalized remarks.' However, Kelly urged the Israeli government to investigate further."

I Can’t Believe We Are Losing To These Guys by Vegetius

I Can’t Believe We Are Losing To These Guys
by Vegetius

I Can’t Believe We Are Losing To These Guys (Full PDF Article)

“The greatest threat to the Afghan government is the Afghan government.” This was the conclusion of a report on the Taliban compiled in the 2005 by the Defense Adaptive Red Team (DART) for the Department of Defense. The report further went on to say that the Taliban are the slow learners of the Islamic fundamentalist world. The report predicted that, if the Karzai government did not reform itself, and if the Taliban ever became a learning organization, the Afghan portion of the Global War on Terror could get very ugly indeed. It is 2009; the Karzai government has not reformed, but the Taliban have. We should not be losing this war, but it now appears that we are losing. One is reminded of John Lovett’s Michael Dukakis character in a Saturday Night Live sketch during the 1988 presidential election. The faux Dukakis listens to an inarticulate pronouncement by Dana Carvey’s faux George H.W. Bush, and exclaims, “I can’t believe that I’m losing to this guy.” That is a fair analogy about where we are in Afghanistan today.

This war is not lost, but we need to make some major changes if we are to turn it around. This was the clear message sent to President Obama by his commander in Afghanistan in August and leaked by The Washington Post on September 21st. General McChrystal was making a clear case for more troops in his report, but lost in the uproar was a strong statement that the Karzai government will have to mend its ways. All the king’s horses and men will not help in Afghanistan if the Taliban are allowed portray their equally flawed governance approach as a viable alternative to the increasingly corrupt kleptocracy that the Karzai government has become.

As this is being written, there are reportedly several options on the table as alternatives to General McChrystal’s recommended approach of sending more troops and fully employing the counterinsurgency doctrine that worked in Iraq (FM 23-4, Counterinsurgency). Some of these proposed alternatives are good supporting tools, but they won’t work by themselves. McChrystal is right; there will not be an easy way to end this war. If the war is worth fighting, which the President said it was during the 2008 campaign, it is worth fighting properly. This piece suggests some specifics for turning it around in the manner that McChrystal suggests.

I Can’t Believe We Are Losing To These Guys (Full PDF Article)

McChrystal's "Ground Truth": Need Half a Million Boots on the Ground Robert Naiman

McChrystal's "Ground Truth": Need Half a Million Boots on the Ground

Robert Naiman, 09.24.2009

National Coordinator of Just Foreign Policy

They wanted a surge; they got a surge. Their surge didn't work. Now they want another surge. How many surges must they get, before we can try something else?

"Iran Is Breaking Rules That All Nations Must Follow"

"Iran Is Breaking Rules That All Nations Must Follow"
Obama Opens G20 Summit With Dramatic Statement After Iran Acknowledges Secret Nuclear Facility... Read Complete Remarks... New York Times: Obama Privately Pressed Leaders This Week On Iran... Marc Lynch: 'The Iran Nuclear Revelation'

Putting Pork Past the Pentagon Winslow T. Wheeler

Superficial analysis of the DOD Appropriations bill, now being debated by the Senate, has led some to assert that the Chairman of the Senate Appropriations Committee's Defense Subcommittee, Daniel Inouye (D-HI), has lessened pork spending in the bill. Some even assert that Inouye is giving President Obama and Defense Secretary Gates a break on some of the programs that have earned the entire bill a presidential veto threat. Having observed, even participated in, the kind of games I believe Senator Inouye is playing, I conclude that he is trying to breath life back into the F-22 and the alternate GE engine for the F-35 (and more), and he very probably is also making his bill veto-proof.

Gates and Obama are sure to put up some sort of a fight against some of this, even if they have not yet visibly started.

On the other hand, Gates and Obama have done nothing about, and are clearly succumbing to, other direct challenges to their declared defense priorities. The bill contains typically huge piles of pork - much of it not listed in the committee's list of earmarks - paid for by raiding the spending needed to support the fighting in Iraq and Afghanistan. It is the usual atrocious funding mechanism the Appropriations and Armed Services Committees have employed for years - they use the Operation and Maintenance account of the bill as an "offset" to pay for the $billions in pork added throughout the bill. Put simply, the parts of the bill that support training, spare parts, maintenance, food, fuel and much else the troops at war need the most are reduced to enable the money added for earmarks.

It is strange indeed that the form of spending that most fundamentally underscores the top priority that Secretary Gates has given to the defense budget (fighting the wars we are currently in) is so ruthlessly attacked by the bill, and yet, Gates and Obama remain utterly silent on the issue.

Equally offensive are some of the completely disingenuous games the bill plays to attempt to justify its attacks on DOD readiness spending.

An article published today in explains all this in some detail. Find the article at,15202,201697,00.html, and below.

Putting Pork Past the Pentagon

Winslow T. Wheeler

2009 is an important year for the evolution of pork in defense bills. Having expanded immensely since September 11, 2001, pork has met its first notable challenge. It came from Secretary of Defense Robert Gates, who in April took a stand against some of the lowest of the hanging fruit in the Pentagon's acquisition budget. Since then, those in Congress who seek to perpetuate the spending - for their home states and districts - on those very systems have been fighting back, some a lot more successfully than others.

The fight is now coming to a head. The last of the four congressional defense committees to act, the Defense Subcommittee of the Senate Appropriations Committee (SAC-D) has reported its version of the 2010 Department of Defense Appropriations bill to the Senate. The bill is now awaiting consideration by the full Senate, later this week.

The bill poses Gates and Obama with a sly and indirect response on some specific pork issues; the president and the secretary may choose not to fight them out with the committee. In other - much more fundamental - ways, the bill confronts them directly, but Gates and Obama appear not to have even noticed, and as a result, they have lost the most important part of the fight.

Earlier in the year, porkers on the Senate Armed Services Committee (SASC) attempted to take Gates on frontally. Led by Saxby Chambliss (R-GA), they sought to stuff additional F-22 fighter aircraft down Gates' throat by mandating seven new ones in the 2010 National Defense Authorization bill. Having provoked Gates and the White House into an open fight, Chambliss was a big loser on July 21 by a vote of 58 to 40.

The members of the House and Senate Appropriations Committees have been far more clever - by not provoking open fights with Gates, and still getting their way.

C-17s Slip Through

The first such example occurred in May on the question of adding more C-17s, which Gates said in April he wanted no more of. The official DOD requirement for 190 aircraft had already been exceeded, there being 205 on order. Nonetheless, the House Appropriations Committee's Defense Subcommittee (HAC-D) added eight more C-17s (for $2.25 billion) to a supplemental spending bill to fund the wars in Iraq and Afghanistan for the rest of fiscal year 2009. Someone - it is not clear who - convinced Gates that the additional C-17s were needed in Iraq and Afghanistan.[1] He basically waved the aircraft through, permitting his spokesman to endorse them in a public statement saying they were "in the fight" in Southwest Asia.

Whether intended or not, it sent a clear signal: not only was the sluice gate open for more C-17s but also Gates was "negotiable" on the rest of his 50 decisions on problematic weapon programs.

The final version of the 2009 supplemental included all eight of the HAC-D's additional C-17s, and when the subcommittee met to consider the new 2010 DOD appropriations bill, it added three more. Encountering no reason not to, the SAC-D has upped the ante in its version of the bill to 10 aircraft, costing $2.5 billion.

More F-22s?

The Senate appropriators even took Gates on in the matter of his big triumph, the F-22. Unlike Chambliss and his clumsy confrontational approach, they were indirect. They earmarked existing F-22 spending not to crash Gates' declared US production limit of 187 aircraft, but for America's allies. Specifically, the SAC-D added a section in the bill's General Provisions title to say that DOD "may" spend money to "develop a future export version of the F-22A that protects classified and sensitive information, technologies and U.S. warfighting capabilities."[2]

The provision contained all the qualities that just might enable it to slip by Secretary Gates and yet also keep the F-22 production line open -ultimately not just for US allies but for the US Air Force:

· The "may" language did not confront Gates by imposing the idea on him;

· Making the aircraft available for US allies addressed a general theme President Obama has favored;

· By using existing funding already in the bill ($177 million for modifications and $569 million for research for the F-22 fleet), it didn't even add spending (right now, at least), and

· Some of the aircraft's critics, such as Lawrence Korb at the stalwartly pro-Obama Center for American Progress, have even said sales of the F-22 to Japan would make great sense.[3]

If an important ally (like Japan) can be enticed to show palpable interest, Gates could find himself in no position to say, "No." The program using US dollars to develop declassified techniques and materials - sure to become a considerable added expense - would have to go ahead. (Should Israel express interest, the US-financed nature of the program would be even more assured.) If a buyer were actually secured, the F-22 production line, now scheduled to close in 2011, would necessarily stay open.

Even better, if the new "declassified" techniques found a way to address the serious problems the existing US Air Force version of the aircraft is having with its "stealth" coating, wouldn't it make the sense to permit the US Air Force to have the new and improved version? Also, if the F-35, which is Gates' alternative to the F-22, were to encounter even more serious problems in its cost, schedule, and performance (which would surprise nobody), wouldn't it be great to have an open combat aircraft production line to fill the gap?

All hypothetic, but quite plausible - and very slick.

The Veto-Bait Pork

In addition to more US F-22s, developing a second (alternate) engine for the F-35 Joint Strike Fighter and continuing the preposterously expensive VH-71 presidential helicopter have attracted veto threats from the White House.[4] The gauntlet is thrown down; the SAC-D clearly had to recognize that any frontal move in favor of those programs would provoke an open fight with Obama and Gates, very possibly with the same result as with Chambliss.

As with the F-22, the Chairman of the SAC-D, Senator Daniel Inouye (D-HI), is known to support the alternative engine for the F-35. He was expected to include a provision in the bill supporting it, just as the HAC-D had with the addition of $560 million for both development and production. Instead, Inouye's bill provided no money for the engine.

Similarly, the SAC-D bill did not imitate its House counterpart on the VH-71. Instead of providing $400 million to continue fabrication of five partially built helicopters, Inouye and his subcommittee provided no money.

Is Inouye surrendering to Obama's and Gates' wishes on the F-35 engine and the VH-71, as most prognosticators seem to believe, or is he playing a more subtle game?

Veto-Proof Pork

When he goes to resolve the differences in his bill with the House version in a House-Senate conference committee, Inouye will face the choice of either insisting on the Senate position which ends both programs, or going along with that of the House, which funds both programs.

Which way will he go? Are there any signs? There are indeed. It looks like Senator Inouye is trying to make his bill veto-proof, which also implies he envisions it containing at least one of the veto-bait programs.

Traditionally, the Senate Appropriations Committee has scheduled its activities so that the full Senate debates its DOD Appropriations bill immediately after the committee reports it to the Senate. That way, senators not on the committee do not have a lot of time to draft multiple amendments to encumber the bill with earmarks and policy provisions the committee does not welcome.

But that's not what is happening this time around. The Committee reported its bill on September 10. Almost two weeks later, it remains undebated, languishing on the Senate Calendar. Word has it among some Senate staff that the reason for the delay is to hold the final version of the bill until later in the month. Then will be the end of the fiscal year, and because the Senate has not passed more than half of the twelve appropriations bills that fund the federal government, there will be a need for an "omnibus" bill to package them altogether and get them passed before the new fiscal year starts on October 1. The DOD Appropriations bill is typically seen as a good vehicle for this mammoth legislation: very few in Congress are willing to tolerate being accused of opposing defense spending bills; incorporating the DOD bill into the Omnibus, let alone using it as the prime mover, helps to ensure passage.

There are also rumors that the DOD Appropriations bill will become a legislative vehicle for other legislation, such as the imminently required bill to extend the debt limit of the entire federal government. In other words, the DOD bill will be transformed into, or made part of, a measure for funding most of the federal government. It will be "must pass" legislation. It will also be veto proof. Senator Inouye will have a clear path to including pretty much anything he wants in the DOD parts of this broader legislation.

The Mother Lode of the Pork System

Inouye's winning, or even losing, on the F-22, F-35, and VH-71 issues will not determine who wins or loses on the broader war over pork in defense spending. There are other far more important issues about pork than the veto-bait programs that have attracted attention in the media. It is those much more fundamental issues that will determine who is winning or losing the match on pork. On those issues, Gates and the White House are not even putting up a fight.

Beyond the C-17s, the F-22s, the F-35 engine, and the helicopter, the Senate bill is filled with hundreds of small earmarks, the garden variety pork. It is all paid for with a mechanism that runs counter to everything Gates has asserted to be his defense spending priority - it's at the expense of military readiness to prepare for and fight the wars in Iraq and Afghanistan.

As counted by Taxpayers for Commonsense, the SAC-D listed 777 earmarks for $2.6 billion in its committee report. That tally does not include some additional pork: $1.7 billion for a DDG-51 destroyer to be built in Pascagoula, MS, home to the SAC-D's top Republican, Thad Cochran, and $2.5 billion for the ten C-17s mentioned above. It also does not include some other expensive additions, and even some more lesser ones, peppered throughout the bill.

Far more troublesome is how all these earmarks are paid for.

The total spending in the bill is $3.9 billion less than the $629.7 Obama and Gates requested. The committee did not add money to the bill to pay for its billions of dollars for pork, it found offsets in other parts of the bill. One of the accounts the committee raided most frequently to pay for the add-ons was the bill's "Operation and Maintenance" (O&M) account.[5] That account pays for - among many things - training, weapons maintenance, fuel, spare parts, food, etc.: all the things a military needs most in the midst of a war. There is hardly any more meaningful budgetary expression for support for the wars than this account.

Nevertheless, and without a peep of objection from Gates and Obama, the Senator Inouye and the SAC-D cut the $156.4 billion O&M request by a net $2.4 billion - according to the tables in the committee's report. In truth, the cuts to the readiness account are larger. Inouye and the Defense Subcommittee peppered several O&M sub-accounts with at least 47 earmarks costing $163 million.[6] This, in effect, reduces the money available in the bill for real readiness by simply spending it elsewhere.

Inflation and Other Scams

Inouye and the SAC-D also cut O&M with provisions not appearing in the O&M title of the bill but in the General Provisions title. For example -

* Sec. 8091 in General Provisions reduced O&M across-the-boards by $294 million, based on completely unspecified and unexplained "revised economic assumptions." (Other titles were cut by an additional $577 million.)

An inquiry to the committee revealed that the justification for this cut was a new estimate that future inflation would be lower than projected earlier, and, thus, the money could be cut with no reduction in purchasing power. The rationale was completely specious: the estimates from the Congressional Budget Office, which are the data the committee is mandated to use, shows future inflation to be higher than previously expected. Specifically, CBO's economic forecast last March anticipated a .8 percent increase in the future GDP price index; this past August, CBO predicted a 1.1 percent increase. If one seeks to trust economists' prediction for such future trends, as clearly the SAC-D purports to, instead of money being cut from the O&M budget, it should be added!

* Section 8100 reduces Air Force O&M by $500 million, justified as "excess cash" in Working Capital Funds.

Working Capital Funds are simply amounts of money sloshing around inside the Pentagon's as one entity pays another for goods and services, such as maintenance and supplies. Without the committee's releasing a competent study of whether such a huge amount of money is truly excess to needs, this reduction must be considered unsubstantiated.

There are also other sections in General Provisions that transfer or use money in the O&M budget from non-O&M purposes. In each case, the committee failed to provide any meaningful explanation.

The committee's whacking at the O&M budget is nauseating. In-air Air Force and Navy pilot training hours for combat aircraft are at historic lows; training time in the Army, for example for tank crews, is lower today than during the low readiness Clinton years. Units reporting for duty in Iraq and Afghanistan have been publicly reported to be leaving the US with low readiness ratings. In each service, the backlog for maintenance and repairs remains huge. It is not as if the money could not be put to high priority use if it were left in the O&M budget. Instead, however, something in excess of $3 billion was extracted out of the O&M budget - for the purpose of offsetting (that is, paying for) pork.

Raiding Also War Spending

And, there's more. The SAC-D cut O&M also in the "Overseas Contingency Operations" (OCO) title of the bill that more directly funds the wars in Iraq and Afghanistan. The $81 billion request from Obama and Gates for O&M for US military operations in the wars was cut by $655 million, and another $1.715 billion was cut from the proposed military aid to Iraq, Afghanistan, and Pakistan.

The committee also added some goodies (major hardware spending) to the procurement account in the OCO title: $512 million for 9 F/A-18E/F aircraft, which are unlikely to be built in time to have an impact in the wars, and $1.2 billion for unrequested M-ATV armored vehicles. As with the base bill, the committee did not add money to the requested level of spending for these (and other) add-ons; they used offsets, including the cuts in US O&M and for allies to keep the total spending below the requested amount.


These raids on what Gates and others should regard as priority spending in the defense budget are nothing new; they have been going on for years. They almost make Gates' and Obama's objections to the veto-bait programs (the F-35 engine and the VH-71) look superfluous.

Gates and Obama may or may not win on the systems that have attracted a veto threat. But even if they do win each of those battles, they still lose on the broader pork war. Billions of dollars for earmarks for large and small programs will remain in the defense budget, and they will be paid for by reducing spending in other parts of the bill, most notably the account that supports key elements of military readiness.

By not objecting, Gates and Obama will have succumbed to, even enabled, it all.

These behaviors have been occurring for years, and still no one does a thing about them. Until someone does, the pork system on Capitol Hill, and in the executive branch, will remain alive and well. The trophy for 2009 will go to Senator Inouye and the other congressional porkers. They may have lost a few games, but they won the match.

Winslow T. Wheeler is the Director of the Straus Military Reform Project at the Center for Defense Information. He is also the editor of the anthology "America's Defense Meltdown: Military Reform for President Obama and the New Congress."


[1] The Air Force's C-17 transport, made by Boeing, is no bargain for those who seek to support the wars in Iraq and Afghanistan with long range, air transport. At $327 million per copy (counting all procurement and development costs), it delivers too little cargo at too much cost. A more fuel-efficient Boeing 747-8 freighter costs 10% less and hauls 85% more cargo for 85% longer range. The Air Force claims that the C-17 was designed to be able to land on "unprepared" landing strips. That claimed ability is rarely, if ever used, but it imposed major payload and cost penalties on the design. When it does deliver to "unprepared" landing strips, it takes weeks to prepare the landing strip! It virtually never directly supports troops in contact with the enemy, such as those in isolated bases in Afghanistan, and even Iraq. In short, the C-17 is no bargain either as a strategic or a tactical air-lifter. Gates was entirely right to seek the end of its production.

[2] See Section 8056 of the bill; find the bill at the GPO website at

[3] See "Multiple Benefits if Japan Buys the F-22," Lawrence Korb and Peter Juul, Atlanta Journal Constitution, September 3, 2009, at

[4] On August 17 at the Veterans of Foreign Wars in Phoenix, President Obama promised an end to "the special interests and their exotic projects that are years behind schedule and billions over budget," and he reaffirmed that he is killing off the F-22 fighter, the second F-35 engine, and the presidential helicopter. He finished saying "And if Congress sends me a defense bill loaded with this kind of waste, I will veto it."

[5] The SAC-D was hardly alone in raiding O&M to pay for pork. The SASC, HASC, and HAC-D did also; the only variations are in the details. Find a discussion of the SASC/HASC/HAC-C raids in an information paper at

[6] 47 is an incomplete listing of the earmarks in the O&M account. It is simply the total number of earmarks listed at the end of the committee report, as required by Senate rules; see pp. 274-295 of the committee report at Other, unlisted earmarks occur in other parts of the committee report. For example, there is $16 million added for an "Asia Pacific Regional Initiative," very probably with Senator Inouye's full support.
Winslow T. Wheeler
Straus Military Reform Project
Center for Defense Information
301 791-2397

Thursday, September 24, 2009

The End Of Capitalism Video and Transcript: Ahmadinejad Speech at the UN General Assembly 9-23-09

The End Of Capitalism

Video and Transcript: Ahmadinejad Speech at the UN General Assembly 9-23-09

By President Mahmoud Ahmadinejad

We have all seen that how the inequitable economic structures controlled by certain political interests have been used to plunder national wealth of countries for the benefit of a group of corrupt business giants. Continue

The Afghan Disaster by Lew Rockwell

The Afghan Disaster by Lew Rockwell

U.S., NATO Poised For Most Massive War In Afghanistan's History - by Rick Rozoff

U.S., NATO Poised For Most Massive War In Afghanistan's History
- by Rick Rozoff - 2009-09-24

The Drama and the Farce The Waldorf-Astoria Summit By Uri Avnery

The Drama and the Farce

The Waldorf-Astoria Summit

By Uri Avnery

NO POINT denying it: in the first round of the match between Barack Obama and Binyamin Netanyahu, Obama was beaten. Continue

Netanyahu and Obama: Who's fooling who?

Netanyahu and Obama: Who's fooling who?
Israel is at ease following United States President Barack Obama's decision to shelve his demand for a freeze on Israeli settlements on the West Bank and East Jerusalem. This, however, could simply mean that the White House has decided to focus its efforts and engage directly in permanent-status talks between the Israelis and the Palestinians. - Jim Lobe (Sep 24, '09)

Obama makes a plea for Pakistan

Obama makes a plea for Pakistan
Insurgency is spilling into Pakistan from the war in Afghanistan and experts fear a full-scale terror campaign that engulfs the whole country. In this scenario, American resources would be insufficient, so President Barack Obama is using this week's UN meeting to drum up international support. It's a tough sell, and the US could find itself increasingly alone in Islamabad. - Syed Saleem Shahzad (Sep 24, '09)

The world according to Gaddafi

The world according to Gaddafi
Libyan leader Muammar Gaddafi's epic 94-minute speech at the United Nations General Assembly touched on everything from swine flu and Western colonialism to the campaigns in Iraq and Afghanistan and an alleged failure by the UN to prevent 65 wars. The at times bizarre performance all but overshadowed the assembly's agenda of regional conflicts and climate change. (Sep 24, '09)

The president is in the trunk

The president is in the trunk

The June 28 oligarch-directed military coup in Honduras has exposed the fallacy of the Barack Obama administration's pledge to uphold democratic values around the world. It unveils how helpless he is facing his subordinates at the Pentagon and the State Department. If Obama can't even control his own militarist backyard in Washington, not to mention Latin America, how will he face up to Russia and China? - Pepe Escobar (Sep 24,



The Department of Justice yesterday released its long-awaited new policy on the state secrets privilege, which the government uses in litigation to withhold evidence when it believes that disclosure would harm national security. The new policy, presented in a memorandum from the Attorney General, includes procedural and substantive changes to current practice. But it reserves decisions over the exercise of the privilege to the executive branch, and it appears to have garbled its treatment of judicial review.

See "Policies and Procedures Governing Invocation of the State Secrets Privilege" (pdf), memorandum from the Attorney General, September 23.

The new policy specifies that the use of the state secrets privilege must be supported by an evidentiary record that justifies its use and demonstrates that it is necessary in order to avoid "significant harm" to the national security. A recommendation to invoke the privilege must be reviewed by senior Justice Department officials, and approved by the Attorney General. The policy also provides for Inspector General review of claims of government wrongdoing when adjudication of those claims is prevented by the privilege.

Collectively, these measures "will provide greater accountability and ensure the state secrets privilege is invoked only when necessary and in the narrowest way possible," said Attorney General Eric Holder.

Perhaps unsurprisingly, the new policy, which will take effect on October 1, would preserve executive branch discretion over the use of the state secrets privilege.

More surprisingly, the policy seems to have fumbled the question of judicial review. A Justice Department news release about the Attorney General's memorandum declared promisingly that "in order to facilitate meaningful judicial scrutiny of the privilege assertions, the Department will submit evidence [justifying the privilege] to the court for review."

But strangely, the memorandum itself says no such thing (as noted by Bill Leonard). Questioned about the discrepancy, a Justice Department official said yesterday that the intent to submit the evidentiary record to the court for review, though left unstated by the Attorney General, was "a necessary inference" and he said that it would be done "in every case." Maybe so.

Internal executive branch procedures to limit official secrecy are not inherently futile or self-serving. The Interagency Security Classification Appeals Panel, an executive branch body which reviews appeals of mandatory declassification review requests that were denied, has actually been more effective than any court in combating overclassification. To the surprise of everyone involved, it has overturned the classification of information in a majority of the cases presented to it since 1996.

More often, however, independent review from outside the executive branch plays an essential role in identifying and reconciling competing interests in secrecy and disclosure.

In a practice that is closely analogous to the new state secrets policy, the Justice Department is supposed to conduct its own evaluation of agency denials of Freedom of Information Act requests and to defend agencies in court only when the denied information is clearly exempt from disclosure under FOIA. If such evaluations were reliably performed, and if only proper agency denials of FOIA requests were ever defended, then the government should never lose a FOIA case. Yet we know that that is not what happens. Courts rule against the government in FOIA cases with some regularity, despite the fact that the Justice Department says it only supports cases where the government position is the legally "correct" one.

In the same way, and for the same reason, the executive branch cannot reasonably be expected to serve as the sole and final arbiter of the proper use of the state secrets privilege.

"While I am pleased that the Obama administration recognizes that the Bush approach was a mistake, its new policy is disappointing because it still amounts to an approach of 'just trust us'," said Sen. Russ Feingold (D-WI) "Independent court review of the government's use of the state secrets privilege is essential. I urge the administration to work with Congress to develop legislation that sets reasonable limits on the privilege and will not be subject to change under each successive president."

State of the global economy

State of the global economy:

Is there a case for a further co-ordinated global fiscal stimulus? Part 4 & ultima
Willem Buiter, Maverecon, September 23, 2009
Will a fiscal stimulus work as effectively when the economy has been hit by a credit crunch?

It's the debt, stupid
Edward Harrison, Naked Capitalism, September 23, 2009
GDP is an inadequate measure for understanding how healthy an economy is.

McKinsey: Growth Won't Come From Developed Nations
Mark Whitehouse, Real Time Economics, September 24, 2009
If any bankers and investors are hoping for a return to the booming U.S. financial markets of recent years, there's a good chance they'll be disappointed, according to consultancy McKinsey & Co.

The G-20:

The G-20:

The G-20 and Rebalancing
Menzie Chinn, Econbrowser, September 24, 2009
Whenever I hear the term "rebalancing", I am pervaded by a sense of déjà vu. We've heard of this hope for years.

G-20 on Economic Regulation: Don't Get Your Hopes Up
Simon Johnson, Economix, September 24, 2009
In terms of the economic agenda at the Group of 20 meeting in Pittsburgh, the likely deliverables look thin, an economist writes.

Busy, Busy, Busy
Nouriel Roubini, Forbes, September 24, 2009
The G-20's crowded agenda.

The Vietnamization of Afghanistan Tim Fernholz Obama's choices in Afghanistan will either break the Democrats' association with Vietnam or confirm

The Vietnamization of Afghanistan
Tim Fernholz

Obama's choices in Afghanistan will either break the Democrats' association with Vietnam or confirm it.

Our Oil Addiction Is About to Make Life a Lot Nastier Michael T. Klare,

Our Oil Addiction Is About to Make Life a Lot Nastier
Michael T. Klare,
Environment: The great age of renewable energy is in our distant future. Before then, energy prices will rise, environmental perils will multiply and conflict will grow. Buckle your seatbelts.

Paul Volcker, Lord Turner & the EU’s new take on the intoxicating effects of global finance

Paul Volcker, Lord Turner & the EU’s new take on the intoxicating effects of global finance

Posted: 23 Sep 2009 11:30 AM PDT

The following is a submission from Naked Capitalism contributor Swedish Lex.

While some observers of U.S. politics lament the lack of progress in reforming the country’s financial system, the European financial industry has abruptly awoken to the EU’s new resolve re-shape the continent’s financial system. How far and how fast the EU intends to go is still unclear, but the financial Industry is bracing itself for what some of its members fear will degenerate into a wrongheaded bonus-destroying regulatory overkill fiesta. Others regard reform as necessary surgery to restore balance in society, even if it means that the financial industry loses a limb or two in the process.

This guest post will discuss the emerging pattern of initiatives in Europe to regulate finance more and differently in the future. Many of these policy initiatives are being drawn up by the EU Institutions and will be tabled and debated in the coming months and years and are likely to have a substantial impact outside the EU’s borders too.

The EU’s Internal Market for banking and financial services really took off in 1992 and thereafter. Pre-existing national models of financial systems were gradually supplanted or replaced by the new EU-wide version. The EU thus had to import an ideological and conceptual framework to build a common system where no such system had existed before. The EU’s banking and financial services framework is a blend of the collective heritage of the EU states that has been transformed to suit the EU as a whole. However, many of the EU’s core laws found their inspiration across the English Channel and, further on westwards, in the U.S.. The appeal of the Anglo-Saxon model was notable.

Those who disproved of the direction in which matters were going were outnumbered and out of fashion. Moreover, they lacked an alternative vision that promised anything remotely resembling the economic and societal gains that would be created if only the financial sector was allowed to reach its full potential. It all sounded pretty good and consequently it became a prioritized goal to expand the EU’s financial sector as a tool to boost GDP, employment and the Union’s position on the global economic pecking order.

Not everybody agreed, however. The European Parliament, and its group of Socialist parlamentarians in particular, have over a number of years sought to draw the other EU Institutions’ attention to the structural flaws in the EU’s financial architecture and to the lack of foresight and contingency planning to curb systemic risk. It may be reasonable to assume that Socialists due to their ideological preferences are more prone identify flaws in a free-market system than others, but the fact remains that the European Parliament as an Institution was concerned early on that a financial meltdown may occur and therefore used its (limited) constitutional powers under the EC Treaty to force the EC Commission into action. In the competition to determine who first saw the financial crisis coming, whether it was Nouriel Roubini or someone else, I believe that that the European Parliament at least deserves has a special mentioning.

These admittedly lengthy excerpts are from a European Parliament resolution (a form of appeal directed at the EC Commission) are straightforward and strikingly clairvoyant. The Resolution was adopted in January 2004 and concerned the future of hedge funds and derivatives and was thus enacted before the use of derivatives reached the stratosphere and contributed to driving the global economy off a cliff.

Concerning derivatives

R. whereas derivatives are increasingly used in investment products available to the general public and are therefore becoming a relevant consideration in all the directives cited above,

S. whereas, over the last 20 years, derivatives have played a vital role in financial innovation, facilitating the creation of a range of new products (including many low risk products) and widening investor choice,

whereas derivatives can be a means of limiting risk as well as of speculative risk-taking and can provide a macroeconomic benefit by dispersing risk to those best able to accept it,

U. whereas commodity derivatives can play a vital role in hedging risk and ensuring efficient utilization of resources in markets such as energy and agriculture, and whereas their importance can be expected to increase with further liberalisation of energy and agriculture markets,

V. whereas it is imperative that such risk be properly monitored and controlled both as regards the risk to individuals and systemic risk to the financial system,

W. whereas it is important to ensure that the regulation of derivatives is proportionate to the risks they pose for individual investors and for overall financial stability, and whereas it is vital that a wide ranging and effective cost-benefit analysis is carried out before any new laws or rules are added to existing regulation of these financial products,

X. whereas the proliferation of credit derivatives raises issues in terms of tracking global levels of risk exposure,

Y. whereas those OTC (”over-the-counter”) derivatives which are unregulated could build up into a dangerous overhang in financial markets,

Z. whereas the validity of derivatives depends on the certainty of full settlement at maturity and therefore on the credit standing and ability of ultimate counterparties to meet obligations,

AA. whereas sophisticated types of derivatives may be illiquid and therefore holders may have difficulties closing or valuing positions, especially in difficult market conditions,

AB. whereas derivatives are becoming a common mechanism in the financial management of corporations, investment companies and smaller banks and it is necessary for those users to have appropriate competence in controlling risk exposure,

AC. whereas knowledge and competence even among regulatory authorities is often inadequate in this fast moving and ever changing area,

AD. whereas financial derivatives can be marketed to retail investors in various forms, such as listed products and spread betting, provided they are under the scope of national financial regulators,

Concerning derivatives

26. Calls on the Commission in the interests of coherence in securities law to draw together the various relevant items of EU legislation in order to facilitate comprehensive legislative treatment (inter alia) of derivatives;

27. Calls on the Commission to instigate, along with national and relevant international institutions, a means of measuring and monitoring global exposure in derivatives and, in particular, the accumulated credit risk (including settlement risk) of credit derivatives; stresses that only those with appropriate capital cover may deal in derivatives, in order that, in periods of crisis, losses do not have to be borne by taxpayers;

This 2004 Resolution is however only one example in a string of initiatives by the European Parliament to get a better grip on the financial sector. As the title of the Resolution indicates, the Parliament has for a long time had its sights on the systemic risk and societal consequences of hedge funds, private equity and other “sophisticated alternative investment vehicles (SAIVs)”. As the financial crisis began to unfold, the Parliament’s views gained more traction, in particular as the EU States also began to exercise pressure on the EC Commission to draft and table new laws for the financial sector. The EC Commission, which is both the EU’s watchdog and also alone holds the keys to tabling new EU policy and regulatory proposals, largely failed to spot the brewing bubble and the financial disease spreading through the economy. Historians will have to determine to what degree this failure has its explanation in the Commission’s underlying philosophy being that of lighter regulation and the inherent self-correcting powers of the financial system.

Whatever the most appropriate historical conclusion may be, it however appears safe to assume that the EU as a whole and the EC Commission in particular has started a process to re-write its ideological source code and that this profound change probably significantly will impact both the scope and direction of proposals that we should be expecting in the coming months and years. This process will be gradual, non-linear and the result of endless debates and processes in the EU’s sociopolitical universe.

One feature of this ensuing debate is that the direction of future policy choices will be made against a backdrop that is broader in its scope than addressing purely financial matters. The wider systemic and, thus, societal impact of the finance sector will be given a more prominent place in the decision-making process. The previous concept of building a legal and political infrastructure to promote banking and financial services as such, will be given less weight. These quotes by the leader of the Socialist group in the European Parliament and former Prime Minister of Denmark Poul Nyrup Rasmussen given at a conference in Brussels in January provide a good illustration:

“Even if such systemic breakdown is prevented, any form of market stress imposes significant costs on a whole host of other financial institutions and often also the real economy. Importantly, this total cost to the system or to society is much higher than private cost to the institution where the financial stress originates.

So, financial disturbances in a hedge fund (or any other significant financial institution) have significant negative externalities. Such potential negative externalities are perhaps the most important reason to regulate hedge funds and private equity.”

“In any case the benefits of lower systemic risk through better prudential norms would far exceed any potential costs in terms of a loss of competitive edge.

The EU has a leading role to play in promoting a certain convergence among regional regulatory and supervisory frameworks. This will be an important path of the basis for future global regulation.”

Rasmussen’s comments are representative of a growing awareness in Europe that the externalities of modern finance, also when they only are potential, should be guiding policy-makers. Views like these were not unusual before but, as discussed above, clearly in minority. With leading UK and U.S. representatives now contributing to this new current, the momentum to undertake a major overhaul of the EU’s strategy on banking and financial services is gaining traction. Recent statements like these do obviously not go unnoticed in Brussels and in EU capitals:

* Paul Volcker: “Extensive participation in the impersonal, transaction-oriented capital market does not seem to me an intrinsic part of commercial banking,” “banks should be banned from “sponsoring and capitalizing” hedge funds and private-equity firms, which are largely unregulated.” “particularly strict supervision, with strong capital and collateral requirements, should be directed toward limiting proprietary securities and derivatives trading.”

* Lord Turner: “We cannot go back to business as usual and accept the risk that a similar crisis occurs again in ten or 20 years’ time. We need radical change. Regulators must design radically changed regulations and supervisory approaches, but we also need to challenge our entire past philosophy of regulation. And parts of the financial services industries need to reflect deeply on their role in the economy, and to recommit to a focus on their essential social and economic functions, if they are to regain public trust.”

The stimuli thus reaching the EU’s policy architects is thus clear and unequivocal; create an environment for financial markets that must effectively contain potential externalities, even if that means a clear break with current practices. A recent blog post – Regulation in Defense of Capitalism – provided a succinct overview of the case of properly accounting for the externalities of finance (”Wall Street’s toxic sludge”):

“Regulation that exposes these costs and forces the trader or bank to absorb them makes the markets more true to capitalist ideals. Capitalist regulation forces the producers to recognize all of their costs. It undoes the harm to capitalism that comes from limited liability and its kissing cousins, the trader’s option and short term compensation deals. The flip side is that with capitalist regulation, no one can take on more risk than they are capable of absorbing. Which means requiring higher levels of capital on the one hand, restricting leverage on the other, which in turn means reduced capacity to generate high returns.”

An extended application of an equivalent of the polluter pays principle (PPP), that governs most of the EU’s environmental laws, into the world of banking and financial services constitutes a not too unlikely scenario when trying to figure out in which direction the EU eventually will choose to go.

An edifying and recent case where the EU undertook a fundamental overhaul of all regulation applicable to a whole Industry, in order to ensure that its externalities were properly accounted for, exists in the area of chemicals. The EU a few years back adopted entirely new and far-reaching regulation of chemicals. That legislative package (REACH), one of the EU’s most ambitious pieces of legislation ever.

It is possible, although I would not say likely at this point, that banking and financial services, like their chemical industry peers, are about to experience the biggest change to their industry, perhaps ever, if a scenario analogous to that of REACH becomes reality. This excerpt from an article in the Washington Post published at the time of the adoption of REACH is long but captures the potential outcome for the banking and financial industries 3-5 years down the road:

“The Washington Post

WASHINGTON — Europe this month rolled out new restrictions on makers of chemicals linked to cancer and other health problems, changes that are forcing U.S. industries to find new ways to produce a wide range of everyday products.

The new laws in the European Union (EU) require companies to demonstrate that a chemical is safe before it enters commerce, the opposite of policies in the United States, where regulators must prove a chemical is harmful before it can be restricted or removed from the market. Manufacturers said complying with the European laws will add billions to their costs.

The changes come as consumers increasingly are worried about the long-term consequences of chemical exposure and are agitating for more aggressive regulation. In the United States, these pressures have spurred efforts in Congress and some state legislatures to pass laws that would circumvent the laborious federal regulatory process.

The EU laws, opposed by the U.S. chemical industry and the Bush administration, will be phased in over the next decade. It is difficult to know how the changes will affect products for sale in the United States. But U.S. manufacturers are searching for safer alternatives to chemicals used to manufacture thousands of consumer goods, from bike helmets to shower curtains.

The EU’s stance on chemical regulation is the latest area in which the Europeans are reshaping business practices with demands that U.S. companies either comply or lose access to a market of 27 countries and nearly 500 million people.

From its crackdown on antitrust practices in the computer industry to its rigorous protection of consumer privacy, the EU has adopted a regulatory philosophy that emphasizes the consumer.

Its approach to managing chemical risks is part of a European focus on caution when it comes to health and the environment.

“There’s a strong sense in Europe and the world at large that America is letting the market have a free ride,” said Sheila Jasanoff, professor of science and technology studies at Harvard University’s John F. Kennedy School of Government.

Under the EU laws, manufacturers must study and report the risks posed by specific chemicals. Through the Internet, the data will be available for the first time to consumers, regulators and potential litigants around the world. Until now, much of that information either did not exist or was closely held by companies.

“This is going to compel companies to be more responsible for their products than they have ever been,” said Daryl Ditz, senior policy adviser at the Center for International Environmental Law.

The laws also call for the EU to create a list of “substances of very high concern,” those suspected of causing cancer or other health problems. Any manufacturer wishing to produce or sell a chemical on that list must receive special authorization.”

“The EU standards will force many manufacturers to reformulate their products for sale there and in the U.S. “We’re not looking at this as a European program; we’re buying and selling all over the globe,” said Linda Fisher, vice president and chief sustainability officer for DuPont and a former EPA deputy administrator.”

During the adoption phase of REACH, the industry threw everything it had into the lobbying campaign to thwart and water down the initiative. Arguments were made that European firms would; lose in competitiveness, have to raise prices, be forced to shed jobs, not be able to afford innovation and that protectionist barriers would be raised vis-à-vis third countries as result. Impact assessments were made on both sides of the debate and it was clear that the legislation would result in billions in extra costs for the industry. In the end, however, the EU Institutions and the Member States, after certain concessions to the chemicals industry, pushed through with legislation.

The U.S. (federal and state levels), and other countries, are not is now debating or introducing measures modeled on REACH.

If the EU Institutions conclude that the same kind of radical (to use Lord Turner’s terminology) reforms are necessary for the financial sector, will they have the clout to enact them into laws against the will of; the Industry, some Member States, including the UK, and Uncle Sam? Perhaps not. But should the European economy continue to disappoint in the coming years as result of the toxins on (and off) the balance sheets of the financial groups, it is possible that sufficient political momentum will be maintained for truly radical reforms to be enacted.

A central factor that will influence in which direction and how for the EU will go with its reform measures is the new top management of the EC Commission that is in the process of being appointed for a five-year term. The current President, Barroso, has been confirmed and had to make pledges to both the EU States and the European Parliament for far-reaching financial reform in order to be reelected. The reform-hungry will be watching every step he takes. Meanwhile, Germany and France are reported both to be demanding for the bank and financial services portfolio for their respective commissioners. Since the job description nowadays clearly states that candidates with an Anglo-Saxon outlook need not apply, the ideology and focus EU’s next bank chief may well come as une grande surprise to many.


Concerning the future of hedge funds and derivatives

Regulation in Defense of Capitalism