1.
The salient feature of the current financial crisis is that it was not caused by some external shock like OPEC raising the price of oil or a particular country or financial institution defaulting. The crisis was generated by the financial system itself. This fact—that the defect was inherent in the system —contradicts the prevailing theory, which holds that financial markets tend toward equilibrium and that deviations from the equilibrium either occur in a random manner or are caused by some sudden external event to which markets have difficulty adjusting. The severity and amplitude of the crisis provides convincing evidence that there is something fundamentally wrong with this prevailing theory and with the approach to market regulation that has gone with it. To understand what has happened, and what should be done to avoid such a catastrophic crisis in the future, will require a new way of thinking about how markets work.
Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked.
The excesses became evident after house prices peaked in 2006 and subprime mortgage lenders began declaring bankruptcy around March 2007. The problems reached crisis proportions in August 2007. The Federal Reserve and other financial authorities had believed that the subprime crisis was an isolated phenomenon that might cause losses of around $100 billion. Instead, the crisis spread with amazing rapidity to other markets. Some highly leveraged hedge funds collapsed and some lightly regulated financial institutions, notably the largest mortgage originator in the US, Countrywide Financial, had to be acquired by other institutions in order to survive.
Confidence in the creditworthiness of many financial institutions was shaken and interbank lending was disrupted. In quick succession, a variety of esoteric credit markets—ranging from collateralized debt obligations (CDOs) to auction-rated municipal bonds—broke down one after another. After periods of relative calm and partial recovery, crisis episodes recurred in January 2008, precipitated by a rogue trader at Société Générale; in March, associated with the demise of Bear Stearns; and then in July, when IndyMac Bank, the largest savings bank in the Los Angeles area, went into receivership, becoming the fourth-largest bank failure in US history. The deepest fall of all came in September, caused by the disorderly bankruptcy of Lehman Brothers in which holders of commercial paper—for example, short-term, unsecured promissory notes—issued by Lehman lost their money.
Then the inconceivable occurred: the financial system actually melted down. A large money market fund that had invested in commercial paper issued by Lehman Brothers "broke the buck," i.e., its asset value fell below the dollar amount deposited, breaking an implicit promise that deposits in such funds are totally safe and liquid. This started a run on money market funds and the funds stopped buying commercial paper. Since they were the largest buyers, the commercial paper market ceased to function. The issuers of commercial paper were forced to draw down their credit lines, bringing interbank lending to a standstill. Credit spreads—i.e., the risk premium over and above the riskless rate of interest—widened to unprecedented levels and eventually the stock market was also overwhelmed by panic. All this happened in the space of a week.
With the financial system in cardiac arrest, resuscitating it took precedence over considerations of moral hazard—i.e., the danger that coming to the rescue of a financial institution in difficulties would reward and encourage reckless behavior in the future—and the authorities injected ever larger quantities of money. The balance sheet of the Federal Reserve ballooned from $800 billion to $1,800 billion in a couple of weeks. When that was not enough, the American and European financial authorities committed themselves not to allow any other major financial institution to fail.
These unprecedented measures have begun to have an effect: interbank lending has resumed and the London Interbank Offered Rate (LIBOR) has improved. The financial crisis has shown signs of abating. But guaranteeing that the banks at the center of the global financial system will not fail has precipitated a new crisis that caught the authorities unawares: countries at the periphery, whether in Eastern Europe, Asia, or Latin America, could not offer similarly credible guarantees, and financial capital started fleeing from the periphery to the center. All currencies fell against the dollar and the yen, some of them precipitously. Commodity prices dropped like a stone and interest rates in emerging markets soared. So did premiums on insurance against credit default. Hedge funds and other leveraged investors suffered enormous losses, precipitating margin calls and forced selling that have also spread to markets at the center.
Unfortunately the authorities are always lagging behind events. The International Monetary Fund is establishing a new credit facility that allows financially sound periphery countries to borrow without any conditions up to five times their annual quota, but that is too little too late. A much larger pool of money is needed to reassure markets. And if the top tier of periphery countries is saved, what happens to the lower-tier countries? The race to save the international financial system is still ongoing. Even if it is successful, consumers, investors, and businesses are undergoing a traumatic experience whose full impact on global economic activity is yet to be felt. A deep recession is now inevitable and the possibility of a depression cannot be ruled out. When I predicted earlier this year that we were facing the worst financial crisis since the 1930s, I did not anticipate that conditions would deteriorate so badly.
2.
This remarkable sequence of events can be understood only if we abandon the prevailing theory of market behavior. As a way of explaining financial markets, I propose an alternative paradigm that differs from the current one in two respects. First, financial markets do not reflect prevailing conditions accurately; they provide a picture that is always biased or distorted in one way or another. Second, the distorted views held by market participants and expressed in market prices can, under certain circumstances, affect the so-called fundamentals that market prices are supposed to reflect. This two-way circular connection between market prices and the underlying reality I call reflexivity.
While the two-way connection is present at all times, it is only occasionally, and in special circumstances, that it gives rise to financial crises. Usually markets correct their own mistakes, but occasionally there is a misconception or misinterpretation that finds a way to reinforce a trend that is already present in reality and by doing so it also reinforces itself. Such self- reinforcing processes may carry markets into far-from-equilibrium territory. Unless something happens to abort the reflexive interaction sooner, it may persist until the misconception becomes so glaring that it has to be recognized as such. When that happens the trend becomes unsustainable and when it is reversed the self-reinforcing process starts working in the opposite direction, causing a sharp downward movement.
The typical sequence of boom and bust has an asymmetric shape. The boom develops slowly and accelerates gradually. The bust, when it occurs, tends to be short and sharp. The asymmetry is due to the role that credit plays. As prices rise, the same collateral can support a greater amount of credit. Rising prices also tend to generate optimism and encourage a greater use of leverage—borrowing for investment purposes. At the peak of the boom both the value of the collateral and the degree of leverage reach a peak. When the price trend is reversed participants are vulnerable to margin calls and, as we've seen in 2008, the forced liquidation of collateral leads to a catastrophic acceleration on the downside.
Bubbles thus have two components: a trend that prevails in reality and a misconception relating to that trend. The simplest and most common example is to be found in real estate. The trend consists of an increased willingness to lend and a rise in prices. The misconception is that the value of the real estate is independent of the willingness to lend. That misconception encourages bankers to become more lax in their lending practices as prices rise and defaults on mortgage payments diminish. That is how real estate bubbles, including the recent housing bubble, are born. It is remarkable how the misconception continues to recur in various guises in spite of a long history of real estate bubbles bursting.
Bubbles are not the only manifestations of reflexivity in financial markets, but they are the most spectacular. Bubbles always involve the expansion and contraction of credit and they tend to have catastrophic consequences. Since financial markets are prone to produce bubbles and bubbles cause trouble, financial markets have become regulated by the financial authorities. In the United States they include the Federal Reserve, the Treasury, the Securities and Exchange Commission, and many other agencies.
It is important to recognize that regulators base their decisions on a distorted view of reality just as much as market participants—perhaps even more so because regulators are not only human but also bureaucratic and subject to political influences. So the interplay between regulators and market participants is also reflexive in character. In contrast to bubbles, which occur only infrequently, the cat-and-mouse game between regulators and markets goes on continuously. As a consequence reflexivity is at work at all times and it is a mistake to ignore its influence. Yet that is exactly what the prevailing theory of financial markets has done and that mistake is ultimately responsible for the severity of the current crisis.
3.
In my book The New Paradigm for Financial Markets,[*] I argue that the current crisis differs from the various financial crises that preceded it. I base that assertion on the hypothesis that the explosion of the US housing bubble acted as the detonator for a much larger "super-bubble" that has been developing since the 1980s. The underlying trend in the super-bubble has been the ever-increasing use of credit and leverage. Credit—whether extended to consumers or speculators or banks—has been growing at a much faster rate than the GDP ever since the end of World War II. But the rate of growth accelerated and took on the characteristics of a bubble when it was reinforced by a misconception that became dominant in 1980 when Ronald Reagan became president and Margaret Thatcher was prime minister in the United Kingdom.
The misconception is derived from the prevailing theory of financial markets, which, as mentioned earlier, holds that financial markets tend toward equilibrium and that deviations are random and can be attributed to external causes. This theory has been used to justify the belief that the pursuit of self-interest should be given free rein and markets should be deregulated. I call that belief market fundamentalism and claim that it employs false logic. Just because regulations and all other forms of governmental interventions have proven to be faulty, it does not follow that markets are perfect.
Although market fundamentalism is based on false premises, it has served well the interests of the owners and managers of financial capital. The globalization of financial markets allowed financial capital to move around freely and made it difficult for individual states to tax it or regulate it. Deregulation of financial transactions also served the interests of the managers of financial capital; and the freedom to innovate enhanced the profitability of financial enterprises. The financial industry grew to a point where it represented 25 percent of the stock market capitalization in the United States and an even higher percentage in some other countries.
Since market fundamentalism is built on false assumptions, its adoption in the 1980s as the guiding principle of economic policy was bound to have negative consequences. Indeed, we have experienced a series of financial crises since then, but the adverse consequences were suffered principally by the countries that lie on the periphery of the global financial system, not by those at the center. The system is under the control of the developed countries, especially the United States, which enjoys veto rights in the International Monetary Fund.
Whenever a crisis endangered the prosperity of the United States—as for example the savings and loan crisis in the late 1980s, or the collapse of the hedge fund Long Term Capital Management in 1998—the authorities intervened, finding ways for the failing institutions to merge with others and providing monetary and fiscal stimulus when the pace of economic activity was endangered. Thus the periodic crises served, in effect, as successful tests that reinforced both the underlying trend of ever-greater credit expansion and the prevailing misconception that financial markets should be left to their own devices.
It was of course the intervention of the financial authorities that made the tests successful, not the ability of financial markets to correct their own excesses. But it was convenient for investors and governments to deceive themselves. The relative safety and stability of the United States, compared to the countries at the periphery, allowed the United States to suck up the savings of the rest of the world and run a current account deficit that reached nearly 7 percent of GNP at its peak in the first quarter of 2006. Eventually even the Federal Reserve and other regulators succumbed to the market fundamentalist ideology and abdicated their responsibility to regulate. They ought to have known better since it was their actions that kept the United States economy on an even keel. Alan Greenspan, in particular, believed that giving users of financial innovations such as derivatives free rein brought such great benefits that having to clean up behind the occasional financial mishap was a small price to pay. And his analysis of the costs and benefits of his permissive policies was not totally wrong while the super-bubble lasted. Only now has he been forced to acknowledge that there was a flaw in his argument.
Financial engineering involved the creation of increasingly sophisticated instruments, or derivatives, for leveraging credit and "managing" risk in order to increase potential profit. An alphabet soup of synthetic financial instruments was concocted: CDOs, CDO squareds, CDSs, ABXs, CMBXs, etc. This engineering reached such heights of complexity that the regulators could no longer calculate the risks and came to rely on the risk management models of the financial institutions themselves. The rating companies followed a similar path in rating synthetic financial instruments, deriving considerable additional revenues from their proliferation. The esoteric financial instruments and techniques for risk management were based on the false premise that, in the behavior of the market, deviations from the mean occur in a random fashion. But the increased use of financial engineering set in motion a process of boom and bust. So eventually there was hell to pay. At first the occasional financial crises served as successful tests. But the subprime crisis came to play a different role: it served as the culmination or reversal point of the super-bubble.
It should be emphasized that this interpretation of the current situation does not necessarily follow from my model of boom and bust. Had the financial authorities succeeded in containing the subprime crisis—as they thought at the time they would be able to do—this would have been seen as just another successful test instead of the reversal point. I have cried wolf three times: first with The Alchemy of Finance in 1987, then with The Crisis of Global Capitalism in 1998, and now. Only now did the wolf arrive.
My interpretation of financial markets based on reflexivity can explain events better than it can predict them. It is less ambitious than the previous theory. It does not claim to determine the outcome as equilibrium theory does. It can assert that a boom must eventually lead to a bust, but it cannot determine either the extent or the duration of a boom. Indeed, those of us who recognized that there was a housing bubble expected it to burst much sooner. Had it done so, the damage would have been much smaller and the super-bubble may have remained intact. Most of the damage was caused by mortgage-related securities issued in the last two years of the housing boom.
The fact that the new paradigm does not claim to predict the future explains why it did not make any headway until now, but in the light of recent experience it can no longer be ignored. We must come to terms with the fact that reflexivity introduces an element of uncertainty into financial markets that the previous theory left out of account. That theory was used to establish mathematical models for calculating risk and converting bundles of subprime mortgages into tradable securities, as well as other forms of debt. Uncertainty by definition cannot be quantified. Excessive reliance on those mathematical models did untold harm.
4.
The new paradigm has far-reaching implications for the regulation of financial markets. Since they are prone to create asset bubbles, regulators such as the Fed, the Treasury, and the SEC must accept responsibility for preventing bubbles from growing too big. Until now financial authorities have explicitly rejected that responsibility.
It is impossible to prevent bubbles from forming, but it should be possible to keep them within tolerable bounds. It cannot be done by controlling only the money supply. Regulators must also take into account credit conditions because money and credit do not move in lockstep. Markets have moods and biases and it falls to regulators to counterbalance them. That requires the use of judgment and since regulators are also human, they are bound to make mistakes. They have the advantage, however, of getting feedback from the market and that should enable them to correct their mistakes. If a tightening of margin and minimum capital requirements does not deflate a bubble, they can tighten them some more. But the process is not foolproof because markets can also be wrong. The search for the optimum equilibrium has to be a never-ending process of trial and error.
The cat-and-mouse game between regulators and market participants is already ongoing, but its true nature has not yet been acknowledged. Alan Greenspan was a past master of manipulation with his Delphic utterances, but instead of acknowledging what he was doing he pretended that he was merely a passive observer of the facts. Reflexivity remained a state secret. That is why the super-bubble could develop so far during his tenure.
Since money and credit do not move in lockstep and asset bubbles cannot be controlled purely by monetary means, additional tools must be employed, or more accurately reactivated, since they were in active use in the 1950s and 1960s. I refer to variable margin requirements and minimal capital requirements, which are meant to control the amount of leverage market participants can employ. Central banks even used to issue guidance to banks about how they should allocate loans to specific sectors of the economy. Such directives may be preferable to the blunt instruments of monetary policy in combating "irrational exuberance" in particular sectors, such as information technology or real estate.
Sophisticated financial engineering of the kind I have mentioned can render the calculation of margin and capital requirements extremely difficult if not impossible. In order to activate such requirements, financial engineering must also be regulated and new products must be registered and approved by the appropriate authorities before they can be used. Such regulation should be a high priority of the new Obama administration. It is all the more necessary because financial engineering often aims at circumventing regulations.
Take for example credit default swaps (CDSs), instruments intended to insure against the possibility of bonds and other forms of debt going into default, and whose price captures the perceived risk of such a possibility occurring. These instruments grew like Topsy because they required much less capital than owning or shorting the underlying bonds. Eventually they grew to more than $50 trillion in nominal size, which is a many-fold multiple of the underlying bonds and five times the entire US national debt. Yet the market in credit default swaps has remained entirely unregulated. AIG, the insurance company, lost a fortune selling credit default swaps as a form of insurance and had to be bailed out, costing the Treasury $126 billion so far. Although the CDS market may be eventually saved from the meltdown that has occurred in many other markets, the sheer existence of an unregulated market of this size has been a major factor in increasing risk throughout the entire financial system.
Since the risk management models used until now ignored the uncertainties inherent in reflexivity, limits on credit and leverage will have to be set substantially lower than those that were tolerated in the recent past. This means that financial institutions in the aggregate will be less profitable than they have been during the super-bubble and some business models that depended on excessive leverage will become uneconomical. The financial industry has already dropped from 25 percent of total market capitalization to 16 percent. This ratio is unlikely to recover to anywhere near its previous high; indeed, it is likely to end lower. This may be considered a healthy adjustment, but not by those who are losing their jobs.
In view of the tremendous losses suffered by the general public, there is a real danger that excessive deregulation will be succeeded by punitive reregulation. That would be unfortunate because regulations are liable to be even more deficient than the market mechanism. As I have suggested, regulators are not only human but also bureaucratic and susceptible to lobbying and corruption. It is to be hoped that the reforms outlined here will preempt a regulatory overkill.
—November 6, 2008
Notes
[*]The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means (PublicAffairs, 2008).
torsdag den 25. december 2008
The Coming Capitalist Consensus - Walden Bello
Not surprisingly, the swift unraveling of the global economy combined with the ascent to the U.S. presidency of an African-American liberal has left millions anticipating that the world is on the threshold of a new era. Some of President-elect Barack Obama’s new appointees – in particular ex-Treasury Secretary Larry Summers to lead the National Economic Council, New York Federal Reserve Board chief Tim Geithner to head Treasury, and former Dallas Mayor Ron Kirk to serve as trade representative – have certainly elicited some skepticism. But the sense that the old neoliberal formulas are thoroughly discredited have convinced many that the new Democratic leadership in the world’s biggest economy will break with the market fundamentalist policies that have reigned since the early 1980s.
One important question, of course, is how decisive and definitive the break with neoliberalism will be. Other questions, however, go to the heart of capitalism itself. Will government ownership, intervention, and control be exercised simply to stabilize capitalism, after which control will be given back to the corporate elites? Are we going to see a second round of Keynesian capitalism, where the state and corporate elites along with labor work out a partnership based on industrial policy, growth, and high wages – though with a green dimension this time around? Or will we witness the beginnings of fundamental shifts in the ownership and control of the economy in a more popular direction? There are limits to reform in the system of global capitalism, but at no other time in the last half century have those limits seemed more fluid.
President Nicolas Sarkozy of France has already staked out one position. Declaring that “laissez-faire capitalism is dead,” he has created a strategic investment fund of 20 billion euros to promote technological innovation, keep advanced industries in French hands, and save jobs. “The day we don’t build trains, airplanes, automobiles, and ships, what will be left of the French economy?” he recently asked rhetorically. “Memories. I will not make France a simple tourist reserve.” This kind of aggressive industrial policy aimed partly at winning over the country’s traditional white working class can go hand-in-hand with the exclusionary anti-immigrant policies with which the French president has been associated.
Global Social Democracy
A new national Keynesianism along Sarkozyan lines, however, is not the only alternative available to global elites. Given the need for global legitimacy to promote their interests in a world where the balance of power is shifting towards the South, western elites might find more attractive an offshoot of European Social Democracy and New Deal liberalism that one might call “Global Social Democracy” or GSD.
Even before the full unfolding of the financial crisis, partisans of GSD had already been positioning it as alternative to neoliberal globalization in response to the stresses and strains being provoked by the latter. One personality associated with it is British Prime Minister Gordon Brown, who led the European response to the financial meltdown via the partial nationalization of the banks. Widely regarded as the godfather of the “Make Poverty History” campaign in the United Kingdom, Brown, while he was still the British chancellor, proposed what he called an “alliance capitalism” between market and state institutions that would reproduce at the global stage what he said Franklin Roosevelt did for the national economy: “securing the benefits of the market while taming its excesses.” This must be a system, continued Brown, that “captures the full benefits of global markets and capital flows, minimizes the risk of disruption, maximizes opportunity for all, and lifts up the most vulnerable – in short, the restoration in the international economy of public purpose and high ideals.”
Joining Brown in articulating the Global Social Democratic discourse has been a diverse group consisting of, among others, the economist Jeffrey Sachs, George Soros, former UN Secretary General Kofi Annan, the sociologist David Held, Nobel laureate Joseph Stiglitz, and even Bill Gates. There are, of course, differences of nuance in the positions of these people, but the thrust of their perspectives is the same: to bring about a reformed social order and a reinvigorated ideological consensus for global capitalism.
Among the key propositions advanced by partisans of GSD are the following:
Globalization is essentially beneficial for the world; the neoliberals have simply botched the job of managing it and selling it to the public;
It is urgent to save globalization from the neoliberals because globalization is reversible and may, in fact, already be in the process of being reversed;
Growth and equity may come into conflict, in which case one must prioritize equity;
Free trade may not, in fact, be beneficial in the long run and may leave the majority poor, so it is important for trade arrangements to be subject to social and environmental conditions;
Unilateralism must be avoided while fundamental reform of the multilateral institutions and agreements must be undertaken – a process that might involve dumping or neutralizing some of them, like the WTO’s Trade-Related Intellectual Property Rights Agreement (TRIPs);
Global social integration, or reducing inequalities both within and across countries, must accompany global market integration;
The global debt of developing countries must be cancelled or radically reduced, so the resulting savings can be used to stimulate the local economy, thus contributing to global reflation;
Poverty and environmental degradation are so severe that a massive aid program or “Marshall Plan” from the North to the South must be mounted within the framework of the “Millennium Development Goals”;
A “Second Green Revolution” must be put into motion, especially in Africa, through the widespread adoption of genetically engineered seeds.
Huge investments must be devoted to push the global economy along more environmentally sustainable paths, with government taking a leading role (“Green Keynesianism” or “Green Capitalism”);
Military action to solve problems must be deemphasized in favor of diplomacy and “soft power,” although humanitarian military intervention in situations involving genocide must be undertaken.
The Limits of Global Social Democracy
Global Social Democracy has not received much critical attention, perhaps because many progressives are still fighting the last war, that is, against neoliberalism. A critique is urgent, and not only because GSD is neoliberalism’s most likely successor. More important, although GSD has some positive elements, it has, like the old Social Democratic Keynesian paradigm, a number of problematic features.
A critique might begin by highlighting problems with four central elements in the GSD perspective.
First, GSD shares neoliberalism’s bias for globalization, differentiating itself mainly by promising to promote globalization better than the neoliberals. This amounts to saying, however, that simply by adding the dimension of “global social integration,” an inherently socially and ecologically destructive and disruptive process can be made palatable and acceptable. GSD assumes that people really want to be part of a functionally integrated global economy where the barriers between the national and the international have disappeared. But would they not in fact prefer to be part of economies that are subject to local control and are buffered from the vagaries of the international economy? Indeed, today’s swift downward trajectory of interconnected economies underscores the validity of one of anti-globalization movement’s key criticisms of the globalization process..
Second, GSD shares neoliberalism’s preference for the market as the principal mechanism for production, distribution, and consumption, differentiating itself mainly by advocating state action to address market failures. The kind of globalization the world needs, according to Jeffrey Sachs in The End of Poverty, would entail “harnessing…the remarkable power of trade and investment while acknowledging and addressing limitations through compensatory collective action.” This is very different from saying that the citizenry and civil society must make the key economic decisions and the market, like the state bureaucracy, is only one mechanism of implementation of democratic decision-making.
Third, GSD is a technocratic project, with experts hatching and pushing reforms on society from above, instead of being a participatory project where initiatives percolate from the ground up.
Fourth, GSD, while critical of neoliberalism, accepts the framework of monopoly capitalism, which rests fundamentally on deriving profit from the exploitative extraction of surplus value from labor, is driven from crisis to crisis by inherent tendencies toward overproduction, and tends to push the environment to its limits in its search for profitability. Like traditional Keynesianism in the national arena, GSD seeks in the global arena a new class compromise that is accompanied by new methods to contain or minimize capitalism’s tendency toward crisis. Just as the old Social Democracy and the New Deal stabilized national capitalism, the historical function of Global Social Democracy is to iron out the contradictions of contemporary global capitalism and to relegitimize it after the crisis and chaos left by neoliberalism. GSD is, at root, about social management.
Obama has a talent for rhetorically bridging different political discourses. He is also a “blank slate” when it comes to economics. Like FDR, he is not bound to the formulas of the ancien regime. He is a pragmatist whose key criterion is success at social management. As such, he is uniquely positioned to lead this ambitious reformist enterprise.
Reveille for Progressives
While progressives were engaged in full-scale war against neoliberalism, reformist thinking was percolating in critical establishment circles. This thinking is now about to become policy, and progressives must work double time to engage it. It is not just a matter of moving from criticism to prescription. The challenge is to overcome the limits to the progressive political imagination imposed by the aggressiveness of the neoliberal challenge in the 1980s combined with the collapse of the bureaucratic socialist regimes in the early 1990s. Progressives should boldly aspire once again to paradigms of social organization that unabashedly aim for equality and participatory democratic control of both the national economy and the global economy as prerequisites for collective and individual liberation.
Like the old post-war Keynesian regime, Global Social Democracy is about social management. In contrast, the progressive perspective is about social liberation.
Copyright © 2008, Institute for Policy Studies
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Walden Bello is a columnist for Foreign Policy In Focus, a senior analyst at the Bangkok-based Focus on the Global South, president of the Freedom from Debt Coalition, and a professor of sociology at the University of the Philippines.
One important question, of course, is how decisive and definitive the break with neoliberalism will be. Other questions, however, go to the heart of capitalism itself. Will government ownership, intervention, and control be exercised simply to stabilize capitalism, after which control will be given back to the corporate elites? Are we going to see a second round of Keynesian capitalism, where the state and corporate elites along with labor work out a partnership based on industrial policy, growth, and high wages – though with a green dimension this time around? Or will we witness the beginnings of fundamental shifts in the ownership and control of the economy in a more popular direction? There are limits to reform in the system of global capitalism, but at no other time in the last half century have those limits seemed more fluid.
President Nicolas Sarkozy of France has already staked out one position. Declaring that “laissez-faire capitalism is dead,” he has created a strategic investment fund of 20 billion euros to promote technological innovation, keep advanced industries in French hands, and save jobs. “The day we don’t build trains, airplanes, automobiles, and ships, what will be left of the French economy?” he recently asked rhetorically. “Memories. I will not make France a simple tourist reserve.” This kind of aggressive industrial policy aimed partly at winning over the country’s traditional white working class can go hand-in-hand with the exclusionary anti-immigrant policies with which the French president has been associated.
Global Social Democracy
A new national Keynesianism along Sarkozyan lines, however, is not the only alternative available to global elites. Given the need for global legitimacy to promote their interests in a world where the balance of power is shifting towards the South, western elites might find more attractive an offshoot of European Social Democracy and New Deal liberalism that one might call “Global Social Democracy” or GSD.
Even before the full unfolding of the financial crisis, partisans of GSD had already been positioning it as alternative to neoliberal globalization in response to the stresses and strains being provoked by the latter. One personality associated with it is British Prime Minister Gordon Brown, who led the European response to the financial meltdown via the partial nationalization of the banks. Widely regarded as the godfather of the “Make Poverty History” campaign in the United Kingdom, Brown, while he was still the British chancellor, proposed what he called an “alliance capitalism” between market and state institutions that would reproduce at the global stage what he said Franklin Roosevelt did for the national economy: “securing the benefits of the market while taming its excesses.” This must be a system, continued Brown, that “captures the full benefits of global markets and capital flows, minimizes the risk of disruption, maximizes opportunity for all, and lifts up the most vulnerable – in short, the restoration in the international economy of public purpose and high ideals.”
Joining Brown in articulating the Global Social Democratic discourse has been a diverse group consisting of, among others, the economist Jeffrey Sachs, George Soros, former UN Secretary General Kofi Annan, the sociologist David Held, Nobel laureate Joseph Stiglitz, and even Bill Gates. There are, of course, differences of nuance in the positions of these people, but the thrust of their perspectives is the same: to bring about a reformed social order and a reinvigorated ideological consensus for global capitalism.
Among the key propositions advanced by partisans of GSD are the following:
Globalization is essentially beneficial for the world; the neoliberals have simply botched the job of managing it and selling it to the public;
It is urgent to save globalization from the neoliberals because globalization is reversible and may, in fact, already be in the process of being reversed;
Growth and equity may come into conflict, in which case one must prioritize equity;
Free trade may not, in fact, be beneficial in the long run and may leave the majority poor, so it is important for trade arrangements to be subject to social and environmental conditions;
Unilateralism must be avoided while fundamental reform of the multilateral institutions and agreements must be undertaken – a process that might involve dumping or neutralizing some of them, like the WTO’s Trade-Related Intellectual Property Rights Agreement (TRIPs);
Global social integration, or reducing inequalities both within and across countries, must accompany global market integration;
The global debt of developing countries must be cancelled or radically reduced, so the resulting savings can be used to stimulate the local economy, thus contributing to global reflation;
Poverty and environmental degradation are so severe that a massive aid program or “Marshall Plan” from the North to the South must be mounted within the framework of the “Millennium Development Goals”;
A “Second Green Revolution” must be put into motion, especially in Africa, through the widespread adoption of genetically engineered seeds.
Huge investments must be devoted to push the global economy along more environmentally sustainable paths, with government taking a leading role (“Green Keynesianism” or “Green Capitalism”);
Military action to solve problems must be deemphasized in favor of diplomacy and “soft power,” although humanitarian military intervention in situations involving genocide must be undertaken.
The Limits of Global Social Democracy
Global Social Democracy has not received much critical attention, perhaps because many progressives are still fighting the last war, that is, against neoliberalism. A critique is urgent, and not only because GSD is neoliberalism’s most likely successor. More important, although GSD has some positive elements, it has, like the old Social Democratic Keynesian paradigm, a number of problematic features.
A critique might begin by highlighting problems with four central elements in the GSD perspective.
First, GSD shares neoliberalism’s bias for globalization, differentiating itself mainly by promising to promote globalization better than the neoliberals. This amounts to saying, however, that simply by adding the dimension of “global social integration,” an inherently socially and ecologically destructive and disruptive process can be made palatable and acceptable. GSD assumes that people really want to be part of a functionally integrated global economy where the barriers between the national and the international have disappeared. But would they not in fact prefer to be part of economies that are subject to local control and are buffered from the vagaries of the international economy? Indeed, today’s swift downward trajectory of interconnected economies underscores the validity of one of anti-globalization movement’s key criticisms of the globalization process..
Second, GSD shares neoliberalism’s preference for the market as the principal mechanism for production, distribution, and consumption, differentiating itself mainly by advocating state action to address market failures. The kind of globalization the world needs, according to Jeffrey Sachs in The End of Poverty, would entail “harnessing…the remarkable power of trade and investment while acknowledging and addressing limitations through compensatory collective action.” This is very different from saying that the citizenry and civil society must make the key economic decisions and the market, like the state bureaucracy, is only one mechanism of implementation of democratic decision-making.
Third, GSD is a technocratic project, with experts hatching and pushing reforms on society from above, instead of being a participatory project where initiatives percolate from the ground up.
Fourth, GSD, while critical of neoliberalism, accepts the framework of monopoly capitalism, which rests fundamentally on deriving profit from the exploitative extraction of surplus value from labor, is driven from crisis to crisis by inherent tendencies toward overproduction, and tends to push the environment to its limits in its search for profitability. Like traditional Keynesianism in the national arena, GSD seeks in the global arena a new class compromise that is accompanied by new methods to contain or minimize capitalism’s tendency toward crisis. Just as the old Social Democracy and the New Deal stabilized national capitalism, the historical function of Global Social Democracy is to iron out the contradictions of contemporary global capitalism and to relegitimize it after the crisis and chaos left by neoliberalism. GSD is, at root, about social management.
Obama has a talent for rhetorically bridging different political discourses. He is also a “blank slate” when it comes to economics. Like FDR, he is not bound to the formulas of the ancien regime. He is a pragmatist whose key criterion is success at social management. As such, he is uniquely positioned to lead this ambitious reformist enterprise.
Reveille for Progressives
While progressives were engaged in full-scale war against neoliberalism, reformist thinking was percolating in critical establishment circles. This thinking is now about to become policy, and progressives must work double time to engage it. It is not just a matter of moving from criticism to prescription. The challenge is to overcome the limits to the progressive political imagination imposed by the aggressiveness of the neoliberal challenge in the 1980s combined with the collapse of the bureaucratic socialist regimes in the early 1990s. Progressives should boldly aspire once again to paradigms of social organization that unabashedly aim for equality and participatory democratic control of both the national economy and the global economy as prerequisites for collective and individual liberation.
Like the old post-war Keynesian regime, Global Social Democracy is about social management. In contrast, the progressive perspective is about social liberation.
Copyright © 2008, Institute for Policy Studies
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Walden Bello is a columnist for Foreign Policy In Focus, a senior analyst at the Bangkok-based Focus on the Global South, president of the Freedom from Debt Coalition, and a professor of sociology at the University of the Philippines.
Dismantling the Imperial Presidency - Aziz Huq
President-elect Obama's first appointments to the Justice, State and Defense Departments mark no radical change. Rather, they return to a centrist consensus familiar from the Clinton years. But pragmatic incrementalism and studied bipartisanship will do little to undo the centerpiece of the Bush/Cheney era's legacy. At its heart, that regime was intent on forcing the Constitution into a new mold of executive dominance.
Obama enters the White House in a slipstream of forces that will hinder attempts to abandon this constitutional vision. He may be a careful constitutional scholar, but we can't rely on Obama alone to reorient the constitutional order. It will be up to progressives to insist on fundamental repudiation of the Bush/Cheney era.
At first blush, Obama's victory is cause for optimism. As a senator he roundly rejected the signature Bush/Cheney national security policies: torture, "extraordinary rendition," Guantánamo and--until July--warrantless surveillance. Obama appointees like Eric Holder as attorney general speak unequivocally against these violations of constitutional and human rights (to be sure, in Holder's case it was after early equivocation).
The most significant Bush/Cheney innovation was planted at the taproot of our Constitution. It was the insistence that the president can exercise what Cheney in 1987 called "monarchical notions of prerogative." That he can, in other words, override validly enacted statutes and treaties simply by invoking national security. This monarchical claim underwrote not only the expansion of torture, extraordinary rendition and warrantless surveillance but also the stonewalling of Congressional and judicial inquiries in the name of "executive privilege" and "state secrets."
The Bush/Cheney White House leveraged pervasive post-9/11 fears to reverse what Cheney called "the erosion of presidential power" since Watergate. Relying on pliant Justice Department lawyers for legal cover, it put into practice a vision of executive power unconstrained by Congress or the courts. It achieved what James Madison once called the "accumulation of all powers, legislative, executive and judiciary, in the same hands," which he condemned as "the very definition of tyranny."
Radical change is needed to re-establish legitimate bounds to executive power. We must again place beyond the pale Nixon's famous aphorism that "when the president does it, that means it's not illegal." But radical change--as early appointments and policy signals from the Obama transition team suggest--comes easier as campaign slogan than governing practice. And there are many reasons to fear a go-slow approach from Obama when it comes to restoring the constitutional equilibrium.
No matter how decent, any new president is tempted by the tools and trappings of executive authority. However tainted the Oval Office is now, Obama's perspective will change dramatically on entering the White House. He is already reading more daily security briefs than Bush and beginning each day with a barrage of fearful intelligence, hinting at dangers that largely never materialize. Submersion in that flow of intelligence will wrenchingly change his sense of the world's risks.
So Obama will be tempted to maintain Bush's innovations in executive power. While the terror threat remains substantial, as the Mumbai attack shows, the Bush administration has left counterterrorism policy in tatters. We have no rational strategy for terrorist interdiction and prevention. Obama's nominations of Robert Gates as defense secretary and Gen. James Jones as national security adviser suggest he is acutely aware of these deficits and of the Democrats' perceived vulnerability on national security. Nor are terrorists the only threat that might lead Obama to reach for emergency powers: credit crunches and fiscal meltdowns can also prompt unilateral executive action, with consequences as sweeping as any national security initiative.
Internal pressure for changing the White House position on executive power will thus wane as the new administration settles in. And pressure from the other two branches is unlikely to swell. The Obama White House will at first face a friendly Congress eager to show results on the economy and healthcare. Unlike the recently oppositional Congress, legislators in the majority have little incentive to make constitutional waves (expect some stalwarts, such as Senator Russ Feingold, to buck this trend). Matters are not helped by the turn from the feckless to the competent. Legislators and the public care most about the constitutional restraints on executive power when the occupant of the White House raises concerns about abuses of power. A more capable leader's entrance saps immediate pressure for reform, even when openings for such limits can be glimpsed.
Nor will the judiciary, listing rightward with President Bush's 324 appointments, provide much constraint. In his appointments to the Supreme Court and the District of Columbia Circuit Court of Appeals (which hears many key constitutional cases), Bush seems to have selected executive-power mavens, including Chief Justice John Roberts, Justice Samuel Alito and Judge Janice Rogers Brown. Their opinions already evince strong deference to executive claims of secrecy and expediency. Paradoxically, then, one of Bush's key legacies will be a judiciary that instinctually hews to an executive controlled by a Democratic president.
I am thus not optimistic that the Obama administration will of its own volition restore the constitutional balance, even if it gives up some of Bush/Cheney's most extravagant and offensive policies. With formidable forces arrayed against them, advocates for the Constitution's original equilibrium of powers must choose their battles carefully.
Three areas are particularly important in the administration's early days: torture, the law that the executive follows and accountability. In each case, measures can be taken that would correct a policy the Obama administration clearly disagrees with and simultaneously help dismantle the Bush/Cheney constitutional revolution. (The other pressing issue to face the incoming administration--detention policy--is so complex and difficult, largely thanks to the outgoing administration's compounded mistakes, that it needs to be looked at separately.)
Begin with torture. President Bush's repeated disavowals of government-sanctioned torture have created cognitive dissonance: White House protestations that "we don't torture" are no longer believed. An Obama administration dedicated to restoring America's tarnished international reputation must do more than talk. The best way to begin is for Congress to enact and President Obama to sign already introduced legislation that would limit the intelligence community to the specific interrogation tactics listed in the recently revised Army Field Manual. This law would make it clear that the CIA in particular cannot use what it euphemistically calls "enhanced interrogation techniques." In signing the law, Obama should eschew the weaseling signing provisos favored by Bush and instead forthrightly recognize that there is no presidential override when it comes to torture. This bill is a golden opportunity to restore international credibility and repudiate the monarchical presidency. So it is unfortunate that Democratic Senators Dianne Feinstein and Ron Wyden have already begun backsliding on it.
Also on the torture front, the Obama administration should candidly acknowledge past wrongs, thereby abandoning the Bush/Cheney demand for absolute secrecy. In legal cases filed by torture victims such as Maher Arar, Khaled el-Masri and Shafiq Rasul, the Bush administration has parried demands for acknowledgment or restitution with a sweeping constitutional theory of "state secrets." Rejecting this theory would be a significant step in dismantling the Bush/Cheney view of executive unilateralism. It would be the smallest measure of justice to abandon this theory as ill founded and also to offer profound apologies and restitution to victims. It would be a public acknowledgment that our fears are never an excuse for anyone's suffering.
Torture is only one aspect of a larger distortion of the Constitution. Changing the executive's operating definitions of the law will be critical to rolling back the Bush/Cheney vision. Now this vision is largely memorialized in Justice Department opinions, many still secret. Some of them directly address presidential prerogatives to override laws. Others deal with specific constitutional rights, such as Fourth Amendment privacy rights and the freedom from indefinite detention without trial.
While there is not much general public pressure to change these positions, many constitutional scholars and advocacy groups have protested these opinions. Consistent pressure is required to ensure that the Obama Justice Department cleans house. All department opinions on executive power should be revealed, and troubling ones should be red-flagged so officials will know they can no longer rely on them. The Justice Department should then develop opinions that systematically repudiate the most offensive positions, in particular the idea of monarchical prerogatives to override the law.
Traditionally, opinions have been prepared by the Office of Legal Counsel in secret and then closely held within the administration. Given executive-branch lawyers' habitual pro-presidential tilt, this process should be refashioned. Not only should opinions be made public after publication; the OLC should invite comment and criticism from the public and scholars during drafting, much as other federal regulations are subject to pre-publication "notice and comment."
Finally, there is the thorny matter of accountability. Absent accountability, the lesson of the Bush/Cheney era would be that those who violate the law can, if brazen enough, get away with it. Yet the Obama transition team has signaled no appetite for criminal proceedings. And in any case, indictments might be pre-empted by a blanket pardon before January 20.
Many others have made a compelling case for prosecutions. But what if they don't happen? Paradoxically, blanket presidential pardons may be the least bad alternative. If prosecutions proceed, they may not be edifying. Admissible evidence will be sparse, given secrecy rules. Officials will protest at being sandbagged after having relied on (flawed) OLC opinions. And there is the danger of a repeat of the Iran/Contra trials, where Oliver North used the dock as a soapbox. Given these risks, a blanket pardon perversely might send the clearest signal that the malaise of the Bush/Cheney era was endemic.
Yet this is no reason to renounce accountability. Several commentators have urged a commission to establish full documentation of what was done and its legal justifications. An investigative commission could be less amenable to manipulation than trials. If it could carry out its work in a bipartisan spirit, while insisting on the investigative tools needed to cut through secrecy, such as subpoena power, it could establish a definitive historical record of Bush/Cheney's extraordinary power grab. Bringing to public scrutiny the imperial presidency's infractions will, I suspect, be as good a way as any of thoroughly discrediting that constitutional vision.
No one should assume that the end of the Bush presidency marks the end of the imperial presidency. The Obama administration faces a geostrategic environment of growing uncertainty, with treasury, reputation and military depleted by eight feckless years. It would be foolhardy simply to assume that the worst will be swept away. Yet the opportunities exist for progressives to insist that Obama stay true to his message of hope and his promise of restoring America's tarnished Constitution.
------
Aziz Huq directs the liberty and national security project at New York University's Brennan Center for Justice. He is co-author of Unchecked and Unbalanced: Presidential Power in a Time of Terror (New Press, 2007)
Obama enters the White House in a slipstream of forces that will hinder attempts to abandon this constitutional vision. He may be a careful constitutional scholar, but we can't rely on Obama alone to reorient the constitutional order. It will be up to progressives to insist on fundamental repudiation of the Bush/Cheney era.
At first blush, Obama's victory is cause for optimism. As a senator he roundly rejected the signature Bush/Cheney national security policies: torture, "extraordinary rendition," Guantánamo and--until July--warrantless surveillance. Obama appointees like Eric Holder as attorney general speak unequivocally against these violations of constitutional and human rights (to be sure, in Holder's case it was after early equivocation).
The most significant Bush/Cheney innovation was planted at the taproot of our Constitution. It was the insistence that the president can exercise what Cheney in 1987 called "monarchical notions of prerogative." That he can, in other words, override validly enacted statutes and treaties simply by invoking national security. This monarchical claim underwrote not only the expansion of torture, extraordinary rendition and warrantless surveillance but also the stonewalling of Congressional and judicial inquiries in the name of "executive privilege" and "state secrets."
The Bush/Cheney White House leveraged pervasive post-9/11 fears to reverse what Cheney called "the erosion of presidential power" since Watergate. Relying on pliant Justice Department lawyers for legal cover, it put into practice a vision of executive power unconstrained by Congress or the courts. It achieved what James Madison once called the "accumulation of all powers, legislative, executive and judiciary, in the same hands," which he condemned as "the very definition of tyranny."
Radical change is needed to re-establish legitimate bounds to executive power. We must again place beyond the pale Nixon's famous aphorism that "when the president does it, that means it's not illegal." But radical change--as early appointments and policy signals from the Obama transition team suggest--comes easier as campaign slogan than governing practice. And there are many reasons to fear a go-slow approach from Obama when it comes to restoring the constitutional equilibrium.
No matter how decent, any new president is tempted by the tools and trappings of executive authority. However tainted the Oval Office is now, Obama's perspective will change dramatically on entering the White House. He is already reading more daily security briefs than Bush and beginning each day with a barrage of fearful intelligence, hinting at dangers that largely never materialize. Submersion in that flow of intelligence will wrenchingly change his sense of the world's risks.
So Obama will be tempted to maintain Bush's innovations in executive power. While the terror threat remains substantial, as the Mumbai attack shows, the Bush administration has left counterterrorism policy in tatters. We have no rational strategy for terrorist interdiction and prevention. Obama's nominations of Robert Gates as defense secretary and Gen. James Jones as national security adviser suggest he is acutely aware of these deficits and of the Democrats' perceived vulnerability on national security. Nor are terrorists the only threat that might lead Obama to reach for emergency powers: credit crunches and fiscal meltdowns can also prompt unilateral executive action, with consequences as sweeping as any national security initiative.
Internal pressure for changing the White House position on executive power will thus wane as the new administration settles in. And pressure from the other two branches is unlikely to swell. The Obama White House will at first face a friendly Congress eager to show results on the economy and healthcare. Unlike the recently oppositional Congress, legislators in the majority have little incentive to make constitutional waves (expect some stalwarts, such as Senator Russ Feingold, to buck this trend). Matters are not helped by the turn from the feckless to the competent. Legislators and the public care most about the constitutional restraints on executive power when the occupant of the White House raises concerns about abuses of power. A more capable leader's entrance saps immediate pressure for reform, even when openings for such limits can be glimpsed.
Nor will the judiciary, listing rightward with President Bush's 324 appointments, provide much constraint. In his appointments to the Supreme Court and the District of Columbia Circuit Court of Appeals (which hears many key constitutional cases), Bush seems to have selected executive-power mavens, including Chief Justice John Roberts, Justice Samuel Alito and Judge Janice Rogers Brown. Their opinions already evince strong deference to executive claims of secrecy and expediency. Paradoxically, then, one of Bush's key legacies will be a judiciary that instinctually hews to an executive controlled by a Democratic president.
I am thus not optimistic that the Obama administration will of its own volition restore the constitutional balance, even if it gives up some of Bush/Cheney's most extravagant and offensive policies. With formidable forces arrayed against them, advocates for the Constitution's original equilibrium of powers must choose their battles carefully.
Three areas are particularly important in the administration's early days: torture, the law that the executive follows and accountability. In each case, measures can be taken that would correct a policy the Obama administration clearly disagrees with and simultaneously help dismantle the Bush/Cheney constitutional revolution. (The other pressing issue to face the incoming administration--detention policy--is so complex and difficult, largely thanks to the outgoing administration's compounded mistakes, that it needs to be looked at separately.)
Begin with torture. President Bush's repeated disavowals of government-sanctioned torture have created cognitive dissonance: White House protestations that "we don't torture" are no longer believed. An Obama administration dedicated to restoring America's tarnished international reputation must do more than talk. The best way to begin is for Congress to enact and President Obama to sign already introduced legislation that would limit the intelligence community to the specific interrogation tactics listed in the recently revised Army Field Manual. This law would make it clear that the CIA in particular cannot use what it euphemistically calls "enhanced interrogation techniques." In signing the law, Obama should eschew the weaseling signing provisos favored by Bush and instead forthrightly recognize that there is no presidential override when it comes to torture. This bill is a golden opportunity to restore international credibility and repudiate the monarchical presidency. So it is unfortunate that Democratic Senators Dianne Feinstein and Ron Wyden have already begun backsliding on it.
Also on the torture front, the Obama administration should candidly acknowledge past wrongs, thereby abandoning the Bush/Cheney demand for absolute secrecy. In legal cases filed by torture victims such as Maher Arar, Khaled el-Masri and Shafiq Rasul, the Bush administration has parried demands for acknowledgment or restitution with a sweeping constitutional theory of "state secrets." Rejecting this theory would be a significant step in dismantling the Bush/Cheney view of executive unilateralism. It would be the smallest measure of justice to abandon this theory as ill founded and also to offer profound apologies and restitution to victims. It would be a public acknowledgment that our fears are never an excuse for anyone's suffering.
Torture is only one aspect of a larger distortion of the Constitution. Changing the executive's operating definitions of the law will be critical to rolling back the Bush/Cheney vision. Now this vision is largely memorialized in Justice Department opinions, many still secret. Some of them directly address presidential prerogatives to override laws. Others deal with specific constitutional rights, such as Fourth Amendment privacy rights and the freedom from indefinite detention without trial.
While there is not much general public pressure to change these positions, many constitutional scholars and advocacy groups have protested these opinions. Consistent pressure is required to ensure that the Obama Justice Department cleans house. All department opinions on executive power should be revealed, and troubling ones should be red-flagged so officials will know they can no longer rely on them. The Justice Department should then develop opinions that systematically repudiate the most offensive positions, in particular the idea of monarchical prerogatives to override the law.
Traditionally, opinions have been prepared by the Office of Legal Counsel in secret and then closely held within the administration. Given executive-branch lawyers' habitual pro-presidential tilt, this process should be refashioned. Not only should opinions be made public after publication; the OLC should invite comment and criticism from the public and scholars during drafting, much as other federal regulations are subject to pre-publication "notice and comment."
Finally, there is the thorny matter of accountability. Absent accountability, the lesson of the Bush/Cheney era would be that those who violate the law can, if brazen enough, get away with it. Yet the Obama transition team has signaled no appetite for criminal proceedings. And in any case, indictments might be pre-empted by a blanket pardon before January 20.
Many others have made a compelling case for prosecutions. But what if they don't happen? Paradoxically, blanket presidential pardons may be the least bad alternative. If prosecutions proceed, they may not be edifying. Admissible evidence will be sparse, given secrecy rules. Officials will protest at being sandbagged after having relied on (flawed) OLC opinions. And there is the danger of a repeat of the Iran/Contra trials, where Oliver North used the dock as a soapbox. Given these risks, a blanket pardon perversely might send the clearest signal that the malaise of the Bush/Cheney era was endemic.
Yet this is no reason to renounce accountability. Several commentators have urged a commission to establish full documentation of what was done and its legal justifications. An investigative commission could be less amenable to manipulation than trials. If it could carry out its work in a bipartisan spirit, while insisting on the investigative tools needed to cut through secrecy, such as subpoena power, it could establish a definitive historical record of Bush/Cheney's extraordinary power grab. Bringing to public scrutiny the imperial presidency's infractions will, I suspect, be as good a way as any of thoroughly discrediting that constitutional vision.
No one should assume that the end of the Bush presidency marks the end of the imperial presidency. The Obama administration faces a geostrategic environment of growing uncertainty, with treasury, reputation and military depleted by eight feckless years. It would be foolhardy simply to assume that the worst will be swept away. Yet the opportunities exist for progressives to insist that Obama stay true to his message of hope and his promise of restoring America's tarnished Constitution.
------
Aziz Huq directs the liberty and national security project at New York University's Brennan Center for Justice. He is co-author of Unchecked and Unbalanced: Presidential Power in a Time of Terror (New Press, 2007)
onsdag den 24. december 2008
Higher Wages or Bubblenomics: What's it gonna be?
Wages, wages, wages. It all gets down to wages.
A strong economy must be built on a solid foundation of steadily rising wages. If wages don't keep pace with production, the only way the economy can grow is through the expansion of debt, which leads to disaster.
Consider this: the US economy is 72 percent consumer spending. That means the Gross Domestic Product (GDP) cannot grow if salaries don't keep up with the price of living. Low Income Families (LOF)--that is, any couple making less than $80,000--represent 50 percent of all consumer spending. These LOF's spend everything they earn just to maintain their present standard of living. So, how can these families help to grow the economy if they're already spending every last farthing they earn?
They can't! Which is why wages have to go up. The cost to short-term profits is miniscule compared to the turmoil of a deep recession which is what the world is facing right now. The present crisis could have been avoided if there was a better balance between management and labor. But the unions are weak, so salaries have languished while Wall Street has grown more powerful, stretching its tentacles into the government and spreading its anti-labor dogma wherever it goes.
The investor class has rejiggered the system to meet their particular needs. Financial wizardry has replaced factories, capital formation and hard assets while real wealth has been replaced by chopped up bits of mortgage paper, stitched together by Ivy League MBAs, and sold to investors as priceless gemstones. This is the system that Bernanke is trying to resuscitate with his multi-trillion dollar injections; a system that shifts a larger and larger amount of the nation's wealth to a smaller and smaller group of elites.
When Alan Greenspan appeared before Congress a few months ago, he admitted that he had discovered a "flaw" in his theory of how markets operate. The former Fed chief was referring to his belief that investment bankers could be trusted to regulate themselves. Whether one believes Greenspan was telling the truth or not is irrelevant. What really matters is that the wily Maestro managed to skirt the larger issues and stick to his script. Congress never challenged Greenspan's discredited, trickle-down economic theories which guided his policymaking from the get-go. Nor was he asked to explain how a consumer-driven economy can thrive when salaries stay flat for 30 years. An answer to that question might have exposed Greenspan's penchant for low interest rates and deregulation, the two fuel-sources for the massive speculative bubbles which emerged on Greenspan's watch. These are the tools the Fed chief used for 18 years to enrich his buddies at the big brokerage houses while workers slipped further and further into debt.
There's no "flaw" in Greenspan's thinking; his views perfectly reflect his unwavering commitment to the rich and powerful. That's never changed. Since retiring, he has continued to ingratiate himself to his Wall Street paymasters while fattening his bank account with royalties from his best seller. Unfortunately, his success has come at great cost to the country.
Millions of homeowners are now facing eviction, consumers are tapped out, and the job market is in a shambles. When equity bubbles unwind, it's never pretty and the Greenspan implosion has been particularly nasty. Assets are being sold at fire sale prices and there's a frantic rush to the safety of US Treasurys. It's a catastrophe.
That said, it may seem like a bad time to boost workers' pay, but that's not the case. Crisis creates opportunities for change---real structural change. And that's what's needed.
The bottom line is that this whole mess could have been avoided if demand was predicated on wage increases instead of asset inflation. Of course, that precludes the Fed's traditional remedies for economic malaise--easy money and massive leveraging. Just last week, Bernanke announced a plan to buy $800 billion of securities backed by mortgages and credit card debt in an effort to stimulate more borrowing. The Fed chairman would rather drown the country in red ink than support pay raises for workers. Go figure? This just illustrates the class bias that underscores the Fed's policies, which is why pointless to debate the issue or try to find common ground. The only way to effect real change is with political power.
From Bernanke and Greenspan's perspective, any small gain by workers is tantamount to communism. They will continue to do everything in their power to preserve the current labor-debasing system which keeps workers just one paycheck away from the homeless shelter. This type of hostility is neither good for the economy nor the country. It just intensifies class animosities by accentuating the chasm between rich and poor. The only way to overcome these differences is by narrowing the wealth gap and rewarding hard work with fair pay.
John Bellamy Foster and Fred Magdoff explain how establishment economists and their corporate patrons developed their ideas of how to use equity bubbles to grow the economy and shift wealth from workers to elites. In their Monthly Review article "Financial Implosion and Stagnation":
"It was the reality of economic stagnation beginning in the 1970s, as heterodox economists Riccardo Bellofiore and Joseph Halevi have recently emphasized, that led to the emergence of “the new financialized capitalist regime,” a kind of “paradoxical financial Keynesianism” whereby demand in the economy was stimulated primarily “thanks to asset-bubbles.” Moreover, it was the leading role of the United States in generating such bubbles—despite (and also because of) the weakening of capital accumulation proper—together with the dollar’s
reserve currency status, that made U.S. monopoly-finance capital the “catalyst of world effective demand.”
Greenspan figured out how to strengthen the grip of the banking sector by creating asset bubbles. That was his great contribution during the Clinton years. The leveraging of complex financial products and the surge in real estate prices gave the impression of prosperity, but it was all smoke and mirrors. The "wealth effect" vanished as soon as the interest payments on mortgages could no longer be paid. That's when Maestro's bubble blew up and Greenspan retired to write his memoirs.
So far, world stock indexes have lost over $30 trillion and there will probably be another bloody leg down in 2009. As the underlying economy contracts, there's no need for a lumbering, oversized financial system. Institutions will have to be shut down and their assets will have to be sold at auction. That means prices will continue to fall, business activity will falter, and GDP will shrivel. The mismatch between output and falling demand presages a painful correction. When credit gets scarce, business activity slows, and nervous investors head for the exits. That forces businesses to lay off workers which causes prices to fall even further, accelerating the pace of deflation. Economist Henry Liu made these observations in his article "China and the Global financial Crisis":
"US neoliberal trade globalization, having promised a primrose garden of economic growth, has instead led the global economy into a jungle of poison reed, resulting in the worst financial disaster in a century, setting the whole world ablaze with a financial firestorm. This unhappy fate was finally acknowledged as having been policy-induced by Alan Greenspan, the former Chairman of the US Federal Reserve who was largely responsible for the monetary indulgence that had caused this hundred-year financial perfect storm....The Federal Reserve under Greenspan repeatedly created money faster than the global economy could profitably absorb, creating serial bubbles denominated in fiat dollars. Greenspan insisted that it was not possible, nor desirable, to identify an economic bubble in the making as he was inflating it with easy money, lest economic growth should be prematurely cut short. It was a perfect example of the rule that intoxication begins when a drinker becomes unable to know its time to stop drinking." (Henry C.K. Liu China and the Global Financial Crisis", Asia Times)
The Fed wants to stimulate demand by slashing the price of money to 0% while pumping trillions of dollars into the financial system (quantitative easing). But the millions of foreclosures, credit card and student loan defaults, indicate that the underlying economy is rapidly contracting and cannot support such an oversized system. Something's gotta' give. Homeowners and consumers are poorer than they were a year ago. They're focused on paying down their debts not creating new ones. Attitudes towards spending have changed; people are hunkering down. That's why Bernanke's radical liquidity experiment is doomed. There's no way to reflate a bubble if consumers refuse to spend.
If the Fed is serious about fulfilling its mandate, it should abandon its serial bubblemaking altogether and return to basics; productivity, good wages and sound money. The country's future rests on its workers. They don't need a bailout, just a raise.
A strong economy must be built on a solid foundation of steadily rising wages. If wages don't keep pace with production, the only way the economy can grow is through the expansion of debt, which leads to disaster.
Consider this: the US economy is 72 percent consumer spending. That means the Gross Domestic Product (GDP) cannot grow if salaries don't keep up with the price of living. Low Income Families (LOF)--that is, any couple making less than $80,000--represent 50 percent of all consumer spending. These LOF's spend everything they earn just to maintain their present standard of living. So, how can these families help to grow the economy if they're already spending every last farthing they earn?
They can't! Which is why wages have to go up. The cost to short-term profits is miniscule compared to the turmoil of a deep recession which is what the world is facing right now. The present crisis could have been avoided if there was a better balance between management and labor. But the unions are weak, so salaries have languished while Wall Street has grown more powerful, stretching its tentacles into the government and spreading its anti-labor dogma wherever it goes.
The investor class has rejiggered the system to meet their particular needs. Financial wizardry has replaced factories, capital formation and hard assets while real wealth has been replaced by chopped up bits of mortgage paper, stitched together by Ivy League MBAs, and sold to investors as priceless gemstones. This is the system that Bernanke is trying to resuscitate with his multi-trillion dollar injections; a system that shifts a larger and larger amount of the nation's wealth to a smaller and smaller group of elites.
When Alan Greenspan appeared before Congress a few months ago, he admitted that he had discovered a "flaw" in his theory of how markets operate. The former Fed chief was referring to his belief that investment bankers could be trusted to regulate themselves. Whether one believes Greenspan was telling the truth or not is irrelevant. What really matters is that the wily Maestro managed to skirt the larger issues and stick to his script. Congress never challenged Greenspan's discredited, trickle-down economic theories which guided his policymaking from the get-go. Nor was he asked to explain how a consumer-driven economy can thrive when salaries stay flat for 30 years. An answer to that question might have exposed Greenspan's penchant for low interest rates and deregulation, the two fuel-sources for the massive speculative bubbles which emerged on Greenspan's watch. These are the tools the Fed chief used for 18 years to enrich his buddies at the big brokerage houses while workers slipped further and further into debt.
There's no "flaw" in Greenspan's thinking; his views perfectly reflect his unwavering commitment to the rich and powerful. That's never changed. Since retiring, he has continued to ingratiate himself to his Wall Street paymasters while fattening his bank account with royalties from his best seller. Unfortunately, his success has come at great cost to the country.
Millions of homeowners are now facing eviction, consumers are tapped out, and the job market is in a shambles. When equity bubbles unwind, it's never pretty and the Greenspan implosion has been particularly nasty. Assets are being sold at fire sale prices and there's a frantic rush to the safety of US Treasurys. It's a catastrophe.
That said, it may seem like a bad time to boost workers' pay, but that's not the case. Crisis creates opportunities for change---real structural change. And that's what's needed.
The bottom line is that this whole mess could have been avoided if demand was predicated on wage increases instead of asset inflation. Of course, that precludes the Fed's traditional remedies for economic malaise--easy money and massive leveraging. Just last week, Bernanke announced a plan to buy $800 billion of securities backed by mortgages and credit card debt in an effort to stimulate more borrowing. The Fed chairman would rather drown the country in red ink than support pay raises for workers. Go figure? This just illustrates the class bias that underscores the Fed's policies, which is why pointless to debate the issue or try to find common ground. The only way to effect real change is with political power.
From Bernanke and Greenspan's perspective, any small gain by workers is tantamount to communism. They will continue to do everything in their power to preserve the current labor-debasing system which keeps workers just one paycheck away from the homeless shelter. This type of hostility is neither good for the economy nor the country. It just intensifies class animosities by accentuating the chasm between rich and poor. The only way to overcome these differences is by narrowing the wealth gap and rewarding hard work with fair pay.
John Bellamy Foster and Fred Magdoff explain how establishment economists and their corporate patrons developed their ideas of how to use equity bubbles to grow the economy and shift wealth from workers to elites. In their Monthly Review article "Financial Implosion and Stagnation":
"It was the reality of economic stagnation beginning in the 1970s, as heterodox economists Riccardo Bellofiore and Joseph Halevi have recently emphasized, that led to the emergence of “the new financialized capitalist regime,” a kind of “paradoxical financial Keynesianism” whereby demand in the economy was stimulated primarily “thanks to asset-bubbles.” Moreover, it was the leading role of the United States in generating such bubbles—despite (and also because of) the weakening of capital accumulation proper—together with the dollar’s
reserve currency status, that made U.S. monopoly-finance capital the “catalyst of world effective demand.”
Greenspan figured out how to strengthen the grip of the banking sector by creating asset bubbles. That was his great contribution during the Clinton years. The leveraging of complex financial products and the surge in real estate prices gave the impression of prosperity, but it was all smoke and mirrors. The "wealth effect" vanished as soon as the interest payments on mortgages could no longer be paid. That's when Maestro's bubble blew up and Greenspan retired to write his memoirs.
So far, world stock indexes have lost over $30 trillion and there will probably be another bloody leg down in 2009. As the underlying economy contracts, there's no need for a lumbering, oversized financial system. Institutions will have to be shut down and their assets will have to be sold at auction. That means prices will continue to fall, business activity will falter, and GDP will shrivel. The mismatch between output and falling demand presages a painful correction. When credit gets scarce, business activity slows, and nervous investors head for the exits. That forces businesses to lay off workers which causes prices to fall even further, accelerating the pace of deflation. Economist Henry Liu made these observations in his article "China and the Global financial Crisis":
"US neoliberal trade globalization, having promised a primrose garden of economic growth, has instead led the global economy into a jungle of poison reed, resulting in the worst financial disaster in a century, setting the whole world ablaze with a financial firestorm. This unhappy fate was finally acknowledged as having been policy-induced by Alan Greenspan, the former Chairman of the US Federal Reserve who was largely responsible for the monetary indulgence that had caused this hundred-year financial perfect storm....The Federal Reserve under Greenspan repeatedly created money faster than the global economy could profitably absorb, creating serial bubbles denominated in fiat dollars. Greenspan insisted that it was not possible, nor desirable, to identify an economic bubble in the making as he was inflating it with easy money, lest economic growth should be prematurely cut short. It was a perfect example of the rule that intoxication begins when a drinker becomes unable to know its time to stop drinking." (Henry C.K. Liu China and the Global Financial Crisis", Asia Times)
The Fed wants to stimulate demand by slashing the price of money to 0% while pumping trillions of dollars into the financial system (quantitative easing). But the millions of foreclosures, credit card and student loan defaults, indicate that the underlying economy is rapidly contracting and cannot support such an oversized system. Something's gotta' give. Homeowners and consumers are poorer than they were a year ago. They're focused on paying down their debts not creating new ones. Attitudes towards spending have changed; people are hunkering down. That's why Bernanke's radical liquidity experiment is doomed. There's no way to reflate a bubble if consumers refuse to spend.
If the Fed is serious about fulfilling its mandate, it should abandon its serial bubblemaking altogether and return to basics; productivity, good wages and sound money. The country's future rests on its workers. They don't need a bailout, just a raise.
World Faces "Total" Financial Meltdown: Bank of Spain Chief
The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a "total" financial meltdown unseen since the Great Depression.
"The lack of confidence is total," Miguel Angel Fernandez Ordonez said in an interview with Spain's El Pais daily.
"The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.
"There is an almost total paralysis from which no-one is escaping," he said, adding that any recovery -- pencilled in by optimists for the end of 2009 and the start of 2010 -- could be delayed if confidence is not restored.
Ordonez recognised that falling oil prices and lower taxes could kick-start a faster-than-anticipated recovery, but warned that a deepening cycle of falling consumer demand, rising unemployment and an ongoing lending squeeze could not be ruled out.
"This is the worst financial crisis since the Great Depression" of 1929, he added.
Ordonez said the European Central Bank, of which he is a governing council member, would cut interest rates in January if inflation expectations went much below two percent.
"If, among other variables, we observe that inflation expectations go much below two percent, it's logical that we will lower rates."
Regarding the dire situation in the United States, Ordonez said he backed the decision by the US Federal Reserve to cut interest rates almost to zero in the face of profound deflation fears.
Central banks are seeking to jumpstart movements on crucial interbank money markets that froze after the US market for high-risk, or subprime mortgages collapsed in mid 2007, and locked tighter after the US investment bank Lehman Brothers declared bankruptcy in mid September.
Interbank markets are a key link in the chain which provides credit to businesses and households.
Copyright AFP 2008, AFP
"The lack of confidence is total," Miguel Angel Fernandez Ordonez said in an interview with Spain's El Pais daily.
"The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.
"There is an almost total paralysis from which no-one is escaping," he said, adding that any recovery -- pencilled in by optimists for the end of 2009 and the start of 2010 -- could be delayed if confidence is not restored.
Ordonez recognised that falling oil prices and lower taxes could kick-start a faster-than-anticipated recovery, but warned that a deepening cycle of falling consumer demand, rising unemployment and an ongoing lending squeeze could not be ruled out.
"This is the worst financial crisis since the Great Depression" of 1929, he added.
Ordonez said the European Central Bank, of which he is a governing council member, would cut interest rates in January if inflation expectations went much below two percent.
"If, among other variables, we observe that inflation expectations go much below two percent, it's logical that we will lower rates."
Regarding the dire situation in the United States, Ordonez said he backed the decision by the US Federal Reserve to cut interest rates almost to zero in the face of profound deflation fears.
Central banks are seeking to jumpstart movements on crucial interbank money markets that froze after the US market for high-risk, or subprime mortgages collapsed in mid 2007, and locked tighter after the US investment bank Lehman Brothers declared bankruptcy in mid September.
Interbank markets are a key link in the chain which provides credit to businesses and households.
Copyright AFP 2008, AFP
Capitalist Fools - Joseph Stieglitz (nobelprisvinder i økonomi).
Capitalist Fools
December 16th, 2008 · No Comments
Joseph Stiglitz in Vanity Fair argues that in the debate over remaking financial policy, it is crucial to get the history right about the causes of the crisis. He puts the blame on five key decisions and moments: Reagan’s appointment of free market zealot Greenspan as Chair of the Federal Reserve, the repeal of Glass-Steagall act and other laws that increased de-regulation of the financial sector, Bush’s tax cuts for the rich and unprecedented low interest rates that encouraged excessive borrowing and lending, failure to tackle stock options or incentive structures for rating agencies which instead encouraged everyone to hide the real figures, and finally the misdirected actions of the Bush administration to the crisis that bailed out bankers and shareholders but not those facing foreclosures of their homes.
“There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history - a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it’s crucial to get the history straight.
What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road - we had what engineers call a “system failure,” when not a single decision but a cascade of decisions produce a tragic result. Let’s look at five key moments.
*No. 1: Firing the Chairman*
In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.
Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000-2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown - as we are seeing now, and as Greenspan should have known. He had many of the tools he needed to cope with the situation. To deal with the high-tech bubble, he could have increased margin requirements (the amount of cash people need to put down to buy stock). To deflate the housing bubble, he could have curbed predatory lending to low-income households and prohibited other insidious practices (the no-documentation - or “liar” - loans, the interest-only loans, and so on). This would have gone a long way toward protecting us. If he didn’t have the tools, he could have gone to Congress and asked for them.
Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen - for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk - but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else - or even of one’s own position. Not surprisingly, the credit markets froze.
Here too Greenspan played a role. When I was chairman of the Council of Economic Advisers, during the Clinton administration, I served on a committee of all the major federal financial regulators, a group that included Greenspan and Treasury Secretary Robert Rubin. Even then, it was clear that derivatives posed a danger. We didn’t put it as memorably as Warren Buffett - who saw derivatives as “financial weapons of mass destruction” - but we took his point. And yet, for all the risk, the deregulators in charge of the financial system - at the Fed, at the Securities and Exchange Commission, and elsewhere - decided to do nothing, worried that any action might interfere with “innovation” in the financial system. But innovation, like “change,” has no inherent value. It can be bad (the “liar” loans are a good example) as well as good.
No. 2: Tearing Down the Walls
The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act - the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn’t its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee.
I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest - toward short-term self-interest, at any rate, rather than Tocqueville’s “self interest rightly understood.”
The most important consequence of the repeal of Glass-Steagall was indirect - it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money - people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.
There were other important steps down the deregulatory path. One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process. In agreeing to this measure, the S.E.C. argued for the virtues of self-regulation: the peculiar notion that banks can effectively police themselves. Self-regulation is preposterous, as even Alan Greenspan now concedes, and as a practical matter it can’t, in any case, identify systemic risks - the kinds of risks that arise when, for instance, the models used by each of the banks to manage their portfolios tell all the banks to sell some security all at once.
As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation - a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar-plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant - and successful - in their opposition. Nothing was done.
No. 3: Applying the Leeches
Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease - the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity.
The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil - money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America’s household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.
The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible. If, for instance, you borrowed a million to buy a home or took a $100,000 home-equity loan to buy stock, the interest would be fully deductible every year. Any capital gains you made were taxed lightly - and at some possibly remote day in the future. The Bush administration was providing an open invitation to excessive borrowing and lending - not that American consumers needed any more encouragement.
No. 4: Faking the Numbers
Meanwhile, on July 30, 2002, in the wake of a series of major scandals - notably the collapse of WorldCom and Enron - Congress passed the Sarbanes-Oxley Act. The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system. Accounting is a sleep-inducing topic for most people, but if you can’t have faith in a company’s numbers, then you can’t have faith in anything about a company at all.
Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many, including the respected former head of the S.E.C. Arthur Levitt, believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are “incentive pay” in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. The rating agencies, like the investment banks that were paying them, believed in financial alchemy - that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.
No. 5: Letting It Bleed
The final turning point came with the passage of a bailout package on October 3, 2008 - that is, with the administration’s response to the crisis itself. We will be feeling the consequences for years to come. Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner. As America’s banks faced collapse, the administration veered from one course of action to another. Some institutions (Bear Stearns, A.I.G., Fannie Mae, Freddie Mac) were bailed out. Lehman Brothers was not. Some shareholders got something back. Others did not.
The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as necessary to restore confidence. But it didn’t address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction.
The bailout package was like a massive transfusion to a patient suffering from internal bleeding - and nothing was being done about the source of the problem, namely all those foreclosures. Valuable time was wasted as Paulson pushed his own plan, “cash for trash,” buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to restart lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.
The other problem not addressed involved the looming weaknesses in the economy. The economy had been sustained by excessive borrowing. That game was up. As consumption contracted, exports kept the economy going, but with the dollar strengthening and Europe and the rest of the world declining, it was hard to see how that could continue. Meanwhile, states faced massive drop-offs in revenues - they would have to cut back on expenditures. Without quick action by government, the economy faced a downturn. And even if banks had lent wisely - which they hadn’t - the downturn was sure to mean an increase in bad debts, further weakening the struggling financial sector.
The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun by addressing the underlying problems - the flawed incentive structures and the inadequate regulatory system.
Was there any single decision which, had it been reversed, would have changed the course of history? Every decision - including decisions not to do something, as many of our bad economic decisions have been - is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You’ll hear some on the right point to certain actions by the government itself - such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.’s had the same perverse incentive to indulge in gambling.
The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America - and much of the rest of the world - of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
——–
/Joseph E. Stiglitz, a Nobel Prize winning economist, is a professor at Columbia University./
December 16th, 2008 · No Comments
Joseph Stiglitz in Vanity Fair argues that in the debate over remaking financial policy, it is crucial to get the history right about the causes of the crisis. He puts the blame on five key decisions and moments: Reagan’s appointment of free market zealot Greenspan as Chair of the Federal Reserve, the repeal of Glass-Steagall act and other laws that increased de-regulation of the financial sector, Bush’s tax cuts for the rich and unprecedented low interest rates that encouraged excessive borrowing and lending, failure to tackle stock options or incentive structures for rating agencies which instead encouraged everyone to hide the real figures, and finally the misdirected actions of the Bush administration to the crisis that bailed out bankers and shareholders but not those facing foreclosures of their homes.
“There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history - a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it’s crucial to get the history straight.
What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road - we had what engineers call a “system failure,” when not a single decision but a cascade of decisions produce a tragic result. Let’s look at five key moments.
*No. 1: Firing the Chairman*
In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.
Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000-2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown - as we are seeing now, and as Greenspan should have known. He had many of the tools he needed to cope with the situation. To deal with the high-tech bubble, he could have increased margin requirements (the amount of cash people need to put down to buy stock). To deflate the housing bubble, he could have curbed predatory lending to low-income households and prohibited other insidious practices (the no-documentation - or “liar” - loans, the interest-only loans, and so on). This would have gone a long way toward protecting us. If he didn’t have the tools, he could have gone to Congress and asked for them.
Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen - for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk - but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else - or even of one’s own position. Not surprisingly, the credit markets froze.
Here too Greenspan played a role. When I was chairman of the Council of Economic Advisers, during the Clinton administration, I served on a committee of all the major federal financial regulators, a group that included Greenspan and Treasury Secretary Robert Rubin. Even then, it was clear that derivatives posed a danger. We didn’t put it as memorably as Warren Buffett - who saw derivatives as “financial weapons of mass destruction” - but we took his point. And yet, for all the risk, the deregulators in charge of the financial system - at the Fed, at the Securities and Exchange Commission, and elsewhere - decided to do nothing, worried that any action might interfere with “innovation” in the financial system. But innovation, like “change,” has no inherent value. It can be bad (the “liar” loans are a good example) as well as good.
No. 2: Tearing Down the Walls
The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act - the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn’t its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee.
I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest - toward short-term self-interest, at any rate, rather than Tocqueville’s “self interest rightly understood.”
The most important consequence of the repeal of Glass-Steagall was indirect - it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money - people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.
There were other important steps down the deregulatory path. One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process. In agreeing to this measure, the S.E.C. argued for the virtues of self-regulation: the peculiar notion that banks can effectively police themselves. Self-regulation is preposterous, as even Alan Greenspan now concedes, and as a practical matter it can’t, in any case, identify systemic risks - the kinds of risks that arise when, for instance, the models used by each of the banks to manage their portfolios tell all the banks to sell some security all at once.
As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation - a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar-plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant - and successful - in their opposition. Nothing was done.
No. 3: Applying the Leeches
Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease - the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity.
The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil - money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America’s household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.
The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible. If, for instance, you borrowed a million to buy a home or took a $100,000 home-equity loan to buy stock, the interest would be fully deductible every year. Any capital gains you made were taxed lightly - and at some possibly remote day in the future. The Bush administration was providing an open invitation to excessive borrowing and lending - not that American consumers needed any more encouragement.
No. 4: Faking the Numbers
Meanwhile, on July 30, 2002, in the wake of a series of major scandals - notably the collapse of WorldCom and Enron - Congress passed the Sarbanes-Oxley Act. The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system. Accounting is a sleep-inducing topic for most people, but if you can’t have faith in a company’s numbers, then you can’t have faith in anything about a company at all.
Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many, including the respected former head of the S.E.C. Arthur Levitt, believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are “incentive pay” in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. The rating agencies, like the investment banks that were paying them, believed in financial alchemy - that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.
No. 5: Letting It Bleed
The final turning point came with the passage of a bailout package on October 3, 2008 - that is, with the administration’s response to the crisis itself. We will be feeling the consequences for years to come. Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner. As America’s banks faced collapse, the administration veered from one course of action to another. Some institutions (Bear Stearns, A.I.G., Fannie Mae, Freddie Mac) were bailed out. Lehman Brothers was not. Some shareholders got something back. Others did not.
The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as necessary to restore confidence. But it didn’t address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction.
The bailout package was like a massive transfusion to a patient suffering from internal bleeding - and nothing was being done about the source of the problem, namely all those foreclosures. Valuable time was wasted as Paulson pushed his own plan, “cash for trash,” buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to restart lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.
The other problem not addressed involved the looming weaknesses in the economy. The economy had been sustained by excessive borrowing. That game was up. As consumption contracted, exports kept the economy going, but with the dollar strengthening and Europe and the rest of the world declining, it was hard to see how that could continue. Meanwhile, states faced massive drop-offs in revenues - they would have to cut back on expenditures. Without quick action by government, the economy faced a downturn. And even if banks had lent wisely - which they hadn’t - the downturn was sure to mean an increase in bad debts, further weakening the struggling financial sector.
The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun by addressing the underlying problems - the flawed incentive structures and the inadequate regulatory system.
Was there any single decision which, had it been reversed, would have changed the course of history? Every decision - including decisions not to do something, as many of our bad economic decisions have been - is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You’ll hear some on the right point to certain actions by the government itself - such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.’s had the same perverse incentive to indulge in gambling.
The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America - and much of the rest of the world - of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
——–
/Joseph E. Stiglitz, a Nobel Prize winning economist, is a professor at Columbia University./
mandag den 15. december 2008
Det vi ved, at vi ikke ved
Skrevet af: Rune Lykkeberg
I anledning af den offentlige sandhed om, at to tunesere har planlagt et mord på en tegner er det måske på tide, at minde om Donald Rumsfelds filosofi om det vi ved, og det vi ikke ved
'As we know, there are known knowns. There are things we know we know. We also know here are known unknowns. That is to say we know there are some things we do not know. But there are also unknown unknowns. The ones we don't know we don't know.'
- Donald Rumsfeld
Trist, sagde Pia Kjærsgaard. Og trist sagde studieværten i TV-Avisen bagefter. De var enige om, at der var tale om en trist udvikling. Det handlede om den ene af de to tunesere, som tidligere på året blev administrativt udvist af Integrationsministeriet. Den anden, som var den, der som kampsportsspecialist ifølge Politiets Efterretningstjeneste skulle kvæle tegneren Kurt Westergaard, har allerede forladt landet.
Der var også en tredje mand involveret. Han blev sigtet for mordforsøg på tegneren, men statsadvokaten valgte siden at frafalde sigtelsen på grund af manglende beviser. Den minister, som havde ansvaret for den administrative udvisning, udtalte allerede dengang, at hun "ikke var begejstret". Det har hun siden gentaget.
Højesteret anmodede i sommeren 2008 om en undersøgelse af det bevismateriale, som skulle ligge til grund for udvisningerne og antagelsen om, at de to var i færd med at planlægge et mord på Kurt Westergaard. PET afviste at udlevere al materiale, men det viste sig, at den tuneser, som er blevet i Danmark, angiveligt er mistænkt for at planlægge mordet på Kurt Westergaard, fordi han har set en selvmordsvideo på nettet, og fordi han i 2005 var i færd med at købe en bil, der ifølge tjenesten skulle bruges til flugten.
Det viste sig også, at den pistol, som PET havde fundet hos den nu bortrejste tuneser, ikke var et potentielt dræbende skydevåben, men derimod en gaspistol, der oven i købet var i stykker.
Det Pia Kjærsgaard mandag aften kaldte "en trist udvikling" var, at den tuneser, som er forblevet i Danmark, ikke kan fængsles, fordi han ikke er dømt. Og ganske påfaldende blev hendes politiske vurdering gentaget af journalisten i studiet: "Det er en trist udvikling."
En vurdering fra Politiets Efterretningstjeneste er således vandret til at blive et politisk udsagn og endelig til en sandhed, som gentages af en studievært på tv.
Den troværdige agent
Det bliver sagt, som om det er noget vi ved positivt, at denne mand skulle være til fare for statens sikkerhed. Justitsministeren har også på trods af Højesterets afgørelse udtalt, at der er tale om "en farlig mand". Men hvis der er noget, vi ved positivt, så er det ikke, at vi ikke ved det. Som den forhenværende amerikanske forsvarsminister Donald Rumsfeld berømt udtalte, må man skelne det, vi ved, at vi ved, det vi ved, at vi ikke ved, og endelig det, som vi ikke ved, at vi ikke ved.
Det sidste er det selvsagt svært at give eksempler på, og det første giver sig selv. Men om PET's vurdering af de to tunesere ved vi, at en af de ansvarlige ministre, der har set grundlaget for den administrative udvisning ikke var begejstret. Vi ved også, at PET's rolle er blevet udvidet med antiterrorloven. Efterretningstjenesten skal ikke længere kun forhindre angreb. Den skal også føre sager ved domstolene. Vi ved, at PET har tabt flere af disse sager.
Ved den såkaldte Glostrup-sag ved vi også, at bevisførelserne mod de fire terrortiltalte i høj grad baserede sig på vurderinger af ydre tegn på de sigtedes religionsforhold: Langt skæg blev eksempel brugt som indicium. Det påfaldende var, at disse indicier blev vurderet som overbevisende af domsmændene, hvorefter dommerne valgte at skride ind og slå fast, at der ikke var tale om beviser. Tre ud af fire tiltalte blev således frifundet. Vi ved også, at PET siden 1999 er blevet undersøgt af en kommission, som blev nedsat ved lov. Meget ved vi ikke om denne kommissions langvarige arbejde, fordi det meste foregår for lukkede døre. Vi ved også, at PET i den såkaldte Vollsmose-sag brugte en civil agent, som af klassekammerater og tidligere kolleger var kendt for både voldsomme overdrivelser og rene løgnehistorier. Han meldte sig selv til PET som angiver og blev af tjenesten vurderet som troværdig. Hans vidneudsagn var med til sende terrormistænkte i fængsel i op til 12 år.
Derudover ved vi, at PET tidligere har løjet for offentligheden. Efter anholdelserne af de terrormistænke i Vollsmose i 2006 kom det frem, at PET havde trukket hætter ned over hovederne på de anholdte, hvilket er i strid med torturkonventionen. De anholdte fortalte selv om hætterne. Først benægtede PET brugen af hætterne, siden indrømmede tjenesten det.
Den triste udvikling
Vi ved altså, at PET ikke altid siger sandheden. Vi ved også, at det ikke er PET's opgave at sige sandheden til borgerne. Derfor ved vi også, at der en masse, vi ikke ved. Det er ikke kontroversielle eller systemkritiske antagelser. Det er forhold, som PET sikkert selv vil bekræfte. Det forekommer på den baggrund besynderligt, at en kritisk offentlighed, der som regel tager for givet, at danskerne er anti-autoritære og ikke vil påduttes andres dogmer, tilsyneladende ophøjer PET's postulater til sandheder.
Det regnes for helt sikkert, at Kurt Westergaard skulle være genstand for planer om et attentat. Og tuneserne regnes for dem, der skulle gøre det. Der tales i offentligheden, som om, det er noget, vi ved. Men det, vi ved, er faktisk, at vi ikke ved det. Vi kan ikke påberåbe os den uskyld, som tilkommer dem, der ikke ved, at de ikke ved det. Og når dette enten behændigt glemmes eller bevidst ignoreres, synes det berettiget at tale om en trist udvikling.
I anledning af den offentlige sandhed om, at to tunesere har planlagt et mord på en tegner er det måske på tide, at minde om Donald Rumsfelds filosofi om det vi ved, og det vi ikke ved
'As we know, there are known knowns. There are things we know we know. We also know here are known unknowns. That is to say we know there are some things we do not know. But there are also unknown unknowns. The ones we don't know we don't know.'
- Donald Rumsfeld
Trist, sagde Pia Kjærsgaard. Og trist sagde studieværten i TV-Avisen bagefter. De var enige om, at der var tale om en trist udvikling. Det handlede om den ene af de to tunesere, som tidligere på året blev administrativt udvist af Integrationsministeriet. Den anden, som var den, der som kampsportsspecialist ifølge Politiets Efterretningstjeneste skulle kvæle tegneren Kurt Westergaard, har allerede forladt landet.
Der var også en tredje mand involveret. Han blev sigtet for mordforsøg på tegneren, men statsadvokaten valgte siden at frafalde sigtelsen på grund af manglende beviser. Den minister, som havde ansvaret for den administrative udvisning, udtalte allerede dengang, at hun "ikke var begejstret". Det har hun siden gentaget.
Højesteret anmodede i sommeren 2008 om en undersøgelse af det bevismateriale, som skulle ligge til grund for udvisningerne og antagelsen om, at de to var i færd med at planlægge et mord på Kurt Westergaard. PET afviste at udlevere al materiale, men det viste sig, at den tuneser, som er blevet i Danmark, angiveligt er mistænkt for at planlægge mordet på Kurt Westergaard, fordi han har set en selvmordsvideo på nettet, og fordi han i 2005 var i færd med at købe en bil, der ifølge tjenesten skulle bruges til flugten.
Det viste sig også, at den pistol, som PET havde fundet hos den nu bortrejste tuneser, ikke var et potentielt dræbende skydevåben, men derimod en gaspistol, der oven i købet var i stykker.
Det Pia Kjærsgaard mandag aften kaldte "en trist udvikling" var, at den tuneser, som er forblevet i Danmark, ikke kan fængsles, fordi han ikke er dømt. Og ganske påfaldende blev hendes politiske vurdering gentaget af journalisten i studiet: "Det er en trist udvikling."
En vurdering fra Politiets Efterretningstjeneste er således vandret til at blive et politisk udsagn og endelig til en sandhed, som gentages af en studievært på tv.
Den troværdige agent
Det bliver sagt, som om det er noget vi ved positivt, at denne mand skulle være til fare for statens sikkerhed. Justitsministeren har også på trods af Højesterets afgørelse udtalt, at der er tale om "en farlig mand". Men hvis der er noget, vi ved positivt, så er det ikke, at vi ikke ved det. Som den forhenværende amerikanske forsvarsminister Donald Rumsfeld berømt udtalte, må man skelne det, vi ved, at vi ved, det vi ved, at vi ikke ved, og endelig det, som vi ikke ved, at vi ikke ved.
Det sidste er det selvsagt svært at give eksempler på, og det første giver sig selv. Men om PET's vurdering af de to tunesere ved vi, at en af de ansvarlige ministre, der har set grundlaget for den administrative udvisning ikke var begejstret. Vi ved også, at PET's rolle er blevet udvidet med antiterrorloven. Efterretningstjenesten skal ikke længere kun forhindre angreb. Den skal også føre sager ved domstolene. Vi ved, at PET har tabt flere af disse sager.
Ved den såkaldte Glostrup-sag ved vi også, at bevisførelserne mod de fire terrortiltalte i høj grad baserede sig på vurderinger af ydre tegn på de sigtedes religionsforhold: Langt skæg blev eksempel brugt som indicium. Det påfaldende var, at disse indicier blev vurderet som overbevisende af domsmændene, hvorefter dommerne valgte at skride ind og slå fast, at der ikke var tale om beviser. Tre ud af fire tiltalte blev således frifundet. Vi ved også, at PET siden 1999 er blevet undersøgt af en kommission, som blev nedsat ved lov. Meget ved vi ikke om denne kommissions langvarige arbejde, fordi det meste foregår for lukkede døre. Vi ved også, at PET i den såkaldte Vollsmose-sag brugte en civil agent, som af klassekammerater og tidligere kolleger var kendt for både voldsomme overdrivelser og rene løgnehistorier. Han meldte sig selv til PET som angiver og blev af tjenesten vurderet som troværdig. Hans vidneudsagn var med til sende terrormistænkte i fængsel i op til 12 år.
Derudover ved vi, at PET tidligere har løjet for offentligheden. Efter anholdelserne af de terrormistænke i Vollsmose i 2006 kom det frem, at PET havde trukket hætter ned over hovederne på de anholdte, hvilket er i strid med torturkonventionen. De anholdte fortalte selv om hætterne. Først benægtede PET brugen af hætterne, siden indrømmede tjenesten det.
Den triste udvikling
Vi ved altså, at PET ikke altid siger sandheden. Vi ved også, at det ikke er PET's opgave at sige sandheden til borgerne. Derfor ved vi også, at der en masse, vi ikke ved. Det er ikke kontroversielle eller systemkritiske antagelser. Det er forhold, som PET sikkert selv vil bekræfte. Det forekommer på den baggrund besynderligt, at en kritisk offentlighed, der som regel tager for givet, at danskerne er anti-autoritære og ikke vil påduttes andres dogmer, tilsyneladende ophøjer PET's postulater til sandheder.
Det regnes for helt sikkert, at Kurt Westergaard skulle være genstand for planer om et attentat. Og tuneserne regnes for dem, der skulle gøre det. Der tales i offentligheden, som om, det er noget, vi ved. Men det, vi ved, er faktisk, at vi ikke ved det. Vi kan ikke påberåbe os den uskyld, som tilkommer dem, der ikke ved, at de ikke ved det. Og når dette enten behændigt glemmes eller bevidst ignoreres, synes det berettiget at tale om en trist udvikling.
tirsdag den 9. december 2008
A Whitewash for Blackwater?
The federal manslaughter indictment of five Blackwater Worldwide security guards in the horrific massacre of more than a dozen Iraqi civilians in Baghdad may look like an exercise in accountability, but it's probably the exact opposite -- a whitewash that absolves the government and corporate officials who should bear ultimate responsibility.
If what Justice Department prosecutors allege is true, the five guards -- Donald Ball, Dustin Heard, Evan Liberty, Nicholas Slatten and Paul Slough -- should have to answer for what happened on Sept. 16, 2007. The men, working under Blackwater's contract to protect State Department personnel in Iraq, are charged with spraying a busy intersection with machine-gun fire and grenades, killing at least 14 unarmed civilians and wounding 20 others. One man, prosecutors said yesterday, was shot in the chest with his hands raised in submission.
The indictment, charging voluntary manslaughter and weapons violations, demonstrates that those who engage "in unprovoked attacks will be held accountable," Assistant Attorney General Patrick Rowan claimed.
But it demonstrates nothing of the sort. As with the torture and humiliation of detainees at the Abu Ghraib prison, our government is deflecting all scrutiny from the corporate higher-ups who employed the guards -- to say nothing of the policymakers whose decisions made the shootings possible, if not inevitable.
Prosecutors did not file charges against the North Carolina-based Blackwater firm -- the biggest U.S. security contractor in Iraq -- or any of the company's executives. The whole tragic incident is being blamed on the guards who, prosecutors say, made Baghdad's Nisoor Square a virtual free-fire zone.
The Blackwater guards were nervous because of a car bombing elsewhere in the city that day. The company says the Blackwater convoy came under attack by insurgents, prompting the guards to fire in self-defense. "Tragically, people did die," defense attorney Paul Cassell told reporters.
There is a huge difference between self-defense and the kind of indiscriminate fusillade that the Blackwater team allegedly unleashed. Proper training and supervision -- which was the Blackwater firm's responsibility -- would have made it more likely for the guards to make the right split-second decisions amid the chaos of Nisoor Square. Rather than give Blackwater a free pass, the Justice Department ought to investigate the preparation these men were given before being sent onto Baghdad's dangerous streets.
Blackwater no doubt has rules and regulations about when and where its people can discharge their weapons. But were those rules enforced? Did the guards who were indicted yesterday have any reason to believe they would be punished for the rampage? Or were the shootings considered acceptable inside the Blackwater bunker? Company executives should have to answer these and other questions -- under oath.
But a real attempt to establish blame for this massacre should go beyond Blackwater. It was the Bush administration that decided to police the occupation of Iraq largely with private rather than regular troops.
There are an estimated 30,000 security "contractors" in Iraq, many of them there to protect U.S. State Department personnel. The presence of these heavily armed private soldiers has become a sore point between the U.S. and Iraqi governments. Until now, the mercenaries -- they object to that label, but it fits -- have been immune from prosecution by the Iraqi courts for any alleged crimes. This will change on Jan. 1, when the new U.S.-Iraqi security pact places them under the jurisdiction of Iraqi law. Blackwater and other firms are likely to have a harder time retaining and recruiting personnel, given the possibility of spending time in an Iraqi prison. Yet it is presumed that more private soldiers, rather than fewer, will be needed as the United States reduces troop levels.
Barack Obama has criticized the Bush administration's decision to outsource so many essentially military tasks in Iraq and elsewhere. The officials who made that decision, however, are not being held accountable -- not yet, at least. We deserve, at a minimum, a thorough investigation of what security contractors have done in the name of the United States.
Putting national security in the hands of private companies and private soldiers was bad practice from the start, and incidents such as what happened at Nisoor Square are the foreseeable result. The five Blackwater guards may have fired the weapons, but they were locked and loaded in Washington.
http://www.washingtonpost.com/wp-dyn/content/story/2008/12/09/ST2008120900107.html
If what Justice Department prosecutors allege is true, the five guards -- Donald Ball, Dustin Heard, Evan Liberty, Nicholas Slatten and Paul Slough -- should have to answer for what happened on Sept. 16, 2007. The men, working under Blackwater's contract to protect State Department personnel in Iraq, are charged with spraying a busy intersection with machine-gun fire and grenades, killing at least 14 unarmed civilians and wounding 20 others. One man, prosecutors said yesterday, was shot in the chest with his hands raised in submission.
The indictment, charging voluntary manslaughter and weapons violations, demonstrates that those who engage "in unprovoked attacks will be held accountable," Assistant Attorney General Patrick Rowan claimed.
But it demonstrates nothing of the sort. As with the torture and humiliation of detainees at the Abu Ghraib prison, our government is deflecting all scrutiny from the corporate higher-ups who employed the guards -- to say nothing of the policymakers whose decisions made the shootings possible, if not inevitable.
Prosecutors did not file charges against the North Carolina-based Blackwater firm -- the biggest U.S. security contractor in Iraq -- or any of the company's executives. The whole tragic incident is being blamed on the guards who, prosecutors say, made Baghdad's Nisoor Square a virtual free-fire zone.
The Blackwater guards were nervous because of a car bombing elsewhere in the city that day. The company says the Blackwater convoy came under attack by insurgents, prompting the guards to fire in self-defense. "Tragically, people did die," defense attorney Paul Cassell told reporters.
There is a huge difference between self-defense and the kind of indiscriminate fusillade that the Blackwater team allegedly unleashed. Proper training and supervision -- which was the Blackwater firm's responsibility -- would have made it more likely for the guards to make the right split-second decisions amid the chaos of Nisoor Square. Rather than give Blackwater a free pass, the Justice Department ought to investigate the preparation these men were given before being sent onto Baghdad's dangerous streets.
Blackwater no doubt has rules and regulations about when and where its people can discharge their weapons. But were those rules enforced? Did the guards who were indicted yesterday have any reason to believe they would be punished for the rampage? Or were the shootings considered acceptable inside the Blackwater bunker? Company executives should have to answer these and other questions -- under oath.
But a real attempt to establish blame for this massacre should go beyond Blackwater. It was the Bush administration that decided to police the occupation of Iraq largely with private rather than regular troops.
There are an estimated 30,000 security "contractors" in Iraq, many of them there to protect U.S. State Department personnel. The presence of these heavily armed private soldiers has become a sore point between the U.S. and Iraqi governments. Until now, the mercenaries -- they object to that label, but it fits -- have been immune from prosecution by the Iraqi courts for any alleged crimes. This will change on Jan. 1, when the new U.S.-Iraqi security pact places them under the jurisdiction of Iraqi law. Blackwater and other firms are likely to have a harder time retaining and recruiting personnel, given the possibility of spending time in an Iraqi prison. Yet it is presumed that more private soldiers, rather than fewer, will be needed as the United States reduces troop levels.
Barack Obama has criticized the Bush administration's decision to outsource so many essentially military tasks in Iraq and elsewhere. The officials who made that decision, however, are not being held accountable -- not yet, at least. We deserve, at a minimum, a thorough investigation of what security contractors have done in the name of the United States.
Putting national security in the hands of private companies and private soldiers was bad practice from the start, and incidents such as what happened at Nisoor Square are the foreseeable result. The five Blackwater guards may have fired the weapons, but they were locked and loaded in Washington.
http://www.washingtonpost.com/wp-dyn/content/story/2008/12/09/ST2008120900107.html
US: Blackwater used grenades on unarmed Iraqis
WASHINGTON (AP) -- Blackwater Worldwide security guards opened machine gun fire on innocent, surrendering Iraqis and launched a grenade into a girls' school during a gruesome Baghdad shooting last year, prosecutors said Monday in announcing manslaughter charges against five guards.
A sixth guard involved in the attack cut a plea deal with prosecutors, turned on his former colleagues, and admitting killing at least one Iraqi in the 2007 shooting in Baghdad's Nisoor Square. Seventeen Iraqis were killed in the assault, which roiled U.S. diplomacy with Iraq and fueled anti-American sentiment abroad.
The five guards surrendered Monday and were due to ask a federal judge in Utah for bail.
"None of the victims of this shooting was armed. None of them was an insurgent," U.S. Attorney Jeffrey Taylor said. "Many were shot while inside civilian vehicles that were attempting the flee from the convoy. One victim was shot in the chest while standing in the street with his hands up. Another was injured from a grenade fired into a nearby girls' school."
The guards were charged with 14 counts of manslaughter and 20 counts of attempted manslaughter. They are also charged with using a machine gun to commit a crime of violence, a charge that carries a 30-year minimum prison sentence.
The shootings happened in a crowded square where prosecutors say civilians were going about their lives, running errands. Following a car bombing elsewhere in the city, the heavily armed Blackwater convoy sought to shut down the intersection. Prosecutors said the convoy, known by the call sign Raven 23, violated an order not to leave the U.S.-controlled Green Zone.
"The tragic events in Nisoor Square on Sept. 16 of last year were shocking and a violation of basic human rights," FBI Assistant Director Joseph Persichini said.
Witnesses said the contractors opened fire unprovoked. Women and children were among the victims and the shooting left the square littered with blown-out cars. Blackwater, the largest security contractor in Iraq, says its guards were ambushed and believed a slowly moving white Kia sedan might have been a car bomb.
"We think it's pure and simple a case of self-defense," defense attorney Paul Cassell said Monday as the guards were being booked. "Tragically people did die."
Prosecutors said the Blackwater guards never even ordered the car to stop before opening fire. In his plea agreement with prosecutors, former guard Jeremy Ridgeway, of California, admitted there was no indication the Kia was a car bomb.
Though the case has already been assigned to U.S. District Judge Ricardo M. Urbina in Washington, the guards surrendered in Utah. They want the case moved there, where they would presumably find a more conservative jury pool and one more likely to support the Iraq war.
The indicted guards are Donald Ball, a former Marine from West Valley City, Utah; Dustin Heard, a former Marine from Knoxville, Tenn.; Evan Liberty, a former Marine from Rochester, N.H.; Nick Slatten, a former Army sergeant from Sparta, Tenn.; and Paul Slough, an Army veteran from Keller, Texas.
Ridgeway's sentencing on manslaughter, attempted manslaughter and aiding and abetting has not yet been scheduled.
An afternoon court hearing was scheduled on whether to release the guards. Defense attorneys were filing court documents challenging the Justice Department's authority to prosecute the case. The law is murky on whether contractors can be charged in U.S. courts for crimes committed overseas.
The shootings caused an uproar, and the fledgling Iraqi government in Baghdad wanted Blackwater, which protects U.S. State Department personnel, expelled from the country. It also sought the right to prosecute the men in Iraqi courts.
"The killers must pay for their crime against innocent civilians. Justice must be achieved so that we can have rest from the agony we are living in," said Khalid Ibrahim, a 40-year-old electrician who said his 78-year-old father, Ibrahim Abid, died in the shooting. "We know that the conviction of the people behind the shooting will not bring my father to life, but we will have peace in our minds and hearts."
Defense attorneys accused the Justice Department of bowing to Iraqi pressure .
"We are confident that any jury will see this for what it is: a politically motivated prosecution to appease the Iraqi government," said defense attorney Steven McCool, who represents Ball.
Based in Moyock, N.C., Blackwater is the largest security contractor in Iraq and provides heavily armed guards for diplomats. Since last year's shooting, the company has been a flash point in the debate over how heavily the U.S. relies on contractors in war zones
The company itself was not charged in the case. In a lengthy statement, Blackwater stood behind the guards and said it was "extremely disappointed and surprised" that one of the guards had pleaded guilty.
A sixth guard involved in the attack cut a plea deal with prosecutors, turned on his former colleagues, and admitting killing at least one Iraqi in the 2007 shooting in Baghdad's Nisoor Square. Seventeen Iraqis were killed in the assault, which roiled U.S. diplomacy with Iraq and fueled anti-American sentiment abroad.
The five guards surrendered Monday and were due to ask a federal judge in Utah for bail.
"None of the victims of this shooting was armed. None of them was an insurgent," U.S. Attorney Jeffrey Taylor said. "Many were shot while inside civilian vehicles that were attempting the flee from the convoy. One victim was shot in the chest while standing in the street with his hands up. Another was injured from a grenade fired into a nearby girls' school."
The guards were charged with 14 counts of manslaughter and 20 counts of attempted manslaughter. They are also charged with using a machine gun to commit a crime of violence, a charge that carries a 30-year minimum prison sentence.
The shootings happened in a crowded square where prosecutors say civilians were going about their lives, running errands. Following a car bombing elsewhere in the city, the heavily armed Blackwater convoy sought to shut down the intersection. Prosecutors said the convoy, known by the call sign Raven 23, violated an order not to leave the U.S.-controlled Green Zone.
"The tragic events in Nisoor Square on Sept. 16 of last year were shocking and a violation of basic human rights," FBI Assistant Director Joseph Persichini said.
Witnesses said the contractors opened fire unprovoked. Women and children were among the victims and the shooting left the square littered with blown-out cars. Blackwater, the largest security contractor in Iraq, says its guards were ambushed and believed a slowly moving white Kia sedan might have been a car bomb.
"We think it's pure and simple a case of self-defense," defense attorney Paul Cassell said Monday as the guards were being booked. "Tragically people did die."
Prosecutors said the Blackwater guards never even ordered the car to stop before opening fire. In his plea agreement with prosecutors, former guard Jeremy Ridgeway, of California, admitted there was no indication the Kia was a car bomb.
Though the case has already been assigned to U.S. District Judge Ricardo M. Urbina in Washington, the guards surrendered in Utah. They want the case moved there, where they would presumably find a more conservative jury pool and one more likely to support the Iraq war.
The indicted guards are Donald Ball, a former Marine from West Valley City, Utah; Dustin Heard, a former Marine from Knoxville, Tenn.; Evan Liberty, a former Marine from Rochester, N.H.; Nick Slatten, a former Army sergeant from Sparta, Tenn.; and Paul Slough, an Army veteran from Keller, Texas.
Ridgeway's sentencing on manslaughter, attempted manslaughter and aiding and abetting has not yet been scheduled.
An afternoon court hearing was scheduled on whether to release the guards. Defense attorneys were filing court documents challenging the Justice Department's authority to prosecute the case. The law is murky on whether contractors can be charged in U.S. courts for crimes committed overseas.
The shootings caused an uproar, and the fledgling Iraqi government in Baghdad wanted Blackwater, which protects U.S. State Department personnel, expelled from the country. It also sought the right to prosecute the men in Iraqi courts.
"The killers must pay for their crime against innocent civilians. Justice must be achieved so that we can have rest from the agony we are living in," said Khalid Ibrahim, a 40-year-old electrician who said his 78-year-old father, Ibrahim Abid, died in the shooting. "We know that the conviction of the people behind the shooting will not bring my father to life, but we will have peace in our minds and hearts."
Defense attorneys accused the Justice Department of bowing to Iraqi pressure .
"We are confident that any jury will see this for what it is: a politically motivated prosecution to appease the Iraqi government," said defense attorney Steven McCool, who represents Ball.
Based in Moyock, N.C., Blackwater is the largest security contractor in Iraq and provides heavily armed guards for diplomats. Since last year's shooting, the company has been a flash point in the debate over how heavily the U.S. relies on contractors in war zones
The company itself was not charged in the case. In a lengthy statement, Blackwater stood behind the guards and said it was "extremely disappointed and surprised" that one of the guards had pleaded guilty.
Iraq's oil-rich Basra province in autonomy move
NATIONAL SYMBOL: Iraqi soldiers hang a huge flag from the roof of Basra Palace in 2007. (AFP)Iraq's independent electoral commission announced plans on Sunday to collect signatures in support of a referendum to transform the oil-rich province of Basra into an autonomous region.
Signatures would be collected from Dec. 15 to Jan. 14 in 34 centres across the predominantly Shi'ite province, the Independent High Electoral Commission (IHEC) said in a statement.
According to the IHEC, there are 1,409,393 eligible voters in the province of Basra which includes the city of Basra, Iraq's second port along with Umm Al-Qasr and the country's economic nerve centre.
Story continues below ↓
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"If after the certification of the signature collection process the signature list reaches the required 10 percent of the 'Final Voters List', a referendum will be held within three months," the statement said.
More than 70 percent of Iraq's oil is produced in Basra and its port is used for 80 percent of crude exports.
The region has been riven with the rivalries among three main Shi'ite factions - the former rebel Supreme Iraqi Islamic Council (SIIC), the Mahdi Army of firebrand cleric Moqtada Al-Sadr and the smaller Fadhila party.
If the referendum is organised and accepted, it will transform Basra into an autonomous region with the same rights as Kurdistan, the autonomous region in northern Iraq which also enjoys considerable oil wealth.
Over the past year, the Kurdish regional government has angered Baghdad by finalising its own energy law and signing contracts with global oil majors despite the absence of national oil legislation.
The national law has been delayed in parliament over bitter differences among the assembly's Shi'ite, Sunni and Kurdish lawmakers over the sharing of the revenues generated from oil sales.
http://www.arabianbusiness.com/540558-iraqs-oil-rich-basra-province-autonomy-move
Signatures would be collected from Dec. 15 to Jan. 14 in 34 centres across the predominantly Shi'ite province, the Independent High Electoral Commission (IHEC) said in a statement.
According to the IHEC, there are 1,409,393 eligible voters in the province of Basra which includes the city of Basra, Iraq's second port along with Umm Al-Qasr and the country's economic nerve centre.
Story continues below ↓
advertisement
"If after the certification of the signature collection process the signature list reaches the required 10 percent of the 'Final Voters List', a referendum will be held within three months," the statement said.
More than 70 percent of Iraq's oil is produced in Basra and its port is used for 80 percent of crude exports.
The region has been riven with the rivalries among three main Shi'ite factions - the former rebel Supreme Iraqi Islamic Council (SIIC), the Mahdi Army of firebrand cleric Moqtada Al-Sadr and the smaller Fadhila party.
If the referendum is organised and accepted, it will transform Basra into an autonomous region with the same rights as Kurdistan, the autonomous region in northern Iraq which also enjoys considerable oil wealth.
Over the past year, the Kurdish regional government has angered Baghdad by finalising its own energy law and signing contracts with global oil majors despite the absence of national oil legislation.
The national law has been delayed in parliament over bitter differences among the assembly's Shi'ite, Sunni and Kurdish lawmakers over the sharing of the revenues generated from oil sales.
http://www.arabianbusiness.com/540558-iraqs-oil-rich-basra-province-autonomy-move
Human rights report: West Bank situation 'reminiscent of apartheid regime in South Africa'
Basic human rights, such as health, a life of dignity, education, housing, equality, freedom from racism, freedom of expression, privacy and democracy are increasingly being violated in Israel, a human rights watchdog group warned Sunday.
In its annual report, the Association of Civil Rights in Israel (ACRI) pointed to "extremely worrisome trends at the center of which are violations of the most elementary human rights."
The report also noted that the situation in the occupied West Bank, between Israeli settlers and the local Palestinian population, was "reminiscent, in many and increasing ways, of the apartheid regime in South Africa."
The ACRI noted that since the foundation of Israel, the country's Arab citizens have been discriminated against though legislation and allocation of resources.
In addition, women were widely discriminated against in the workplace, earning less money than men in nearly every profession, with a higher rate of unemployment, and with representation in the Israeli academia 10 per cent lower than the average in any of the European Union nations.
While the discrimination between Jews of European origins and those of Oriental or Middle Eastern origin has now been virtually eradicated, the report said, the socioeconomic gap between the two groups has grown, which bolsters a feeling of discrimination.
As regards the Israeli occupation of the Palestinian areas, the ACRI said that Israeli settlements in the West Bank have resulted in institutionalized discrimination in which two separate populations live under two separate judicial systems.
Allocation of funds and services in the occupied area is also unequal and settler violence against local Palestinians has grown.
Many of the 430 people killed and 1,150 wounded in the West Bank by Israeli security forcers in 2008 were innocent bystanders, the report said, without giving exact figures.
The report went on to note that despite progressive labour legislation in Israel, the rights of employees are still violated, or at least not enforced, and many services remain physically inaccessible to the handicapped, who also suffer from a high rate of unemployment compared to the rest of the population.
However, the ACRI did find that the rights of gays in Israel were relatively advanced compared to other Western countries, and gay couples enjoyed the same rights as common-law couples.
The report was published to coincide with the 60th anniversary of the United Nations Universal Declaration of Human Rights.
kilde: http://www.haaretz.com/hasen/spages/1044309.html
In its annual report, the Association of Civil Rights in Israel (ACRI) pointed to "extremely worrisome trends at the center of which are violations of the most elementary human rights."
The report also noted that the situation in the occupied West Bank, between Israeli settlers and the local Palestinian population, was "reminiscent, in many and increasing ways, of the apartheid regime in South Africa."
The ACRI noted that since the foundation of Israel, the country's Arab citizens have been discriminated against though legislation and allocation of resources.
In addition, women were widely discriminated against in the workplace, earning less money than men in nearly every profession, with a higher rate of unemployment, and with representation in the Israeli academia 10 per cent lower than the average in any of the European Union nations.
While the discrimination between Jews of European origins and those of Oriental or Middle Eastern origin has now been virtually eradicated, the report said, the socioeconomic gap between the two groups has grown, which bolsters a feeling of discrimination.
As regards the Israeli occupation of the Palestinian areas, the ACRI said that Israeli settlements in the West Bank have resulted in institutionalized discrimination in which two separate populations live under two separate judicial systems.
Allocation of funds and services in the occupied area is also unequal and settler violence against local Palestinians has grown.
Many of the 430 people killed and 1,150 wounded in the West Bank by Israeli security forcers in 2008 were innocent bystanders, the report said, without giving exact figures.
The report went on to note that despite progressive labour legislation in Israel, the rights of employees are still violated, or at least not enforced, and many services remain physically inaccessible to the handicapped, who also suffer from a high rate of unemployment compared to the rest of the population.
However, the ACRI did find that the rights of gays in Israel were relatively advanced compared to other Western countries, and gay couples enjoyed the same rights as common-law couples.
The report was published to coincide with the 60th anniversary of the United Nations Universal Declaration of Human Rights.
kilde: http://www.haaretz.com/hasen/spages/1044309.html
mandag den 8. december 2008
'2025' Report: A World of Resource Strife
Michael Klare | December 2, 2008
A new report by the National Intelligence Council (NIC) on the emerging strategic landscape, "Global Trends 2025," has attracted worldwide attention because it forecasts a future environment in which the United States wields less power than it does today and must contend with a constellation of other, newly ambitious great powers. "Although the United States is likely to remain the single most important actor," the report notes, "the United States' relative strength — even in the military realm — will decline and U.S. leverage will become more constrained." Of all the many revealing findings in the study, this has been the most widely quoted.
That the United States is likely to experience a decline in its strength relative to other great powers over the next 10 to 15 years is, of course, an observation bound to attract keen attention around the world, where criticism of U.S. foreign policy — over the Iraq War, the handling of the war on terror, our failure to sign the Kyoto Protocol on climate change — remains strong. The fact that "Global Trends 2025" emanated from a U.S. government agency — the NIC is part of the "national intelligence community" and reports to the Director of National Intelligence — lends additional weight to its findings. Still, when all is said and done, it's hardly surprising that professional analysts would come to this conclusion, given the enormous toll on America's military and economic resources taken by five-and-half years of fighting in Iraq and the accompanying loss to our influence, prestige, and goodwill abroad.
Climate and Competition
Far more striking and original, I believe, is the report's emphasis on the role of climate change and resource competition in the world of 2025 and beyond. Until now, these issues have appeared solely on the margins of U.S. strategic and intelligence studies. Now, for the first time, they have moved front and center.
"Resource issues will gain prominence on the international agenda," the NIC report notes. "Unprecedented global economic growth — positive in so many other regards — will continue to put pressure on a number of highly strategic resources, including energy, food, and water, and demand is projected to outstrip easily available supplies over the next decade or so."
The likely future availability of energy and water receives especially close attention. Oil, in particular, is seen as being at risk of failing to meet anticipated world requirements: "Non-OPEC liquid hydrocarbon production — crude oil, natural gas liquids, and unconventionals such as tar sands — will not grow commensurate with demand. Oil and gas production of many traditional energy producers already is declining…Countries capable of significantly expanding production will dwindle; oil and gas production will be concentrated in unstable areas." The bottom line: global oil supplies will be inadequate to satisfy demand, and importing nations will be forced to consume less and/or speed the production of alternatives.
Water scarcity is seen as an equally significant problem: "Lack of access to stable supplies of water is reaching critical proportions, and the problem will worsen because of rapid urbanization worldwide and the roughly 1.2 billion persons to be added [to the world's population] over the next 20 years." At present, we are told, some 600 million people in 21 countries are suffering from inadequate water supplies; by 2025, an estimated 1.4 billion people in 36 countries will face this peril.
Global warming will further exacerbate resource pressures, especially with respect to water and food. Although the impact of climate change will vary from region to region and cannot be predicted with precision, "a number of regions will begin to suffer harmful effects, particularly water scarcity and loss of agricultural production." Some areas will suffer more than others, "with declines disproportionately concentrated in developing countries, particularly those in sub-Saharan Africa." For many of these countries, "decreased agricultural output will be devastating because agriculture accounts for a large share of their economies and many citizens live close to subsistence levels."
Resource Wars
That resource scarcity and climate change will become increasingly severe in the decades ahead are hardly novel observations — many "peak oil" and environmental groups have been saying the same thing for years. But the NIC report takes this one step further by describing how these phenomena will intrude into international affairs and could provide the spark for armed violence. Increased scarcity, it suggests, could lead to greater efforts by states to secure control over overseas sources of energy and other key resources, producing geopolitical struggles among the major energy-deficit nations and possibly provoking all-out war.
"The rising energy demands of growing populations and economies may bring into question the availability, reliability, and affordability of energy supplies," the report notes. "Such a situation would heighten tensions between states competing for limited resources…In the worst case this could lead to interstate conflicts if government leaders deem assured access to energy resources to be essential to maintaining domestic stability and the survival of the regime."
Even in the absence of major interstate conflict, the report argues, growing competition for dwindling energy supplies could lead to heightened tensions, internal conflict, and terrorism. "Even actions short of war will have important geopolitical implications as states undertake strategies to hedge against the possibility that existing energy supplies will not meet rising demands." For example, "energy-deficient states may employ transfers of arms and sensitive technologies and the promise of a political and military alliance as inducements to establish strategic relationships with energy-producing states." Such relationships are already emerging in Central Asia, where China, Russia, and the United States are all competing for access to and control over the region's oil and gas reserves.
The growing concentration of wealth in the hands of petro-elites in places like Angola, Azerbaijan, Kazakhstan, and Nigeria will be another source of potential conflict. Because such elites rarely allocate oil revenues on an equitable basis or allow for a democratic transfer of power, any alteration in national governance (and the distribution of wealth) is likely to be accompanied by violence — often in the form of attacks on pipelines, refineries, and other oil-industry infrastructure. This, in turn, could invite "military intervention by outside powers to stabilize energy flows."
Several areas of the world are likely to figure in energy conflicts of this sort, especially Sub-Saharan Africa, the Middle East, and Central Asia. Each is the site of overlapping lines of conflict produced by a combination of ethnic and religious schisms, internal disputes over the allocation of resource revenues, and the contending geopolitical interests of the major powers. Under these circumstances, it would not take much for a minor skirmish — such as that between Georgia and Russia last August — to escalate into something much greater.
Water and land scarcity brought about or exacerbated by climate change could also trigger armed conflict, suggests the NIC report, although mostly of the internal sort. "Climate change is unlikely to trigger interstate war, but it could lead to increasingly heated interstate recriminations and possibly to low-level armed conflicts." A particular danger zone is the Himalayan region, where the ongoing melting of major glaciers is expected to diminish the annual flow of vital rivers in Bangladesh, China, India, and Pakistan — many of them shared by two or more of these countries and a perennial source of friction among them.
Clusters of Hostility
Terrorist violence will also be spurred by the struggle over critical resources. As climate change and water scarcity renders many rural areas uninhabitable — especially in high-population-growth areas of North Africa, the Middle East, and Asia — hundreds of millions of unemployed young men will pour into the sprawling mega-cities of the developing world, often facing unfriendly reception from the original inhabitants of these areas (who often will be of another religion or ethnicity). Some of these desperate, bitter young men will be drawn to crime; others to militant ideologies and movements.
"As long as turmoil and societal disruptions, generated by resource scarcities, poor governance, ethnic rivalries, or environmental degradation, increase in the Middle East, conditions will remain conducive to the spread of radicalism and insurgencies," the report concludes. And these clusters of hostility will not be confined to the Middle East: "Increasing interconnectedness will enable individuals to coalesce around common causes across national boundaries, creating new cohorts of the angry, downtrodden, and disenfranchised."
As the report makes clear, these phenomena will have an ever-increasing impact on world affairs. For one thing, the growing uninhabitability of large parts of North Africa, the Middle East, Asia, and Central America will force more and more people to migrate to the cities — producing political and social unrest, as noted — or across international boundaries, to countries less severely affected by climate change and resource scarcity. This surely will produce increased political debate over immigration in receiving countries — and, in all likelihood, an increase in anti-immigrant violence. At the same time, it will complicate the task of combating international terrorist networks that recruit from and hide within immigrant communities in Europe and elsewhere.
New Technologies
Eventually, the report suggests, entrepreneurs and their government backers in the industrialized world will develop new materials and technologies to replace substances in short supply or methods for using them more sparingly. For example, we can expect further improvements in wind and solar power, advanced biofuels, hydrogen fuel-cells, and other alternative energy systems making them more efficient and affordable. This technological revolution will be well underway by 2025 — but not so far advanced as to erase the problems raised by inadequate supplies of oil and natural gas. Also, land and water scarcity will remain a significant worry no matter how much progress is made in other areas. The report's warning of intensified resource strife in 2025 and beyond should, therefore, be read with considerable alarm.
A new report by the National Intelligence Council (NIC) on the emerging strategic landscape, "Global Trends 2025," has attracted worldwide attention because it forecasts a future environment in which the United States wields less power than it does today and must contend with a constellation of other, newly ambitious great powers. "Although the United States is likely to remain the single most important actor," the report notes, "the United States' relative strength — even in the military realm — will decline and U.S. leverage will become more constrained." Of all the many revealing findings in the study, this has been the most widely quoted.
That the United States is likely to experience a decline in its strength relative to other great powers over the next 10 to 15 years is, of course, an observation bound to attract keen attention around the world, where criticism of U.S. foreign policy — over the Iraq War, the handling of the war on terror, our failure to sign the Kyoto Protocol on climate change — remains strong. The fact that "Global Trends 2025" emanated from a U.S. government agency — the NIC is part of the "national intelligence community" and reports to the Director of National Intelligence — lends additional weight to its findings. Still, when all is said and done, it's hardly surprising that professional analysts would come to this conclusion, given the enormous toll on America's military and economic resources taken by five-and-half years of fighting in Iraq and the accompanying loss to our influence, prestige, and goodwill abroad.
Climate and Competition
Far more striking and original, I believe, is the report's emphasis on the role of climate change and resource competition in the world of 2025 and beyond. Until now, these issues have appeared solely on the margins of U.S. strategic and intelligence studies. Now, for the first time, they have moved front and center.
"Resource issues will gain prominence on the international agenda," the NIC report notes. "Unprecedented global economic growth — positive in so many other regards — will continue to put pressure on a number of highly strategic resources, including energy, food, and water, and demand is projected to outstrip easily available supplies over the next decade or so."
The likely future availability of energy and water receives especially close attention. Oil, in particular, is seen as being at risk of failing to meet anticipated world requirements: "Non-OPEC liquid hydrocarbon production — crude oil, natural gas liquids, and unconventionals such as tar sands — will not grow commensurate with demand. Oil and gas production of many traditional energy producers already is declining…Countries capable of significantly expanding production will dwindle; oil and gas production will be concentrated in unstable areas." The bottom line: global oil supplies will be inadequate to satisfy demand, and importing nations will be forced to consume less and/or speed the production of alternatives.
Water scarcity is seen as an equally significant problem: "Lack of access to stable supplies of water is reaching critical proportions, and the problem will worsen because of rapid urbanization worldwide and the roughly 1.2 billion persons to be added [to the world's population] over the next 20 years." At present, we are told, some 600 million people in 21 countries are suffering from inadequate water supplies; by 2025, an estimated 1.4 billion people in 36 countries will face this peril.
Global warming will further exacerbate resource pressures, especially with respect to water and food. Although the impact of climate change will vary from region to region and cannot be predicted with precision, "a number of regions will begin to suffer harmful effects, particularly water scarcity and loss of agricultural production." Some areas will suffer more than others, "with declines disproportionately concentrated in developing countries, particularly those in sub-Saharan Africa." For many of these countries, "decreased agricultural output will be devastating because agriculture accounts for a large share of their economies and many citizens live close to subsistence levels."
Resource Wars
That resource scarcity and climate change will become increasingly severe in the decades ahead are hardly novel observations — many "peak oil" and environmental groups have been saying the same thing for years. But the NIC report takes this one step further by describing how these phenomena will intrude into international affairs and could provide the spark for armed violence. Increased scarcity, it suggests, could lead to greater efforts by states to secure control over overseas sources of energy and other key resources, producing geopolitical struggles among the major energy-deficit nations and possibly provoking all-out war.
"The rising energy demands of growing populations and economies may bring into question the availability, reliability, and affordability of energy supplies," the report notes. "Such a situation would heighten tensions between states competing for limited resources…In the worst case this could lead to interstate conflicts if government leaders deem assured access to energy resources to be essential to maintaining domestic stability and the survival of the regime."
Even in the absence of major interstate conflict, the report argues, growing competition for dwindling energy supplies could lead to heightened tensions, internal conflict, and terrorism. "Even actions short of war will have important geopolitical implications as states undertake strategies to hedge against the possibility that existing energy supplies will not meet rising demands." For example, "energy-deficient states may employ transfers of arms and sensitive technologies and the promise of a political and military alliance as inducements to establish strategic relationships with energy-producing states." Such relationships are already emerging in Central Asia, where China, Russia, and the United States are all competing for access to and control over the region's oil and gas reserves.
The growing concentration of wealth in the hands of petro-elites in places like Angola, Azerbaijan, Kazakhstan, and Nigeria will be another source of potential conflict. Because such elites rarely allocate oil revenues on an equitable basis or allow for a democratic transfer of power, any alteration in national governance (and the distribution of wealth) is likely to be accompanied by violence — often in the form of attacks on pipelines, refineries, and other oil-industry infrastructure. This, in turn, could invite "military intervention by outside powers to stabilize energy flows."
Several areas of the world are likely to figure in energy conflicts of this sort, especially Sub-Saharan Africa, the Middle East, and Central Asia. Each is the site of overlapping lines of conflict produced by a combination of ethnic and religious schisms, internal disputes over the allocation of resource revenues, and the contending geopolitical interests of the major powers. Under these circumstances, it would not take much for a minor skirmish — such as that between Georgia and Russia last August — to escalate into something much greater.
Water and land scarcity brought about or exacerbated by climate change could also trigger armed conflict, suggests the NIC report, although mostly of the internal sort. "Climate change is unlikely to trigger interstate war, but it could lead to increasingly heated interstate recriminations and possibly to low-level armed conflicts." A particular danger zone is the Himalayan region, where the ongoing melting of major glaciers is expected to diminish the annual flow of vital rivers in Bangladesh, China, India, and Pakistan — many of them shared by two or more of these countries and a perennial source of friction among them.
Clusters of Hostility
Terrorist violence will also be spurred by the struggle over critical resources. As climate change and water scarcity renders many rural areas uninhabitable — especially in high-population-growth areas of North Africa, the Middle East, and Asia — hundreds of millions of unemployed young men will pour into the sprawling mega-cities of the developing world, often facing unfriendly reception from the original inhabitants of these areas (who often will be of another religion or ethnicity). Some of these desperate, bitter young men will be drawn to crime; others to militant ideologies and movements.
"As long as turmoil and societal disruptions, generated by resource scarcities, poor governance, ethnic rivalries, or environmental degradation, increase in the Middle East, conditions will remain conducive to the spread of radicalism and insurgencies," the report concludes. And these clusters of hostility will not be confined to the Middle East: "Increasing interconnectedness will enable individuals to coalesce around common causes across national boundaries, creating new cohorts of the angry, downtrodden, and disenfranchised."
As the report makes clear, these phenomena will have an ever-increasing impact on world affairs. For one thing, the growing uninhabitability of large parts of North Africa, the Middle East, Asia, and Central America will force more and more people to migrate to the cities — producing political and social unrest, as noted — or across international boundaries, to countries less severely affected by climate change and resource scarcity. This surely will produce increased political debate over immigration in receiving countries — and, in all likelihood, an increase in anti-immigrant violence. At the same time, it will complicate the task of combating international terrorist networks that recruit from and hide within immigrant communities in Europe and elsewhere.
New Technologies
Eventually, the report suggests, entrepreneurs and their government backers in the industrialized world will develop new materials and technologies to replace substances in short supply or methods for using them more sparingly. For example, we can expect further improvements in wind and solar power, advanced biofuels, hydrogen fuel-cells, and other alternative energy systems making them more efficient and affordable. This technological revolution will be well underway by 2025 — but not so far advanced as to erase the problems raised by inadequate supplies of oil and natural gas. Also, land and water scarcity will remain a significant worry no matter how much progress is made in other areas. The report's warning of intensified resource strife in 2025 and beyond should, therefore, be read with considerable alarm.
Drawing the Future From the Past...
The bombing was relentless. From 1964 to 1973, the United States dropped more than 2 million tons of ordnance on Laos. That's a planeload of bombs every eight minutes, 24 hours a day, for nine years. Laos has the unfortunate distinction of being the most heavily bombed country in the history of the world.
"In the area of Xieng Khoang, the place of my birth, there was health, good earth, and fine weather," one survivor, a 33-year-old man, recalls of that period. "But then the airplanes came, bombing the rice fields and the forests, making us leave our land and rice fields with great sadness. One day a plane came bombing my rice field as well as the village. I had gone very early to harrow the field. I thought, ‘I am only a village rice farmer, the airplane will not shoot me.’ But that day truly it did shoot me and wounded me together with my buffalo, which was the source of a hundred thousand loves and a hundred thousand worries for me."
For nearly three decades, the U.S. secret war in Laos and the impact of the most massive bombing campaign in the world was nearly forgotten. For those who remembered, the events seemed surreal. They witnessed the reckless destruction of a people and their land, and careful efforts by the U.S. government to conceal it. For those too young to know, gathering information and knowledge of this history was scattered and fragmented. It seemed the secret war in Laos and its aftermath would remain a secret.
But then a remarkable set of drawings and eyewitness accounts came to light. Laotian villagers put their memories on paper in the 1970s to depict the secret bombing of their country. This trove of reminiscences became the inspiration for Legacies of War. Founded by Laotian Americans in 2004, the project raises awareness about the history of the Vietnam War-era bombing in Laos. Using a unique combination of art, culture, education, community organizing, advocacy, and dialogue, Legacies of War also works for the removal of unexploded bombs in Laos, to provide space for healing the wounds of war, and to create greater hope for a future of peace.
A Secret War, a People Scattered
When the United States withdrew from Indochina, the "Secret War" in Laos was lost to history. But the legacy of the war lives on. Up to 30% of the cluster bombs dropped by the United States in Laos failed to detonate, leaving extensive contamination from unexploded ordnance (UXO) in the countryside. That translates into 78 to 130 million unexploded bomblets. Over one-third of the land in Laos is contaminated. These "bombies," as the Lao now call them, have killed or maimed more than 34,000 people since the war's end, and continue to claim more innocent victims every day. About 40% of accidents result in death, and 60% of the victims are children. UXO remains a major barrier to the safety, health, livelihoods, and food security of the people of Laos.
The war also displaced up to one-third of the Lao population. Nearly 750,000 would eventually become refugees in France, Australia, and Canada, among other countries. Over 350,000 refugees from Laos came to the United States after having experienced war, destruction, death, imprisonment, family separation, loss of homeland, loss of identity, and loss of control over their destinies. Many had undiagnosed post-traumatic stress disorder. But these weren't things Laotian refugees had the luxury to contemplate, for basic economic survival trumped all other needs.
Drawing on the Past
Between December 1970 and May 1971, Fred Branfman, an American, and Boungeun, a Lao man, collected illustrations and narratives in the Vientiane refugee camps, where bombing victims fled. The drawings and narratives represent the voiceless, faceless, and nameless who endured an air war campaign committed in secrecy. Drawn in pencil, pens, crayons, and markers, they are raw and stark, reflecting the crude events that shaped their reality. The simplicity of the narration and drawings emphasize the illustrators' identities as ordinary villagers who bore witness to a devastating event.
For instance, an 18-year-old woman remembers, "In the year 1967, my village built small shelters in the forest and we had holes in the bamboo thicket on top of the hill. It was a place to which we could flee. But there were two brothers who went out to cut wood in the forest. The airplanes shot them and both brothers died. Their mother and father had just these two sons and were both in the same hole with me. I think with much pity about this old father and mother who were like crazy people because their children had died."
Each of the illustrations demonstrates the violence of warfare. However, the images of blood and death are contradicted by the memories of the scenic and peaceful village life these survivors once lived. Scenes show farmers tending to their rice fields, monks praying at the temple, women going to the market, and children playing in the schoolyard. The drawings capture the very moments when their lives and society were forever altered. The illustrations and narratives are at the heart of the Legacies of War National Traveling Exhibition, which is accompanied by historical photos, maps and other relevant documents to give context to the decade-long bombings.
Only a small circle of individuals knew of the existence of these illustrations. The pictures hadn’t been seen in decades, not since the end of the war. A fortuitous meeting between me and Institute for Policy Studies director John Cavanagh led to the return of the illustrations to the Lao American community. In the last several years, thousands of visitors have seen the illustrations through the Legacies of War traveling exhibit and other community forums. Although most Laotian Americans didn't experience the same horrors depicted in the drawings, the illustrations invoke memory of their own stories of refuge, survival, and resilience.
The reaction to the drawings was instructive to Legacies’ work. Initially considered an artifact, the illustrations have become a living document. One at a time, each drawing tells the story of a survivor. Although the illustrations were from four decades ago, they inspire others to share their stories, contributing to a collective narrative that began long ago in Laos, but continues today through the voices of Laotian Americans.
Following a viewing of the illustrations at an exhibit in Lowell, Massachusetts, a Lao woman in the audience stood up to speak at a community forum, "The illustrations made me remember. I have not shared, not even with my family because I didn't think it was important. When I was a young woman in Laos, I worked as a nurse to help people hurt by the bombing. Every day, the airplanes would come: Boom! Boom! Boom! And then one day, it came so close to us, we had to hide in the cave and we hear right outside the cave, the sound so loud. It scared me so much. I feel so lucky I did not die. The pictures made me remember. I am so sad that today, people in Lao are still being hurt and dying from these bombs." The woman, whose husband had spoken on several occasions about his experience, had never shared hers. The illustrations and community forum gave her a chance to tell her story for the first time in 30 years. Today, she remains engaged in educating people in the Boston-area about the bombing and its aftermath.
These new voices and stories are captured in various ways through Legacies of War: interactive exhibition pieces, community programs, oral history interviews, theater performance pieces, and new commissioned works of art. Based on oral histories collected from Laotian refugees and their descendents, the Refugee Nation theater piece reveals connections between U.S. and Southeast Asian history, and the unique challenges faced by political refugees and their American children. Touching on themes of identity, globalization, and activism, it brings a Laotian voice to a growing part of the Asian-American Diaspora that is yet to be included in the American experience. <
The integration of storytelling, art, and performance are critical in breaking the silence. By creating multiple access points of engagement, Legacies of War facilitates the connection of personal stories to a collective experience in recognition that we are not alone in our experiences, that we are connected to a larger narrative and a larger context. The acknowledgement of a shared journey and struggle could lead to collective strength and power.
Since the end to the U.S. wars in Southeast Asia, many other wars have been waged, in other parts of the world, in new terrain, villages, and communities. Yet, the wars in Southeast Asia lingers. And for the people living in Laos as well as those who became refugees, the lingering impact of war remains ever present in their daily lives. Although war and conflict created the refugee community, they don't have to define it. Through the transformative power of stories, art, and performance, Laotian Americans are evolving from victim to agency of change. "Now that I know about the secret war," said a Lao American student in Seattle, "I have to do something about the horrible things that are still happening to people. As Americans, we must do something."
Another victim, a 37-year old woman, reflects, "Our lives became like those of animals desperately trying to escape their hunters . . . Human beings, whose parents brought them into the world and carefully raised them with overflowing love despite so many difficulties, these human beings would die from a single blast as explosions burst, lying still without moving again at all. And who then thinks of the blood, flesh, sweat and strength of their parents, and who will have charity and pity for them?...In reality, whatever happens, it is only the innocent who suffer. And as for other men, do they know all the unimaginable things happening in this war?"
Copyright © 2008, Institute for Policy Studies
http://www.fpif.org/fpiftxt/5719
"In the area of Xieng Khoang, the place of my birth, there was health, good earth, and fine weather," one survivor, a 33-year-old man, recalls of that period. "But then the airplanes came, bombing the rice fields and the forests, making us leave our land and rice fields with great sadness. One day a plane came bombing my rice field as well as the village. I had gone very early to harrow the field. I thought, ‘I am only a village rice farmer, the airplane will not shoot me.’ But that day truly it did shoot me and wounded me together with my buffalo, which was the source of a hundred thousand loves and a hundred thousand worries for me."
For nearly three decades, the U.S. secret war in Laos and the impact of the most massive bombing campaign in the world was nearly forgotten. For those who remembered, the events seemed surreal. They witnessed the reckless destruction of a people and their land, and careful efforts by the U.S. government to conceal it. For those too young to know, gathering information and knowledge of this history was scattered and fragmented. It seemed the secret war in Laos and its aftermath would remain a secret.
But then a remarkable set of drawings and eyewitness accounts came to light. Laotian villagers put their memories on paper in the 1970s to depict the secret bombing of their country. This trove of reminiscences became the inspiration for Legacies of War. Founded by Laotian Americans in 2004, the project raises awareness about the history of the Vietnam War-era bombing in Laos. Using a unique combination of art, culture, education, community organizing, advocacy, and dialogue, Legacies of War also works for the removal of unexploded bombs in Laos, to provide space for healing the wounds of war, and to create greater hope for a future of peace.
A Secret War, a People Scattered
When the United States withdrew from Indochina, the "Secret War" in Laos was lost to history. But the legacy of the war lives on. Up to 30% of the cluster bombs dropped by the United States in Laos failed to detonate, leaving extensive contamination from unexploded ordnance (UXO) in the countryside. That translates into 78 to 130 million unexploded bomblets. Over one-third of the land in Laos is contaminated. These "bombies," as the Lao now call them, have killed or maimed more than 34,000 people since the war's end, and continue to claim more innocent victims every day. About 40% of accidents result in death, and 60% of the victims are children. UXO remains a major barrier to the safety, health, livelihoods, and food security of the people of Laos.
The war also displaced up to one-third of the Lao population. Nearly 750,000 would eventually become refugees in France, Australia, and Canada, among other countries. Over 350,000 refugees from Laos came to the United States after having experienced war, destruction, death, imprisonment, family separation, loss of homeland, loss of identity, and loss of control over their destinies. Many had undiagnosed post-traumatic stress disorder. But these weren't things Laotian refugees had the luxury to contemplate, for basic economic survival trumped all other needs.
Drawing on the Past
Between December 1970 and May 1971, Fred Branfman, an American, and Boungeun, a Lao man, collected illustrations and narratives in the Vientiane refugee camps, where bombing victims fled. The drawings and narratives represent the voiceless, faceless, and nameless who endured an air war campaign committed in secrecy. Drawn in pencil, pens, crayons, and markers, they are raw and stark, reflecting the crude events that shaped their reality. The simplicity of the narration and drawings emphasize the illustrators' identities as ordinary villagers who bore witness to a devastating event.
For instance, an 18-year-old woman remembers, "In the year 1967, my village built small shelters in the forest and we had holes in the bamboo thicket on top of the hill. It was a place to which we could flee. But there were two brothers who went out to cut wood in the forest. The airplanes shot them and both brothers died. Their mother and father had just these two sons and were both in the same hole with me. I think with much pity about this old father and mother who were like crazy people because their children had died."
Each of the illustrations demonstrates the violence of warfare. However, the images of blood and death are contradicted by the memories of the scenic and peaceful village life these survivors once lived. Scenes show farmers tending to their rice fields, monks praying at the temple, women going to the market, and children playing in the schoolyard. The drawings capture the very moments when their lives and society were forever altered. The illustrations and narratives are at the heart of the Legacies of War National Traveling Exhibition, which is accompanied by historical photos, maps and other relevant documents to give context to the decade-long bombings.
Only a small circle of individuals knew of the existence of these illustrations. The pictures hadn’t been seen in decades, not since the end of the war. A fortuitous meeting between me and Institute for Policy Studies director John Cavanagh led to the return of the illustrations to the Lao American community. In the last several years, thousands of visitors have seen the illustrations through the Legacies of War traveling exhibit and other community forums. Although most Laotian Americans didn't experience the same horrors depicted in the drawings, the illustrations invoke memory of their own stories of refuge, survival, and resilience.
The reaction to the drawings was instructive to Legacies’ work. Initially considered an artifact, the illustrations have become a living document. One at a time, each drawing tells the story of a survivor. Although the illustrations were from four decades ago, they inspire others to share their stories, contributing to a collective narrative that began long ago in Laos, but continues today through the voices of Laotian Americans.
Following a viewing of the illustrations at an exhibit in Lowell, Massachusetts, a Lao woman in the audience stood up to speak at a community forum, "The illustrations made me remember. I have not shared, not even with my family because I didn't think it was important. When I was a young woman in Laos, I worked as a nurse to help people hurt by the bombing. Every day, the airplanes would come: Boom! Boom! Boom! And then one day, it came so close to us, we had to hide in the cave and we hear right outside the cave, the sound so loud. It scared me so much. I feel so lucky I did not die. The pictures made me remember. I am so sad that today, people in Lao are still being hurt and dying from these bombs." The woman, whose husband had spoken on several occasions about his experience, had never shared hers. The illustrations and community forum gave her a chance to tell her story for the first time in 30 years. Today, she remains engaged in educating people in the Boston-area about the bombing and its aftermath.
These new voices and stories are captured in various ways through Legacies of War: interactive exhibition pieces, community programs, oral history interviews, theater performance pieces, and new commissioned works of art. Based on oral histories collected from Laotian refugees and their descendents, the Refugee Nation theater piece reveals connections between U.S. and Southeast Asian history, and the unique challenges faced by political refugees and their American children. Touching on themes of identity, globalization, and activism, it brings a Laotian voice to a growing part of the Asian-American Diaspora that is yet to be included in the American experience. <
The integration of storytelling, art, and performance are critical in breaking the silence. By creating multiple access points of engagement, Legacies of War facilitates the connection of personal stories to a collective experience in recognition that we are not alone in our experiences, that we are connected to a larger narrative and a larger context. The acknowledgement of a shared journey and struggle could lead to collective strength and power.
Since the end to the U.S. wars in Southeast Asia, many other wars have been waged, in other parts of the world, in new terrain, villages, and communities. Yet, the wars in Southeast Asia lingers. And for the people living in Laos as well as those who became refugees, the lingering impact of war remains ever present in their daily lives. Although war and conflict created the refugee community, they don't have to define it. Through the transformative power of stories, art, and performance, Laotian Americans are evolving from victim to agency of change. "Now that I know about the secret war," said a Lao American student in Seattle, "I have to do something about the horrible things that are still happening to people. As Americans, we must do something."
Another victim, a 37-year old woman, reflects, "Our lives became like those of animals desperately trying to escape their hunters . . . Human beings, whose parents brought them into the world and carefully raised them with overflowing love despite so many difficulties, these human beings would die from a single blast as explosions burst, lying still without moving again at all. And who then thinks of the blood, flesh, sweat and strength of their parents, and who will have charity and pity for them?...In reality, whatever happens, it is only the innocent who suffer. And as for other men, do they know all the unimaginable things happening in this war?"
Copyright © 2008, Institute for Policy Studies
http://www.fpif.org/fpiftxt/5719
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