The Election, Economy, War, and Peace
By Noam Chomsky
The Election
The word that immediately rolled off of every tongue after the presidential election was "historic." And rightly so. A Black family in the White House is truly a momentous event.
There were some surprises. One was that the election was not over after the Democratic convention. By usual indicators, the opposition party should have had a landslide victory during a severe economic crisis, after eight years of disastrous policies on all fronts including the worst record on job growth of any post-war president and a rare decline in median wealth, an incumbent so unpopular that his own party had to disavow him, and a dramatic collapse in US standing in world opinion. The Democrats did win, barely. If the financial crisis had been slightly delayed, they might not have.
A good question is why the margin of victory for the opposition party was so small, given the circumstances. One possibility is that neither party reflected public opinion at a time when 80% think the country is going in the wrong direction and that the government is run by "a few big interests looking out for themselves," not for the people, and a stunning 94% object that government does not attend to public opinion. As many studies show, both parties are well to the right of the population on many major issues, domestic and international.
It could be argued that no party speaking for the public would be viable in a society that is business-run to an unusual extent. Evidence for that is substantial. At a very general level, evidence is provided by the predictive success of political economist Thomas Ferguson's "investment theory" of politics, which holds that policies tend to reflect the wishes of the powerful blocs that invest every four years to control the state. More specific illustrations are numerous. To mention just one, for 60 years the US has failed to ratify the core principle of international labor law, which guarantees freedom of association. Legal analysts call it "the untouchable treaty in American politics," and observe that there has never even been any debate about the matter. And many have noted Washington's dismissal of conventions of the International Labor Organization as contrasted with the intense dedication to enforcement of monopoly pricing rights for corporations ("intellectual property rights"). There is much to explore here, but this is not the place.
The two candidates in the Democratic primary were a woman and an African-American. That too was historic. It would have been unimaginable forty years ago. The fact that the country has become civilized enough to accept this outcome is a considerable tribute to the activism of the 1960s and its aftermath.
In some ways the election followed familiar patterns. The McCain campaign was honest enough to announce clearly that the election wouldn't be about issues. Sarah Palin's hairdresser received twice the salary of McCain's foreign policy adviser, the Financial Times reported, probably an accurate reflection of significance for the campaign. Obama's message of "hope" and "change" offered a blank slate on which supporters could write their wishes. One could search websites for position papers, but correlation of these to policies is hardly spectacular, and in any event, what enters into voters' choices is what the campaign places front and center, as party managers know well.
The Obama campaign greatly impressed the public relations industry, which named Obama "Advertising Age's marketer of the year for 2008," easily beating out Apple. The industry's prime task is to ensure that uninformed consumers make irrational choices, thus undermining market theories. And it recognizes the benefits of undermining democracy the same way.
The Center for Responsive Politics reports that once again elections were bought: "The best-funded candidates won nine out of 10 contests, and all but a few members of Congress will be returning to Washington." Before the conventions, the viable candidates with most funding from financial institutions were Obama and McCain, with 36% each. Preliminary results indicate that by the end, Obama's campaign contributions, by industry, were concentrated among Law Firms (including lobbyists) and financial institutions. The investment theory of politics suggests some conclusions about the guiding policies of the new administration.
The power of financial institutions reflects the increasing shift of the economy from production to finance since the liberalization of finance in the 1970s, a root cause of the current economic malaise: the financial crisis, recession in the real economy, and the miserable performance of the economy for the large majority, whose real wages stagnated for 30 years, while benefits declined. The steward of this impressive record, Alan Greenspan, attributed his success to "growing worker insecurity," which led to "atypical restraint on compensation increases" - and corresponding increases into the pockets of those who matter. His failure even to perceive the dramatic housing bubble, following the collapse of the earlier tech bubble that he oversaw, was the immediate cause of the current financial crisis, as he ruefully conceded.
Reactions to the election from across the spectrum commonly adopted the "soaring rhetoric" that was the hallmark of the Obama campaign. Veteran correspondent John Hughes wrote that "America has just shown the world an extraordinary example of democracy at work," while to British historian-journalist Tristram Hunt, the election showed that America is a land "where miracles happen," such as "the glorious epic of Barack Obama" (leftist French journalist Jean Daniel). "In no other country in the world is such an election possible," said Catherine Durandin of the Institute for International and Strategic Relations in Paris. Many others were no less rapturous.
The rhetoric has some justification if we keep to the West, but elsewhere matters are different. Consider the world's largest democracy, India. The chief minister of Uttar Pradesh, which is larger than all but a few countries of the world and is notorious for horrifying treatment of women, is not only a woman, but a Dalit ("untouchable"), at the lowest rung of India's disgraceful caste system.
Turning to the Western hemisphere, consider its two poorest countries: Haiti and Bolivia. In Haiti's first democratic election in 1990, grass-roots movements organized in the slums and hills, and though without resources, elected their own candidate, the populist priest Jean-Bertrand Aristide. The results astonished observers who expected an easy victory for the candidate of the elite and the US, a former World Bank official.
True, the victory for democracy was soon overturned by a military coup, followed by years of terror and suffering to the present, with crucial participation of the two traditional torturers of Haiti, France and the US (contrary to self-serving illusions). But the victory itself was a far more "extraordinary example of democracy at work" than the miracle of 2008.
The same is true of the 2005 election in Bolivia. The indigenous majority, the most oppressed population in the hemisphere (those who survived), elected a candidate from their own ranks, a poor peasant, Evo Morales. The electoral victory was not based on soaring rhetoric about hope and change, or body language and fluttering of eyelashes, but on crucial issues, very well known to the voters: control over resources, cultural rights, and so on. Furthermore, the election went far beyond pushing a lever or even efforts to get out the vote. It was a stage in long and intense popular struggles in the face of severe repression, which had won major victories, such as defeating the efforts to deprive poor people of water through privatization.
These popular movements did not simply take instructions from party leaders. Rather, they formulated the policies that their candidates were chosen to implement. That is quite different from the Western model of democracy, as we see clearly in the reactions to Obama's victory.
In the liberal Boston Globe, the headline of the lead story observed that Obama's "grass-roots strategy leaves few debts to interest groups": labor unions, women, minorities, or other "traditional Democratic constituencies." That is only partially right, because massive funding by concentrated sectors of capital is ignored. But leaving that detail aside, the report is correct in saying that Obama's hands are not tied, because his only debt is to "a grass-roots army of millions" - who took instructions, but contributed essentially nothing to formulating his program.
At the other end of the doctrinal spectrum, a headline in the Wall Street Journal reads "Grass-Roots Army Is Still at the Ready" - namely, ready to follow instructions to "push his agenda," whatever it may be.
Obama's organizers regard the network they constructed "as a mass movement with unprecedented potential to influence voters," the Los Angeles Times reported. The movement, organized around the "Obama brand" can pressure Congress to "hew to the Obama agenda." But they are not to develop ideas and programs and call on their representatives to implement them. These would be among the "old ways of doing politics" from which the new "idealists" are "breaking free."
It is instructive to compare this picture to the workings of a functioning democracy such as Bolivia. The popular movements of the third world do not conform to the favored Western doctrine that the "function" of the "ignorant and meddlesome outsiders" - the population -- is to be "spectators of action" but not "participants" (Walter Lippmann, articulating a standard progressive view).
Perhaps there might even be some substance to fashionable slogans about "clash of civilizations."
In earlier periods of American history, the public refused to keep to its assigned "function." Popular activism has repeatedly been the force that led to substantial gains for freedom and justice. The authentic hope of the Obama campaign is that the "grass roots army" organized to take instructions from the leader might "break free" and return to "old ways of doing politics," by direct participation in action.
Latin America
In Bolivia, as in Haiti, efforts to promote democracy, social justice, and cultural rights, and to bring about desperately needed structural and institutional changes are, naturally, bitterly opposed by the traditional rulers, the Europeanized mostly white elite in the Eastern provinces, the site of most of the natural resources currently desired by the West. Also naturally, their quasi-secessionist movement is supported by Washington, which once again scarcely conceals its distaste for democracy when it does not conform to strategic and economic interests. The generalization is a staple of serious scholarship, but does not make its way to commentary about the revered "freedom agenda."
To punish Bolivians for showing "the world an extraordinary example of democracy at work," the Bush administration cancelled trade preferences, threatening tens of thousands of jobs, on the pretext that Bolivia was not cooperating with US counter-narcotic efforts. In the real world, the UN estimates that Bolivia's coca crop increased 5 percent in 2007, as compared with a 26 percent increase in Colombia, the terror state that is Washington's closest regional ally and the recipient of enormous military aid. AP reports that "Cocaine seizures by Bolivian police working with DEA agents had also increased dramatically during the Morales administration."
"Drug wars" have regularly been used as a pretext for repression, violence, and state crimes, at home as well.
After Morales's victory in a recall referendum in August 2008, with a sharp increase in support over his 2005 success, rightist opposition turned violent, leading to assassination of many peasants supporting the government. After the massacre, a summit meeting of UNASUR, the newly-formed Union of South American Republics, was convened in Santiago Chile. The summit issued a strong statement of support for the elected Morales government, read by Chilean President Michelle Bachelet. The statement declared "their full and firm support for the constitutional government of President Evo Morales, whose mandate was ratified by a big majority" -- referring to his overwhelming victory in the referendum a month earlier. Morales thanked UNASUR for its support, observing that "For the first time in South America's history, the countries of our region are deciding how to resolve our problems, without the presence of the United States."
A matter of no slight significance, not reported in the US.
The Administration
Turning to the future, what can we realistically expect of an Obama administration? We have two sources of information: actions and rhetoric.
The most important actions to date are selection of staff. The first selection was for vice-President: Joe Biden, one of the strongest supporters of the Iraq invasion among Senate Democrats, a long-time Washington insider, who consistently votes with his fellow Democrats but not always, as when he supported a measure to make it harder for individuals to erase debt by declaring bankruptcy.
The first post-election appointment was for the crucial position of chief of staff: Rahm Emanuel, one of the strongest supporters of the Iraq invasion among House Democrats and like Biden, a long-term Washington insider. Emanuel is also one of the biggest recipients of Wall Street campaign contributions, the Center for Responsive Politics reports. He "was the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry." Since being elected to Congress in 2002, he "has received more money from individuals and PACs in the securities and investment business than any other industry"; these are also among Obama's top donors. His task is to oversee Obama's approach to the worst financial crisis since the 1930s, for which his and Obama's funders share ample responsibility.
In an interview with an editor of the Wall Street Journal, Emanuel was asked what the Obama administration would do about "the Democratic congressional leadership, which is brimming with left-wing barons who have their own agenda," such as slashing defense spending (in accord with the will of the majority of the population) and "angling for steep energy taxes to combat global warming," not to speak of the outright lunatics in Congress who toy with slavery reparations and even sympathize with Europeans who want to indict Bush administration war criminals for war crimes. "Barack Obama can stand up to them," Emanuel assured the editor. The administration will be "pragmatic," fending off left extremists.
Obama's transition team is headed by John Podesta, Clinton's chief of staff. The leading figures in his economic team are Robert Rubin and Lawrence Summers, both enthusiasts for the deregulation that was a major factor in the current financial crisis. As Treasury Secretary, Rubin worked hard to abolish the Glass-Steagall act, which had separated commercial banks from financial institutions that incur high risks. Economist Tim Canova comments that Rubin had "a personal interest in the demise of Glass-Steagall." Soon after leaving his position as Treasury Secretary, he became "chair of Citigroup, a financial-services conglomerate that was facing the possibility of having to sell off its insurance underwriting subsidiary... the Clinton administration never brought charges against him for his obvious violations of the Ethics in Government Act."
Rubin was replaced as Treasury Secretary by Summers, who presided over legislation barring federal regulation of derivatives, the "weapons of mass destruction" (Warren Buffett) that helped plunge financial markets to disaster. He ranks as "one of the main villains in the current economic crisis," according to Dean Baker, one of the few economists to have warned accurately of the impending crisis. Placing financial policy in the hands of Rubin and Summers is "a bit like turning to Osama Bin Laden for aid in the war on terrorism," Baker adds.
The business press reviewed the records of Obama's Transition Economic Advisory Board, which met on November 7 to determine how to deal with the financial crisis. In Bloomberg News, Jonathan Weil concluded that "Many of them should be getting subpoenas as material witnesses right about now, not places in Obama's inner circle." About half "have held fiduciary positions at companies that, to one degree or another, either fried their financial statements, helped send the world into an economic tailspin, or both." Is it really plausible that "they won't mistake the nation's needs for their own corporate interests?" He also pointed out that chief of staff Emanuel "was a director at Freddie Mac in 2000 and 2001 while it was committing accounting fraud."
Those are the actions, at the time of writing. The rhetoric is "change" and "hope."
Health Care
The primary concern for the administration will be to arrest the financial crisis and the simultaneous recession in the real economy. But there is also a monster in the closet: the notoriously inefficient privatized health care system, which threatens to overwhelm the federal budget if current tendencies persist. A majority of the public has long favored a national health care system, which should be far less expensive and more effective, comparative evidence indicates (along with many studies). As recently as 2004, any government intervention in the health care system was described in the press as "politically impossible" and "lacking political support" - meaning: opposed by the insurance industry, pharmaceutical corporations, and others who count. In 2008, however, first Edwards, then Obama and Clinton, advanced proposals that approach what the public has long preferred. These ideas now have "political support." What has changed? Not public opinion, which remains much as before. But by 2008, major sectors of power, primarily manufacturing industry, had come to recognize that they are being severely damaged by the privatized health care system. Hence the public will is coming to have "political support." There is a long way to go, but the shift tells us something about dysfunctional democracy.
International Relations
Internationally, there is not much of substance on the largely blank slate. What there is gives little reason to expect much a change from Bush's second term, which stepped back from the radical ultranationalism and aggressive posture of the first term, also discarding some of the extreme hawks and opponents of democracy (in action, that is, not soothing words), like Rumsfeld and Wolfowitz.
Israel-Palestine
The immediate issues have to do mostly with the Middle East. On Israel-Palestine, rumors are circulating that Obama might depart from the US rejectionism that has blocked a political settlement for over 30 years, with rare exceptions, notably for a few days in January 2001 before promising negotiations were called off prematurely by Israel. The record, however, provides no basis for taking the rumors seriously. I have reviewed Obama's formal positions elsewhere (Perilous Power), and will put the matter aside here.
After the election, Israeli president Shimon Peres informed the press that on his July trip to Israel, Obama had told him that he was "very impressed" with the Arab League peace proposal, calling for full normalization of relations with Israel along with Israeli withdrawal from the occupied territories - basically, the long-standing international consensus that the US-Israel have unilaterally blocked (and that Peres has never accepted - in fact, in his last days as Prime Minister in 1996 he held that a Palestinian state can never come into existence). That might suggest a significant change of heart, except that the right-wing Israeli leader Binyamin Netanyahu said that on the same trip, Obama had told him that he was "very impressed" with Netanyahu's plan, which calls for indefinite Israeli control of the occupied territories.
The paradox is plausibly resolved by Israeli political analyst Aluf Ben, who points out that Obama's "main goal was not to screw up or ire anyone. Presumably he was polite, and told his hosts their proposals were `very interesting' - they leave satisfied and he hasn't promised a thing." Understandable, but it leaves us with nothing except his fervent professions of love for Israel and dismissal of Palestinian concerns.
Iraq
On Iraq, Obama has frequently been praised for his "principled opposition" to the war. In reality, as he has made clear, his opposition has been entirely unprincipled throughout. The war, he said, is a "strategic blunder." When Kremlin critics of the invasion of Afghanistan called it a strategic blunder, we did not say that they were taking a principled stand.
By the time of writing, the government of Iraq seems close to accepting a Status of Forces Agreement (SOFA) with Washington on the US military presence in Iraq - with reservations, according to Prime Minister Maliki, who said that this is the best Iraq could get and it was at least "a strong beginning." The talks dragged on, the Washington Post reports, because Iraq insisted on "some major concessions, including the establishment of the 2011 withdrawal date instead of vaguer language favored by the Bush administration [and] also rejected long-term U.S. military bases on its soil." Iraqi leaders "consider the firm deadline for withdrawal to be a negotiating victory," Reuters reports: Washington "long opposed setting any timetable for its troops to withdraw, but relented in recent months," unable to overcome Iraqi resistance.
Throughout the negotiations, the press regularly dismissed the obstinate stance of the Maliki government as regrettable pandering to public opinion. US-run polls continue to report that a large majority of Iraqis oppose any US military presence, and believe that US forces make the situation worse, including the "surge." That judgment is supported, among others, by Middle East specialist and security analyst Steven Simon, who writes in Foreign Affairs that the Petraeus counterinsurgency strategy is "stoking the three forces that have traditionally threatened the stability of Middle Eastern states: tribalism, warlordism, and sectarianism. States that have failed to control these forces have ultimately become ungovernable, and this is the fate for which the surge is preparing Iraq. A strategy intended to reduce casualties in the short term will ineluctably weaken the prospects for Iraq's cohesion over the long run." It may lead to "a strong, centralized state ruled by a military junta that would resemble the Baathist regime Washington overthrew in 2003," or "something very much like the imperial protectorates in the Middle East of the first half of the twentieth century" in which the "club of patrons" in the capital would 'dole out goods to tribes through favored conduits." In the Petraeus system, "the U.S. military is performing the role of the patrons -- creating an unhealthy dependency and driving a dangerous wedge between the tribes and the state," undermining prospects for a "stable, unitary Iraq."
The latest Iraqi success culminates a long process of resistance to demands of the US invaders. Washington fought tooth and nail to prevent elections, but was finally forced to back down in the face of popular demands for democracy, symbolized by the Ayatollah Sistani. The Bush administration then managed to install their own choice as Prime Minister, and sought to control the government in various ways, meanwhile also building huge military bases around the country and an "embassy" that is a virtual city within Baghdad - all funded by congressional Democrats. If the invaders do live up to the SOFA that they have been compelled to accept, it would constitute a significant triumph of nonviolent resistance. Insurgents can be killed, but mass nonviolent resistance is much harder to quell.
Within the political class and the media it is reflexively assumed that Washington has the right to demand terms for the SOFA. No such right was accorded to Russian invaders of Afghanistan, or indeed to anyone except the US and its clients. For others, we rightly adopt the principle that invaders have no rights, only responsibilities, including the responsibility to attend to the will of the victims, and to pay massive reparations for their crimes. In this case, the crimes include strong support for Saddam Hussein through his worst atrocities on Reagan's watch, then on to Saddam's massacre of Shiites under the eyes of the US military after the first Gulf War; the Clinton sanctions that were termed "genocidal" by the distinguished international diplomats who administered them and resigned in protest, and that also helped Saddam escape the fate of other gangsters whom the US and Britain supported to the very end of their bloody rule; and the war and its hideous aftermath. No such thoughts can be voiced in polite society.
The Iraqi government spokesman said that the tentative SOFA "matches the vision of U.S. President-elect Barack Obama." Obama's vision was in fact left somewhat vague, but presumably he would go along in some fashion with the demands of the Iraqi government. If so, that would require modification of US plans to ensure control over Iraq's enormous oil resources while reinforcing its dominance over the world's major energy producing region.
Afghanistan, Pakistan...
Obama's announced "vision" was to shift forces from Iraq to Afghanistan. That stand evoked a lesson from the editors of the Washington Post: "While the United States has an interest in preventing the resurgence of the Afghan Taliban, the country's strategic importance pales beside that of Iraq, which lies at the geopolitical center of the Middle East and contains some of the world's largest oil reserves." Increasingly, as Washington has been compelled to accede to Iraqi demands, tales about "democracy promotion" and other self-congratulatory fables have been shelved in favor of recognition of what had been obvious throughout to all but the most doctrinaire ideologists: that the US would not have invaded if Iraq's exports were asparagus and tomatoes and the world's major energy resources were in the South Pacific.
The NATO command is also coming to recognize reality publicly. In June 2007, NATO Secretary-General Jaap de Hoop Scheffer informed a meeting of NATO members that "NATO troops have to guard pipelines that transport oil and gas that is directed for the West," and more generally to protect sea routes used by tankers and other "crucial infrastructure" of the energy system. That is the true meaning of the fabled "responsibility to protect." Presumably the task includes the projected $7.6-billion TAPI pipeline that would deliver natural gas from Turkmenistan to Pakistan and India, running through Afghan's Kandahar province, where Canadian troops are deployed. The goal is "to block a competing pipeline that would bring gas to Pakistan and India from Iran" and to "diminish Russia's dominance of Central Asian energy exports," the Toronto Globe and Mail reported, plausibly outlining some of the contours of the new "Great Game."
Obama strongly endorsed the then-secret Bush administration policy of attacking suspected al-Qaeda leaders in countries that Washington has not (yet) invaded, disclosed by the New York Times shortly after the election. The doctrine was illustrated again on October 26, when US forces based in Iraq raided Syria, killing 8 civilians, allegedly to capture an al-Qaeda leader. Washington did not notify Iraqi Prime Minister Maliki or President Talabani, both of whom have relatively amicable relations with Syria, which has accepted 1.5 million Iraqi refugees and is bitterly opposed to al-Qaeda. Syria protested, claiming, credibly, that if notified they would have eagerly apprehended this enemy. According to Asia Times, Iraqi leaders were furious, and hardened their stance in the SOFA negotiations, insisting on provisions to bar the use of Iraqi territory to attack neighbors.
The Syria raid elicited a harsh reaction in the Arab world. In pro-government newspapers, the Bush administration was denounced for lengthening its "loathsome legacy" (Lebanon), while Syria was urged to "march forward in your reconciliatory path" and America to "keep going backwards with your language of hatred, arrogance and the murder of innocents" (Kuwait). For the region generally, it was another illustration of what the government-controlled Saudi press condemned as "not diplomacy in search of peace, but madness in search of war."
Obama was silent. So were other Democrats. Political scientist Stephen Zunes contacted the offices of every Democrat on the House and Senate Foreign Relations Committees, but was unable to find any critical word on the US raid on Syria from occupied Iraq.
Presumably, Obama also accepts the more expansive Bush doctrine that the US not only has the right to invade countries as it chooses (unless it is a "blunder," too costly to us), but also to attack others that Washington claims are supporting resistance to its aggression. In particular, Obama has, it seems, not criticized the raids by Predator drones that have killed many civilians in Pakistan.
These raids of course have consequences: people have the odd characteristic of objecting to slaughter of family members and friends. Right now there is a vicious mini-war being waged in the tribal area of Bajaur in Pakistan, adjacent to Afghanistan. BBC describes widespread destruction from intense combat, reporting further that "Many in Bajaur trace the roots of the uprising to a suspected US missile strike on an Islamic seminary, or madrassa, in November 2006, which killed around 80 people." The attack on the school, killing 80-85 people, was reported in the mainstream Pakistani press by the highly respected dissident physicist Pervez Hoodbhoy, but ignored in the US as insignificant. Events often look different at the other end of the club.
Hoodbhoy observed that the usual outcome of such attacks "has been flattened houses, dead and maimed children, and a growing local population that seeks revenge against Pakistan and the US." Bajaur today may be an illustration of the familiar pattern.
On November 3, General Petraeus, the newly appointed head of the US Central Command that covers the Middle East region, had his first meeting with Pakistani President Asif Ali Zardari, army chief General Ashfaq Parvez Kayani, and other high officials. Their primary concern was US missile attacks on Pakistani territory, which had increased sharply in previous weeks. "Continuing drone attacks on our territory, which result in loss of precious lives and property, are counterproductive and difficult to explain by a democratically elected government," Zardari informed Petraeus. His government, he said, is "under pressure to react more aggressively" to the strikes. These could lead to "a backlash against the US," which is already deeply unpopular in Pakistan.
Petraeus said that he had heard the message, and "we would have to take [Pakistani opinions] on board" when attacking the country. A practical necessity, no doubt, when over 80% of the supplies for the US-NATO war in Afghanistan pass through Pakistan.
Pakistan developed nuclear weapons, outside the Non-Proliferation Treaty (NPT), thanks in no small measure to Ronald Reagan, who pretended not to see what his ally was doing. This was one element of Reagan's "unstinting support" for the "ruthless and vindictive" dictator Zia ul-Haq, whose rule had "the most long-lasting and damaging effect on Pakistani society, one still prevalent today," the highly respected analyst Ahmed Rashid observes. With Reagan's firm backing, Zia moved to impose "an ideological Islamic state upon the population." These are the immediate roots of many of "today's problems - the militancy of the religious parties, the mushrooming of madrassas and extremist groups, the spread of drug and Kalashnikov culture, and the increase in sectarian violence."
The Reaganites also "built up the [Inter-Services Intelligence Directorate, ISI] into a formidable intelligence agency that ran the political process inside Pakistan while promoting Islamic insurgencies in Kashmir and Central Asia," Rashid continues. "This global jihad launched by Zia and Reagan was to sow the seeds of al Qaeda and turn Pakistan into the world center of jihadism for the next two decades." Meanwhile Reagan's immediate successors left Afghanistan in the hands of the most vicious jihadis, later abandoning it to warlord rule under Rumsfeld's direction. The fearsome ISI continues to play both sides of the street, supporting the resurgent Taliban and simultaneously acceding to some US demands.
The US and Pakistan are reported to have reached "tacit agreement in September [2008] on a don't-ask-don't-tell policy that allows unmanned Predator aircraft to attack suspected terrorist targets" in Pakistan, according to unidentified senior officials in both countries. "The officials described the deal as one in which the U.S. government refuses to publicly acknowledge the attacks while Pakistan's government continues to complain noisily about the politically sensitive strikes."
Once again problems are caused by the "ignorant and meddlesome outsiders" who dislike being bombed by an increasingly hated enemy from the other side of the world.
The day before this report on the "tacit agreement" appeared, a suicide bombing in the conflicted tribal areas killed eight Pakistani soldiers, retaliation for an attack by a US Predator drone that killed 20 people, including two Taliban leaders. The Pakistani parliament called for dialogue with the Taliban. Echoing the resolution, Pakistani foreign Minister Shah Mehmood Qureshi said "There is an increasing realization that the use of force alone cannot yield the desired results."
Afghan President Hamid Karzai's first message to president-elect Obama was much like that delivered to General Petraeus by Pakistani leaders: "end US airstrikes that risk civilian casualties." His message was sent shortly after coalition troops bombed a wedding party in Kandahar province, reportedly killing 40 people. There is no indication that his opinion was "taken on board."
The British command has warned that there is no military solution to the conflict in Afghanistan and that there will have to be negotiations with the Taliban, risking a rift with the US, the Financial Times reports. Correspondent Jason Burke, who has long experience in the region, reports that "the Taliban have been engaged in secret talks about ending the conflict in Afghanistan in a wide-ranging 'peace process' sponsored by Saudi Arabia and supported by Britain."
Some Afghan peace activists have reservations about this approach, preferring a solution without foreign interference. A growing network of activists is calling for negotiations and reconciliation with the Taliban in a National Peace Jirga, a grand assembly of Afghans, formed in May 2008. At a meeting in support of the Jirga, 3,000 Afghan political and intellectuals, mainly Pashtuns, the largest ethnic group, criticized "the international military campaign against Islamic militants in Afghanistan and called for dialogue to end the fighting," AFP reported.
The interim chairman of the National Peace Jirga, Bakhtar Aminzai, "told the opening gathering that the current conflict could not be resolved by military means and that only talks could bring a solution. He called on the government to step up its negotiations with the Taliban and Hizb-i-Islami groups." The latter is the party of the extremist radical Islamist warlord Gulbuddin Hekmatyar, a Reagan favorite responsible for many terrible atrocities, now reported to provide core parliamentary support for the Karzai government and to be pressing it towards a form of re-Talibanization.
Aminzai said further that "We need to pressure the Afghan government and the international community to find a solution without using guns." A spokeswoman added that "We are against Western policy in Afghanistan. They should bury their guns in a grave and focus on diplomacy and economic development." A leader of Awakened Youth of Afghanistan, a prominent antiwar group, says that we must end "Afghanicide -- the killing of Afghanistan." In a joint declaration with German peace organizations, the National Peace Jirga claimed to represent "a wide majority of Afghan people who are tired of war," calling for an end to escalation and initiation of a peace process.
The deputy director of the umbrella organization of NGOs in the country says that of roughly 1,400 registered NGOs, nearly 1,100 are purely Afghan operations: women's groups, youth groups and others, many of them advocates of the Peace Jirga.
Though polling in war-torn Afghanistan is a difficult process, there are some suggestive results. A Canadian-run poll found that Afghans favor the presence of Canadian and other foreign troops, the result that made the headlines in Canada. Other findings suggest some qualifications. Only 20% "think the Taliban will prevail once foreign troops leave." Three-fourths support negotiations between the Karzai government and the Taliban, and more than half favor a coalition government. The great majority therefore strongly disagree with the US-NATO focus on further militarization of the conflict, and appear to believe that peace is possible with a turn towards peaceful means. Though the question was not asked, it is reasonable to surmise that the foreign presence is favored for aid and reconstruction.
A study of Taliban foot soldiers carried out by the Toronto Globe & Mail, though not a scientific survey as they point out, nevertheless yields considerable insight. All were Afghan Pashtuns, from the Kandahar area. They described themselves as Mujahadeen, following the ancient tradition of driving out foreign invaders. Almost a third reported that at least one family member had died in aerial bombings in recent years. Many said that they were fighting to defend Afghan villagers from air strikes by foreign troops. Few claimed to be fighting a global Jihad, or had allegiance to Taliban leader Mullah Omar. Most saw themselves as fighting for principles - an Islamic government -- not a leader. Again, the results suggest possibilities for a negotiated peaceful settlement, without foreign interference.
A valuable perspective on such prospects is provided by Sir Rodric Braithwaite, a specialist on Afghanistan who was UK ambassador to Moscow during the crucial 1988-92 period when the Russians withdrew (and the USSR collapsed), then becoming chair of the British Joint Intelligence Committee. On a recent visit, Braithwaite spoke to Afghan journalists, former Mujahideen, professionals, people working for the US-based "coalition" - in general, to "natural supporters for its claims to bring peace and reconstruction." In the Financial Times, he reports that they were "contemptuous of President Hamid Karzai," regarding him as another one of the puppets installed by foreign force. Their favorite was "Mohammad Najibullah, the last communist president, who attempted to reconcile the nation within an Islamic state, and was butchered by the Taliban in 1996: DVDs of his speeches are being sold on the streets. Things were, they said, better under the Soviets. Kabul was secure, women were employed, the Soviets built factories, roads, schools and hospitals, Russian children played safely in the streets. The Russian soldiers fought bravely on the ground like real warriors, instead of killing women and children from the air. Even the Taliban were not so bad: they were good Muslims, kept order, and respected women in their own way. These myths may not reflect historical reality, but they do measure a deep disillusionment with the `coalition' and its policies."
Specialists on the region urge that US strategy should shift from more troops and attacks in Pakistan to a "diplomatic grand bargain -- forging compromise with insurgents while addressing an array of regional rivalries and insecurities" (Barnett Rubin and Ahmed Rashid in Foreign Affairs, Nov.-Dec. 2008). They warn that the current military focus "and the attendant terrorism" might lead to the collapse of nuclear-armed Pakistan, with grim consequences. They urge the incoming US administration "to put an end to the increasingly destructive dynamics of the Great Game in the region" through negotiations that recognize the interests of the concerned parties within Afghanistan as well as Pakistan and Iran, but also India, China and Russia, who "have reservations about a NATO base within their spheres of influence" and concerns about the threats "posed by the United States and NATO" as well as by al-Qaeda and the Taliban. The immediate goal should be "Lowering the level of violence in the region and moving the global community toward genuine agreement on the long-term goals," thus allowing Afghans to confront their internal problems peacefully. The incoming US president must put an end to "Washington's keenness for `victory' as the solution to all problems, and the United States' reluctance to involve competitors, opponents, or enemies in diplomacy."
It appears that there are feasible alternatives to escalation of the cycle of violence, but there is little hint of it in the electoral campaign or political commentary. Afghanistan and Pakistan do not appear among foreign policy issues on the Obama campaign's website.
Iran
Iran, in contrast, figures prominently -- though not of course as compared with effusive support for Israel; Palestinians remain unmentioned, apart from a vague reference to a two-state settlement of some unspecified kind. For Iran, Obama supports tough direct diplomacy "without preconditions" in order "to pressure Iran directly to change their troubling behavior," namely pursuing a nuclear program and supporting terrorism (presumably referring to support for Hamas and Hezbollah). If Iran abandons its troubling behavior, the US might move towards normal diplomatic and economic relations. "If Iran continues its troubling behavior, we will step up our economic pressure and political isolation." And as Obama informed the Israeli Lobby (AIPAC), "I will do everything in my power to prevent Iran from obtaining a nuclear weapon" - up to nuclear war, if he meant what he said.
Furthermore Obama will strengthen the NPT "so that countries like North Korea and Iran that break the rules will automatically face strong international sanctions." There is no mention of the conclusion of US intelligence with "high confidence" that Iran has not had a weapons program for 5 years, unlike US allies Israel, Pakistan, India, which maintain extensive nuclear weapons programs in violation of the NPT with direct US support, all unmentioned here as well.
The final mention of Iran is in the context of Obama's strong support for Israel's "Right to Self Defense" and its "right to protect its citizens." This commitment is demonstrated by Obama's co-sponsorship of "a Senate resolution against Iran and Syria's involvement in the war, and insisting that Israel should not be pressured into a ceasefire that did not deal with the threat of Hezbollah missiles." The reference is to Israel's US-backed invasion of Lebanon in 2006, with pretexts that are hardly credible in light of Israel's regular practices. This invasion, Israel's fifth, killed over 1000 Lebanese and once again destroyed much of southern Lebanon as well as parts of Beirut.
This is the sole mention of Lebanon among foreign policy issues on Obama's website. Evidently, Lebanon has no right of self defense. In fact who could possibly have a right of self defense against the US or its clients?
Nor does Iran have such rights. Among specialists, even rational hawks, it is well understood that if Iran is pursuing a weapons program, it is for deterrence. In the conservative National Interest, former CIA weapons inspector David Kay speculates that Iran might be moving towards "nuclear weapons capability," with the "strategic goal" of countering a US threat that "is real in Teheran's eyes," for good reasons that he reviews. He notes further that "Perhaps the biggest agitator of all in this is the United States, with its abbreviated historical memory and diplomatic ADD." Wayne White, formerly deputy director for the Near East and South Asia in State Department intelligence, dismisses the possibility that Supreme Leader Khamenei and the clerical elite, who hold power in Iran, would throw away the "vast amounts of money" and "huge economic empires" they have created for themselves "in some quixotic attack against Israel with a nuclear weapon," if they had one. The probability of that is virtually undetectable, he points out.
White agrees that Iran might seek weapons capability (which is not the same as weapons) for deterrence. He goes on to suggest Iran might also recall that Saddam Hussein had no nuclear weapons program when Israel bombed its Osiraq reactor in 1981, and that the attack led him to initiate a program using nuclear materials it had on hand as a result of the bombing. At the time, White was Iraq analyst for State Department intelligence, with access to a rich body of evidence. His testimony adds internal US intelligence confirmation to the very credible evidence available at once, later strengthened by reports of Iraqi defectors, that the Israeli bombing did not terminate, but rather initiated, Saddam's pursuit of nuclear weapons. US or Israeli bombing of Iranian facilities, White and other specialists observe, might have the same effect. Violence consistently elicits more violence in response.
These matters are well understood by informed hardliners. The leading neoconservative expert on Iran, Reuel Marc Gerecht, formerly in the CIA Middle East division, wrote in 2000 that:
Tehran certainly wants nuclear weapons; and its reasoning is not illogical. Iran was gassed into surrender in the first Persian Gulf War; Pakistan, Iran's ever more radicalized Sunni neighbor to the southeast, has nuclear weapons; Saddam Hussein, with his Scuds and his weapons-of-mass-destruction ambitions, is next door; Saudi Arabia, Iran's most ardent and reviled religious rival, has long-range missiles; Russia, historically one of Iran's most feared neighbors, is once again trying to reassert its dominion in the neighboring Caucasus; and Israel could, of course blow the Islamic Republic to bits. Having been vanquished by a technologically superior Iraq at a cost of at least a half-million men, Iran knows very well the consequences of having insufficient deterrence. And the Iranians possess the essential factor to make deterrence work: sanity. Tehran or Isfahan in ashes would destroy the Persian soul, about which even the most hard-line cleric cares deeply. As long as the Iranians believe that either the U.S. or Israel or somebody else in the region might retaliate with nuclear weapons, they won't do something stupid.
Gerecht also understands very well the real "security problem" posed by Iranian nuclear weapons, should it acquire them:
A nuclear-armed Islamic Republic would of course check, if not checkmate, the United States' maneuvering room in the Persian Gulf. We would no doubt think several times about responding to Iranian terrorism or military action if Tehran had the bomb and a missile to deliver it. During the lead-up to the second Gulf War, ruling clerical circles in Tehran and Qom were abuzz with the debate about nuclear weapons. The mullahs...agreed: if Saddam Hussein had had nuclear weapons, the Americans would not have challenged him. For the "left" and the "right," this weaponry is the ultimate guarantee of Iran's defense, its revolution, and its independence as a regional great power.
With appropriate translations for the doctrinal term "Iranian terrorism," Gerecht's concerns capture realistically the threat posed by an Iran with a deterrent capacity (Iranian military action is quite a remote contingency).
While as usual ignored as irrelevant to policy formation, American public opinion is close to that of serious analysts and also to world opinion. Large majorities oppose threats against Iran, thus rejecting the Bush-Obama position that the US must be an outlaw state, violating the UN Charter, which bars the threat of force. The public also joins the majority of the world's states in endorsing Iran's right, as a signer of the NPT, to enrich uranium for nuclear energy (the position endorsed also by Cheney, Rumsfeld, Wolfowitz, Kissinger and others when Iran was ruled by the tyrant imposed by US-UK subversion). Most important, the public favors establishment of a nuclear-weapons-free zone in the Middle East, which would mitigate and perhaps eliminate this highly threatening issue.
Popular Influence
These observations suggest an interesting thought experiment. What would be the content of the "Obama brand" if the public were to become "participants" rather than mere "spectators in action"? It is an experiment well worth undertaking, and there is good reason to suppose that the results might point the way to a saner and more decent world.
onsdag den 26. november 2008
fredag den 17. oktober 2008
Taking Hard New Look at a Greenspan Legacy
“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004
George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”
And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
One prominent financial figure, however, has long thought otherwise. And his views held the greatest sway in debates about the regulation and use of derivatives — exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added.
Today, with the world caught in an economic tempest that Mr. Greenspan recently described as “the type of wrenching financial crisis that comes along only once in a century,” his faith in derivatives remains unshaken.
The problem is not that the contracts failed, he says. Rather, the people using them got greedy. A lack of integrity spawned the crisis, he argued in a speech a week ago at Georgetown University, intimating that those peddling derivatives were not as reliable as “the pharmacist who fills the prescription ordered by our physician.”
But others hold a starkly different view of how global markets unwound, and the role that Mr. Greenspan played in setting up this unrest.
“Clearly, derivatives are a centerpiece of the crisis, and he was the leading proponent of the deregulation of derivatives,” said Frank Partnoy, a law professor at the University of San Diego and an expert on financial regulation.
The derivatives market is $531 trillion, up from $106 trillion in 2002 and a relative pittance just two decades ago. Theoretically intended to limit risk and ward off financial problems, the contracts instead have stoked uncertainty and actually spread risk amid doubts about how companies value them.
If Mr. Greenspan had acted differently during his tenure as Federal Reserve chairman from 1987 to 2006, many economists say, the current crisis might have been averted or muted.
Over the years, Mr. Greenspan helped enable an ambitious American experiment in letting market forces run free. Now, the nation is confronting the consequences.
Derivatives were created to soften — or in the argot of Wall Street, “hedge” — investment losses. For example, some of the contracts protect debt holders against losses on mortgage securities. (Their name comes from the fact that their value “derives” from underlying assets like stocks, bonds and commodities.) Many individuals own a common derivative: the insurance contract on their homes.
On a grander scale, such contracts allow financial services firms and corporations to take more complex risks that they might otherwise avoid — for example, issuing more mortgages or corporate debt. And the contracts can be traded, further limiting risk but also increasing the number of parties exposed if problems occur.
Throughout the 1990s, some argued that derivatives had become so vast, intertwined and inscrutable that they required federal oversight to protect the financial system. In meetings with federal officials, celebrated appearances on Capitol Hill and heavily attended speeches, Mr. Greenspan banked on the good will of Wall Street to self-regulate as he fended off restrictions.
Ever since housing began to collapse, Mr. Greenspan’s record has been up for revision. Economists from across the ideological spectrum have criticized his decision to let the nation’s real estate market continue to boom with cheap credit, courtesy of low interest rates, rather than snuffing out price increases with higher rates. Others have criticized Mr. Greenspan for not disciplining institutions that lent indiscriminately.
But whatever history ends up saying about those decisions, Mr. Greenspan’s legacy may ultimately rest on a more deeply embedded and much less scrutinized phenomenon: the spectacular boom and calamitous bust in derivatives trading.
Faith in the System
Some analysts say it is unfair to blame Mr. Greenspan because the crisis is so sprawling. “The notion that Greenspan could have generated a totally different outcome is naïve,” said Robert E. Hall, an economist at the conservative Hoover Institution, a research group at Stanford.
Mr. Greenspan declined requests for an interview. His spokeswoman referred questions about his record to his memoir, “The Age of Turbulence,” in which he outlines his beliefs.
“It seems superfluous to constrain trading in some of the newer derivatives and other innovative financial contracts of the past decade,” Mr. Greenspan writes. “The worst have failed; investors no longer fund them and are not likely to in the future.”
In his Georgetown speech, he entertained no talk of regulation, describing the financial turmoil as the failure of Wall Street to behave honorably.
“In a market system based on trust, reputation has a significant economic value,” Mr. Greenspan told the audience. “I am therefore distressed at how far we have let concerns for reputation slip in recent years.”
As the long-serving chairman of the Fed, the nation’s most powerful economic policy maker, Mr. Greenspan preached the transcendent, wealth-creating powers of the market.
A professed libertarian, he counted among his formative influences the novelist Ayn Rand, who portrayed collective power as an evil force set against the enlightened self-interest of individuals. In turn, he showed a resolute faith that those participating in financial markets would act responsibly.
An examination of more than two decades of Mr. Greenspan’s record on financial regulation and derivatives in particular reveals the degree to which he tethered the health of the nation’s economy to that faith.
As the nascent derivatives market took hold in the early 1990s, and in subsequent years, critics denounced an absence of rules forcing institutions to disclose their positions and set aside funds as a reserve against bad bets.
Time and again, Mr. Greenspan — a revered figure affectionately nicknamed the Oracle — proclaimed that risks could be handled by the markets themselves.
“Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury,” recalled Alan S. Blinder, a former Federal Reserve board member and an economist at Princeton University. “I think of him as consistently cheerleading on derivatives.”
Arthur Levitt Jr., a former chairman of the Securities and Exchange Commission, says Mr. Greenspan opposes regulating derivatives because of a fundamental disdain for government.
Mr. Levitt said that Mr. Greenspan’s authority and grasp of global finance consistently persuaded less financially sophisticated lawmakers to follow his lead.
“I always felt that the titans of our legislature didn’t want to reveal their own inability to understand some of the concepts that Mr. Greenspan was setting forth,” Mr. Levitt said. “I don’t recall anyone ever saying, ‘What do you mean by that, Alan?’ ”
Still, over a long stretch of time, some did pose questions. In 1992, Edward J. Markey, a Democrat from Massachusetts who led the House subcommittee on telecommunications and finance, asked what was then the General Accounting Office to study derivatives risks.
Two years later, the office released its report, identifying “significant gaps and weaknesses” in the regulatory oversight of derivatives.
“The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole,” Charles A. Bowsher, head of the accounting office, said when he testified before Mr. Markey’s committee in 1994. “In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers.”
In his testimony at the time, Mr. Greenspan was reassuring. “Risks in financial markets, including derivatives markets, are being regulated by private parties,” he said.
“There is nothing involved in federal regulation per se which makes it superior to market regulation.”
Mr. Greenspan warned that derivatives could amplify crises because they tied together the fortunes of many seemingly independent institutions. “The very efficiency that is involved here means that if a crisis were to occur, that that crisis is transmitted at a far faster pace and with some greater virulence,” he said.
But he called that possibility “extremely remote,” adding that “risk is part of life.”
Later that year, Mr. Markey introduced a bill requiring greater derivatives regulation. It never passed.
Resistance to Warnings
In 1997, the Commodity Futures Trading Commission, a federal agency that regulates options and futures trading, began exploring derivatives regulation. The commission, then led by a lawyer named Brooksley E. Born, invited comments about how best to oversee certain derivatives.
Ms. Born was concerned that unfettered, opaque trading could “threaten our regulated markets or, indeed, our economy without any federal agency knowing about it,” she said in Congressional testimony. She called for greater disclosure of trades and reserves to cushion against losses.
Ms. Born’s views incited fierce opposition from Mr. Greenspan and Robert E. Rubin, the Treasury secretary then. Treasury lawyers concluded that merely discussing new rules threatened the derivatives market. Mr. Greenspan warned that too many rules would damage Wall Street, prompting traders to take their business overseas.
“Greenspan told Brooksley that she essentially didn’t know what she was doing and she’d cause a financial crisis,” said Michael Greenberger, who was a senior director at the commission. “Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.”
Ms. Born declined to comment. Mr. Rubin, now a senior executive at the banking giant Citigroup, says that he favored regulating derivatives — particularly increasing potential loss reserves — but that he saw no way of doing so while he was running the Treasury.
“All of the forces in the system were arrayed against it,” he said. “The industry certainly didn’t want any increase in these requirements. There was no potential for mobilizing public opinion.”
Mr. Greenberger asserts that the political climate would have been different had Mr. Rubin called for regulation.
In early 1998, Mr. Rubin’s deputy, Lawrence H. Summers, called Ms. Born and chastised her for taking steps he said would lead to a financial crisis, according to Mr. Greenberger. Mr. Summers said he could not recall the conversation but agreed with Mr. Greenspan and Mr. Rubin that Ms. Born’s proposal was “highly problematic.”
On April 21, 1998, senior federal financial regulators convened in a wood-paneled conference room at the Treasury to discuss Ms. Born’s proposal. Mr. Rubin and Mr. Greenspan implored her to reconsider, according to both Mr. Greenberger and Mr. Levitt.
Ms. Born pushed ahead. On June 5, 1998, Mr. Greenspan, Mr. Rubin and Mr. Levitt called on Congress to prevent Ms. Born from acting until more senior regulators developed their own recommendations. Mr. Levitt says he now regrets that decision. Mr. Greenspan and Mr. Rubin were “joined at the hip on this,” he said. “They were certainly very fiercely opposed to this and persuaded me that this would cause chaos.”
Ms. Born soon gained a potent example. In the fall of 1998, the hedge fund Long Term Capital Management nearly collapsed, dragged down by disastrous bets on, among other things, derivatives. More than a dozen banks pooled $3.6 billion for a private rescue to prevent the fund from slipping into bankruptcy and endangering other firms.
Despite that event, Congress froze the Commodity Futures Trading Commission’s regulatory authority for six months. The following year, Ms. Born departed.
In November 1999, senior regulators — including Mr. Greenspan and Mr. Rubin — recommended that Congress permanently strip the C.F.T.C. of regulatory authority over derivatives.
Mr. Greenspan, according to lawmakers, then used his prestige to make sure Congress followed through. “Alan was held in very high regard,” said Jim Leach, an Iowa Republican who led the House Banking and Financial Services Committee at the time. “You’ve got an area of judgment in which members of Congress have nonexistent expertise.”
As the stock market roared forward on the heels of a historic bull market, the dominant view was that the good times largely stemmed from Mr. Greenspan’s steady hand at the Fed.
“You will go down as the greatest chairman in the history of the Federal Reserve Bank,” declared Senator Phil Gramm, the Texas Republican who was chairman of the Senate Banking Committee when Mr. Greenspan appeared there in February 1999.
Mr. Greenspan’s credentials and confidence reinforced his reputation — helping him to persuade Congress to repeal Depression-era laws that separated commercial and investment banking in order to reduce overall risk in the financial system.
“He had a way of speaking that made you think he knew exactly what he was talking about at all times,” said Senator Tom Harkin, a Democrat from Iowa. “He was able to say things in a way that made people not want to question him on anything, like he knew it all. He was the Oracle, and who were you to question him?”
In 2000, Mr. Harkin asked what might happen if Congress weakened the C.F.T.C.’s authority.
“If you have this exclusion and something unforeseen happens, who does something about it?” he asked Mr. Greenspan in a hearing.
Mr. Greenspan said that Wall Street could be trusted. “There is a very fundamental trade-off of what type of economy you wish to have,” he said. “You can have huge amounts of regulation and I will guarantee nothing will go wrong, but nothing will go right either,” he said.
Later that year, at a Congressional hearing on the merger boom, he argued that Wall Street had tamed risk.
“Aren’t you concerned with such a growing concentration of wealth that if one of these huge institutions fails that it will have a horrendous impact on the national and global economy?” asked Representative Bernard Sanders, an independent from Vermont.
“No, I’m not,” Mr. Greenspan replied. “I believe that the general growth in large institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically — I should say, fully — hedged.”
The House overwhelmingly passed the bill that kept derivatives clear of C.F.T.C. oversight. Senator Gramm attached a rider limiting the C.F.T.C.’s authority to an 11,000-page appropriations bill. The Senate passed it. President Clinton signed it into law.
Pressing Forward
Still, savvy investors like Mr. Buffett continued to raise alarms about derivatives, as he did in 2003, in his annual letter to shareholders of his company, Berkshire Hathaway.
“Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers,” he wrote. “The troubles of one could quickly infect the others.”
But business continued.
And when Mr. Greenspan began to hear of a housing bubble, he dismissed the threat. Wall Street was using derivatives, he said in a 2004 speech, to share risks with other firms.
Shared risk has since evolved from a source of comfort into a virus. As the housing crisis grew and mortgages went bad, derivatives actually magnified the downturn.
The Wall Street debacle that swallowed firms like Bear Stearns and Lehman Brothers, and imperiled the insurance giant American International Group, has been driven by the fact that they and their customers were linked to one another by derivatives.
In recent months, as the financial crisis has gathered momentum, Mr. Greenspan’s public appearances have become less frequent.
His memoir was released in the middle of 2007, as the disaster was unfolding, and his book tour suddenly became a referendum on his policies. When the paperback version came out this year, Mr. Greenspan wrote an epilogue that offers a rebuttal of sorts.
“Risk management can never achieve perfection,” he wrote. The villains, he wrote, were the bankers whose self-interest he had once bet upon.
“They gambled that they could keep adding to their risky positions and still sell them out before the deluge,” he wrote. “Most were wrong.”
No federal intervention was marshaled to try to stop them, but Mr. Greenspan has no regrets.
“Governments and central banks,” he wrote, “could not have altered the course of the boom.”
George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”
And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
One prominent financial figure, however, has long thought otherwise. And his views held the greatest sway in debates about the regulation and use of derivatives — exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added.
Today, with the world caught in an economic tempest that Mr. Greenspan recently described as “the type of wrenching financial crisis that comes along only once in a century,” his faith in derivatives remains unshaken.
The problem is not that the contracts failed, he says. Rather, the people using them got greedy. A lack of integrity spawned the crisis, he argued in a speech a week ago at Georgetown University, intimating that those peddling derivatives were not as reliable as “the pharmacist who fills the prescription ordered by our physician.”
But others hold a starkly different view of how global markets unwound, and the role that Mr. Greenspan played in setting up this unrest.
“Clearly, derivatives are a centerpiece of the crisis, and he was the leading proponent of the deregulation of derivatives,” said Frank Partnoy, a law professor at the University of San Diego and an expert on financial regulation.
The derivatives market is $531 trillion, up from $106 trillion in 2002 and a relative pittance just two decades ago. Theoretically intended to limit risk and ward off financial problems, the contracts instead have stoked uncertainty and actually spread risk amid doubts about how companies value them.
If Mr. Greenspan had acted differently during his tenure as Federal Reserve chairman from 1987 to 2006, many economists say, the current crisis might have been averted or muted.
Over the years, Mr. Greenspan helped enable an ambitious American experiment in letting market forces run free. Now, the nation is confronting the consequences.
Derivatives were created to soften — or in the argot of Wall Street, “hedge” — investment losses. For example, some of the contracts protect debt holders against losses on mortgage securities. (Their name comes from the fact that their value “derives” from underlying assets like stocks, bonds and commodities.) Many individuals own a common derivative: the insurance contract on their homes.
On a grander scale, such contracts allow financial services firms and corporations to take more complex risks that they might otherwise avoid — for example, issuing more mortgages or corporate debt. And the contracts can be traded, further limiting risk but also increasing the number of parties exposed if problems occur.
Throughout the 1990s, some argued that derivatives had become so vast, intertwined and inscrutable that they required federal oversight to protect the financial system. In meetings with federal officials, celebrated appearances on Capitol Hill and heavily attended speeches, Mr. Greenspan banked on the good will of Wall Street to self-regulate as he fended off restrictions.
Ever since housing began to collapse, Mr. Greenspan’s record has been up for revision. Economists from across the ideological spectrum have criticized his decision to let the nation’s real estate market continue to boom with cheap credit, courtesy of low interest rates, rather than snuffing out price increases with higher rates. Others have criticized Mr. Greenspan for not disciplining institutions that lent indiscriminately.
But whatever history ends up saying about those decisions, Mr. Greenspan’s legacy may ultimately rest on a more deeply embedded and much less scrutinized phenomenon: the spectacular boom and calamitous bust in derivatives trading.
Faith in the System
Some analysts say it is unfair to blame Mr. Greenspan because the crisis is so sprawling. “The notion that Greenspan could have generated a totally different outcome is naïve,” said Robert E. Hall, an economist at the conservative Hoover Institution, a research group at Stanford.
Mr. Greenspan declined requests for an interview. His spokeswoman referred questions about his record to his memoir, “The Age of Turbulence,” in which he outlines his beliefs.
“It seems superfluous to constrain trading in some of the newer derivatives and other innovative financial contracts of the past decade,” Mr. Greenspan writes. “The worst have failed; investors no longer fund them and are not likely to in the future.”
In his Georgetown speech, he entertained no talk of regulation, describing the financial turmoil as the failure of Wall Street to behave honorably.
“In a market system based on trust, reputation has a significant economic value,” Mr. Greenspan told the audience. “I am therefore distressed at how far we have let concerns for reputation slip in recent years.”
As the long-serving chairman of the Fed, the nation’s most powerful economic policy maker, Mr. Greenspan preached the transcendent, wealth-creating powers of the market.
A professed libertarian, he counted among his formative influences the novelist Ayn Rand, who portrayed collective power as an evil force set against the enlightened self-interest of individuals. In turn, he showed a resolute faith that those participating in financial markets would act responsibly.
An examination of more than two decades of Mr. Greenspan’s record on financial regulation and derivatives in particular reveals the degree to which he tethered the health of the nation’s economy to that faith.
As the nascent derivatives market took hold in the early 1990s, and in subsequent years, critics denounced an absence of rules forcing institutions to disclose their positions and set aside funds as a reserve against bad bets.
Time and again, Mr. Greenspan — a revered figure affectionately nicknamed the Oracle — proclaimed that risks could be handled by the markets themselves.
“Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury,” recalled Alan S. Blinder, a former Federal Reserve board member and an economist at Princeton University. “I think of him as consistently cheerleading on derivatives.”
Arthur Levitt Jr., a former chairman of the Securities and Exchange Commission, says Mr. Greenspan opposes regulating derivatives because of a fundamental disdain for government.
Mr. Levitt said that Mr. Greenspan’s authority and grasp of global finance consistently persuaded less financially sophisticated lawmakers to follow his lead.
“I always felt that the titans of our legislature didn’t want to reveal their own inability to understand some of the concepts that Mr. Greenspan was setting forth,” Mr. Levitt said. “I don’t recall anyone ever saying, ‘What do you mean by that, Alan?’ ”
Still, over a long stretch of time, some did pose questions. In 1992, Edward J. Markey, a Democrat from Massachusetts who led the House subcommittee on telecommunications and finance, asked what was then the General Accounting Office to study derivatives risks.
Two years later, the office released its report, identifying “significant gaps and weaknesses” in the regulatory oversight of derivatives.
“The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole,” Charles A. Bowsher, head of the accounting office, said when he testified before Mr. Markey’s committee in 1994. “In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers.”
In his testimony at the time, Mr. Greenspan was reassuring. “Risks in financial markets, including derivatives markets, are being regulated by private parties,” he said.
“There is nothing involved in federal regulation per se which makes it superior to market regulation.”
Mr. Greenspan warned that derivatives could amplify crises because they tied together the fortunes of many seemingly independent institutions. “The very efficiency that is involved here means that if a crisis were to occur, that that crisis is transmitted at a far faster pace and with some greater virulence,” he said.
But he called that possibility “extremely remote,” adding that “risk is part of life.”
Later that year, Mr. Markey introduced a bill requiring greater derivatives regulation. It never passed.
Resistance to Warnings
In 1997, the Commodity Futures Trading Commission, a federal agency that regulates options and futures trading, began exploring derivatives regulation. The commission, then led by a lawyer named Brooksley E. Born, invited comments about how best to oversee certain derivatives.
Ms. Born was concerned that unfettered, opaque trading could “threaten our regulated markets or, indeed, our economy without any federal agency knowing about it,” she said in Congressional testimony. She called for greater disclosure of trades and reserves to cushion against losses.
Ms. Born’s views incited fierce opposition from Mr. Greenspan and Robert E. Rubin, the Treasury secretary then. Treasury lawyers concluded that merely discussing new rules threatened the derivatives market. Mr. Greenspan warned that too many rules would damage Wall Street, prompting traders to take their business overseas.
“Greenspan told Brooksley that she essentially didn’t know what she was doing and she’d cause a financial crisis,” said Michael Greenberger, who was a senior director at the commission. “Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.”
Ms. Born declined to comment. Mr. Rubin, now a senior executive at the banking giant Citigroup, says that he favored regulating derivatives — particularly increasing potential loss reserves — but that he saw no way of doing so while he was running the Treasury.
“All of the forces in the system were arrayed against it,” he said. “The industry certainly didn’t want any increase in these requirements. There was no potential for mobilizing public opinion.”
Mr. Greenberger asserts that the political climate would have been different had Mr. Rubin called for regulation.
In early 1998, Mr. Rubin’s deputy, Lawrence H. Summers, called Ms. Born and chastised her for taking steps he said would lead to a financial crisis, according to Mr. Greenberger. Mr. Summers said he could not recall the conversation but agreed with Mr. Greenspan and Mr. Rubin that Ms. Born’s proposal was “highly problematic.”
On April 21, 1998, senior federal financial regulators convened in a wood-paneled conference room at the Treasury to discuss Ms. Born’s proposal. Mr. Rubin and Mr. Greenspan implored her to reconsider, according to both Mr. Greenberger and Mr. Levitt.
Ms. Born pushed ahead. On June 5, 1998, Mr. Greenspan, Mr. Rubin and Mr. Levitt called on Congress to prevent Ms. Born from acting until more senior regulators developed their own recommendations. Mr. Levitt says he now regrets that decision. Mr. Greenspan and Mr. Rubin were “joined at the hip on this,” he said. “They were certainly very fiercely opposed to this and persuaded me that this would cause chaos.”
Ms. Born soon gained a potent example. In the fall of 1998, the hedge fund Long Term Capital Management nearly collapsed, dragged down by disastrous bets on, among other things, derivatives. More than a dozen banks pooled $3.6 billion for a private rescue to prevent the fund from slipping into bankruptcy and endangering other firms.
Despite that event, Congress froze the Commodity Futures Trading Commission’s regulatory authority for six months. The following year, Ms. Born departed.
In November 1999, senior regulators — including Mr. Greenspan and Mr. Rubin — recommended that Congress permanently strip the C.F.T.C. of regulatory authority over derivatives.
Mr. Greenspan, according to lawmakers, then used his prestige to make sure Congress followed through. “Alan was held in very high regard,” said Jim Leach, an Iowa Republican who led the House Banking and Financial Services Committee at the time. “You’ve got an area of judgment in which members of Congress have nonexistent expertise.”
As the stock market roared forward on the heels of a historic bull market, the dominant view was that the good times largely stemmed from Mr. Greenspan’s steady hand at the Fed.
“You will go down as the greatest chairman in the history of the Federal Reserve Bank,” declared Senator Phil Gramm, the Texas Republican who was chairman of the Senate Banking Committee when Mr. Greenspan appeared there in February 1999.
Mr. Greenspan’s credentials and confidence reinforced his reputation — helping him to persuade Congress to repeal Depression-era laws that separated commercial and investment banking in order to reduce overall risk in the financial system.
“He had a way of speaking that made you think he knew exactly what he was talking about at all times,” said Senator Tom Harkin, a Democrat from Iowa. “He was able to say things in a way that made people not want to question him on anything, like he knew it all. He was the Oracle, and who were you to question him?”
In 2000, Mr. Harkin asked what might happen if Congress weakened the C.F.T.C.’s authority.
“If you have this exclusion and something unforeseen happens, who does something about it?” he asked Mr. Greenspan in a hearing.
Mr. Greenspan said that Wall Street could be trusted. “There is a very fundamental trade-off of what type of economy you wish to have,” he said. “You can have huge amounts of regulation and I will guarantee nothing will go wrong, but nothing will go right either,” he said.
Later that year, at a Congressional hearing on the merger boom, he argued that Wall Street had tamed risk.
“Aren’t you concerned with such a growing concentration of wealth that if one of these huge institutions fails that it will have a horrendous impact on the national and global economy?” asked Representative Bernard Sanders, an independent from Vermont.
“No, I’m not,” Mr. Greenspan replied. “I believe that the general growth in large institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically — I should say, fully — hedged.”
The House overwhelmingly passed the bill that kept derivatives clear of C.F.T.C. oversight. Senator Gramm attached a rider limiting the C.F.T.C.’s authority to an 11,000-page appropriations bill. The Senate passed it. President Clinton signed it into law.
Pressing Forward
Still, savvy investors like Mr. Buffett continued to raise alarms about derivatives, as he did in 2003, in his annual letter to shareholders of his company, Berkshire Hathaway.
“Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers,” he wrote. “The troubles of one could quickly infect the others.”
But business continued.
And when Mr. Greenspan began to hear of a housing bubble, he dismissed the threat. Wall Street was using derivatives, he said in a 2004 speech, to share risks with other firms.
Shared risk has since evolved from a source of comfort into a virus. As the housing crisis grew and mortgages went bad, derivatives actually magnified the downturn.
The Wall Street debacle that swallowed firms like Bear Stearns and Lehman Brothers, and imperiled the insurance giant American International Group, has been driven by the fact that they and their customers were linked to one another by derivatives.
In recent months, as the financial crisis has gathered momentum, Mr. Greenspan’s public appearances have become less frequent.
His memoir was released in the middle of 2007, as the disaster was unfolding, and his book tour suddenly became a referendum on his policies. When the paperback version came out this year, Mr. Greenspan wrote an epilogue that offers a rebuttal of sorts.
“Risk management can never achieve perfection,” he wrote. The villains, he wrote, were the bankers whose self-interest he had once bet upon.
“They gambled that they could keep adding to their risky positions and still sell them out before the deluge,” he wrote. “Most were wrong.”
No federal intervention was marshaled to try to stop them, but Mr. Greenspan has no regrets.
“Governments and central banks,” he wrote, “could not have altered the course of the boom.”
Oxford Research Group: The Financial Crisis and Sustainable Security
Introduction
Oxford Research Group’s International Security Monthly Briefings focus primarily on issues such as the conflicts in Iraq, Afghanistan and Pakistan, the evolution of western counter-terrorism policies and the development of the al-Qaida movement. On occasions they also cover matters such as energy security, climate change and world food prospects. In view of the serious financial situation that has developed in recent months, this briefing provides an initial analysis of the possible impact of the crisis on security.
This is undertaken in the context of ORG’s work on sustainable security which, in turn, is predicated on an underlying analysis of the security issues that are likely to be most prominent in the next two to three decades. This assesses that there are four main trends that are particularly salient.
Firstly, global socio-economic divisions are widening, with most of the benefits of the past three decades of economic growth being concentrated in the hands of a trans-global elite community of about 1.2 billion people, mainly in the countries of the Atlantic community and the West Pacific, but with elite communities in the tens of millions in countries such as China, India and Brazil. Improvements in education, literacy and communications in recent decades have increased the awareness of many marginalised people of this unjust distribution of wealth. In extreme circumstances this can lead to the rise of violent and extreme social movements such as the Naxalites in India.
Secondly, climate change is expected to have profound effects on that majority of the world’s population living in the tropical and sub-tropical regions but without the economic resources to respond to severe storms, rising sea levels and drastic changes in rainfall distribution. Increased migration and social and political unrest are likely consequences.
Thirdly, resource competition, especially over energy resources in the Persian Gulf region and elsewhere, will, on present trends, be an increasing source of tension and conflict.
Lastly, the strong tendency of powerful elites to maintain security, by military force if necessary, is expected to be counter-productive, as has already been seen by many of the consequences of the war on terror.
Countering such trends involves a fundamental commitment to emancipation and socio-economic justice. This includes fair trade, debt cancellation, assistance for sustainable development, a radical cut in carbon emissions, rapidly increased use of renewable energy resources and the development of conflict prevention and conflict resolution policies that avoid the use of force (see Beyond Terror).
The Financial Crisis and Historical Experience
The current crisis has three main characteristics:
* It is global. While most emphasis was initially on the sub-prime market in the United States, the crisis has spread rapidly through the UK and across Europe, has resulted in a 60% fall in the Shanghai stock market in a year, steep stock market falls across much of Latin America and bank crises in Australia and New Zealand.
* It has initially been a crisis of liquidity and confidence in the financial sector rather than a decline in industrial and retail activities, but it is expected to have a substantial effect on industrial and commercial output as sources of investment finance diminish.
* It is likely to last at least two years, with several more years for recovery.
Prior to the sub-prime issue, the international economy was already affected by rapid oil price rises and a more general bull market of rising prices for primary commodities. One early effect was a substantial increase in food prices that had a particular impact on poorer communities across the world (see the May 2008 briefing, Food Poverty and Security).
The 2008 crisis is not directly comparable to the 1929 Wall Street crash, which was not truly global, nor to the 1987 stock market problems in Europe nor even the widespread Asian downturn of the 1990s, even though these had some global ramifications. The only comparable previous global crisis was that of 1973-74. Then, unilateral moves by Arab oil producers during the Yom Kippur/Ramadan War of October 1973 precipitated a remarkable 450% increase in oil prices within ten months, resulting in an unusual combination of economic stagnation and inflation. A parallel issue was a rapid increase food prices.
The worst excesses of the food crisis were averted partly by a decline in food prices because of the onset of the recession, together with some emergency aid coming from some of the newly-rich oil producers. The experience of stagflation in industrial countries resulted less in a move towards mixed economies with a higher level of state planning, and more to the development of free-market ideas, not least in the form of what was later termed “Reaganomics”.
The 25 years from 1980 saw the rapid development of free market globalisation that stimulated substantial economic growth but with a notable lack of socio-economic justice as wealth-poverty divisions widened. Towards the end of the 2000s, the combination of oil price rises and economic overextension, especially in sub-prime markets, resulted in a transnational banking crisis.
Impacts on Poorer Communities
Some aspects of the current crisis will have relatively little impact on poorer communities. For example, oil prices are unlikely to maintain their current levels as demand falls due to a decline in economic activity. It would be possible for oil producers to act together to maintain higher prices but this is unlikely for two reasons. One is that the Organisation of Petroleum Exporting Countries (OPEC) does not have sufficient political unity to exert control over the market, unlike the 1973-74 period. The second is that sovereign wealth funds and other investment vehicles of some oil-rich states depend on buoyant stock markets in North America, Europe and East Asia. Maintaining very high oil prices would therefore tend to damage such investments.
Lower oil prices will be of some help to poorer countries struggling to meet the higher costs of their oil imports. Furthermore, the oil price decline is also likely to have some impact on food prices, resulting in price decreases that will be of some help to the poorest communities.
These, though, are among the few aspects of the current economic environment that might have some limited advantage for poorer people. In almost every other respect the outcome is less positive. For example, weak economies in major countries that normally attract migrant labour mean that remittances from labourers to their home countries will diminish as jobs become scarcer and wages decline. Such remittances are not just important across South and Southeast Asia but are also important for several Latin American economies. Furthermore, increases in unemployment in countries that are destinations for migrant workers will lead to a reaction against such workers, as has been seen recently in South Africa. This can readily extend to increased support for far-right political parties.
Another early consequence of an economic downturn will be a decline in international tourism and travel. Whatever the damaging impact that tourism can have on poorer communities, it is still the case that there is some monetary transfer involved, and some poorer states depend heavily in such earnings.
More importantly, a decline in economic activity will have a substantial impact on commodity prices, affecting the export earnings for poorer countries for a wide range of commodities including copper, tin, coffee, tea, sugar, cotton and hardwoods. Even now, many southern countries depend on such commodity exports for the substantial majority of all their export earnings. It is here that previous experience is particularly relevant to the current crisis and its effects on the majority world.
A New International Economic Order?
In the early 1970s, a substantial increase in commodity prices put the economies of most industrialised countries under some strain, especially as they were also experiencing the oil price rises. The UN Conference on Trade and Development (UNCTAD) had already been attempting to bring a degree of planning into world commodity markets, encouraging individual commodity agreements for products such as coffee and tin that were designed to provide stability along with some slow but steady increases in prices. Such agreements were seen as helping to alter the terms of trade between third world and industrialised states in a manner that would greatly improve the development prospects of the former.
By early 1974 the wild fluctuations in commodity markets were so marked that industrialised countries such as the US, UK, France and Japan were ready to accept the need for international market planning, and a Declaration on a New International Economic Order was agreed at a special session of the UN General Assembly in April 1974. The core of this proposal was the Integrated Programme for Commodities (IPC) which would bring in a series of linked commodity agreements backed by a Common Fund to finance the setting up of the necessary commodity buffer stocks. At the time many development economists believed that the IPC could provide a really valuable boost to the development prospects of many poorer countries, helping to bring in a new era of fair trade. However, that it was even proposed was mainly due to the temporary problems being faced by the world’s wealthy economies.
In the event, the increase in oil prices resulted in a decrease in industrial activity, a fall in primary commodity prices and, almost immediately, a general loss of interest in the IPC by the major industrial powers. What was eventually established, later in the 1970s, was a pale shadow of the original programme, and this had little impact as the era of the free market unfolded in the 1980s. The loss of that programme is a reminder that, in times of economic downturn, the prospects for poorer communities rarely loom large in the recovery policies of the world’s wealthy states.
Such behaviour has reached almost grotesque proportions in the current crisis, with wealthy states willing to commit more than a trillion dollars to rescue their own banking system in crisis. These are financial outlays that are enormous when compared with those that are being committed to achieving the United Nations Millennium Development Goals.
Responding to the Current Crisis
Although the current crisis does not have direct historical parallels, the marked tendency will therefore be for the most powerful economies to engage primarily in responding to their own problems. Much of this will be at the level of individual states, such as recent US Government intervention in the mortgage and insurance markets and numerous interventions across Europe. There is also likely to be some degree of cooperation between the more wealthy states of the North Atlantic community, drawn mainly from the members of the OECD.
Previous experience indicates that the emphasis will be almost entirely on domestic concerns rather than the wider global community. While this might provide some relief among the poorer sectors of the populations of wealthy states, it will do nothing to help the much larger numbers of impoverished people of the majority world. Moreover, further action to limit third world debt is unlikely and there will almost certainly be pressure on aid budgets. Even key issues such as climate change and the risk of resource conflict are likely to slip down the political agenda.
The implications of this are serious, in that any hindrance to facilitating sustainable development across the countries of the South will increase human insecurity and suffering. Furthermore, any limitation in addressing the urgent issue of climate change will just add to the problems of the South as the damaging effects of climate change increase their impact. Some of the most fragile of the world’s economies, from much of Africa through to Southwest Asia, will suffer most from economic recession and the impact of climate change. More generally, the bitterness that already exists across continents will be reinforced by a perception that the dominant economies have little or no interest in the majority of the world’s people.
Even so, it is just possible that the current crisis will be seen to necessitate a serious reconsideration of how the world economy has evolved in the past three decades. In essence, the nature of the globalised free market is being called into question amidst demands for considerable reforms. The reason for this may well be the manner in which the free market has allowed the current crisis of liquidity and confidence to develop in the wealthy economies, rather than that the free market has increased socio-economic divisions. The extent to which the reforms will be instituted will depend to some extent on the depth and duration of the current crisis but at the time of writing (early October) there are indications that it could well be severe and prolonged.
What could come out of this might be reforms that not only respond to the crisis in the western banking system but also address the deeper global inequalities that have developed in recent years. For that to happen there will need to be a degree of political wisdom on the part of some national governments, accompanied by visionary proposals by intergovernmental agencies, such as some of the specialised agencies of the United Nations. There are notable past examples of this, not least the Prebisch Plan on trade and development in 1963 that prompted UNCTAD’s early work, the UN Environment Programme’s work on ozone depletion in the mid-1980s and recent intergovernmental work on climate change.
However, there is little prospect of effective change if it is left solely to governments and inter-governmental agencies. The richer states will look to their own predicaments, and their influence in intergovernmental organisations may limit new proposals. What is essential is the sustained action of nongovernmental organisations as part of a wider civil society. Responding to the current crisis can either be a process limited to the narrow domestic concerns of the most powerful states or it can be seen as an opportunity for reform of the world’s economic system that will benefit the majority world. The timescale is the next two to five years, the likely duration of the current crisis, and the stakes are high.
Link til pdf-filen.
Oxford Research Group’s International Security Monthly Briefings focus primarily on issues such as the conflicts in Iraq, Afghanistan and Pakistan, the evolution of western counter-terrorism policies and the development of the al-Qaida movement. On occasions they also cover matters such as energy security, climate change and world food prospects. In view of the serious financial situation that has developed in recent months, this briefing provides an initial analysis of the possible impact of the crisis on security.
This is undertaken in the context of ORG’s work on sustainable security which, in turn, is predicated on an underlying analysis of the security issues that are likely to be most prominent in the next two to three decades. This assesses that there are four main trends that are particularly salient.
Firstly, global socio-economic divisions are widening, with most of the benefits of the past three decades of economic growth being concentrated in the hands of a trans-global elite community of about 1.2 billion people, mainly in the countries of the Atlantic community and the West Pacific, but with elite communities in the tens of millions in countries such as China, India and Brazil. Improvements in education, literacy and communications in recent decades have increased the awareness of many marginalised people of this unjust distribution of wealth. In extreme circumstances this can lead to the rise of violent and extreme social movements such as the Naxalites in India.
Secondly, climate change is expected to have profound effects on that majority of the world’s population living in the tropical and sub-tropical regions but without the economic resources to respond to severe storms, rising sea levels and drastic changes in rainfall distribution. Increased migration and social and political unrest are likely consequences.
Thirdly, resource competition, especially over energy resources in the Persian Gulf region and elsewhere, will, on present trends, be an increasing source of tension and conflict.
Lastly, the strong tendency of powerful elites to maintain security, by military force if necessary, is expected to be counter-productive, as has already been seen by many of the consequences of the war on terror.
Countering such trends involves a fundamental commitment to emancipation and socio-economic justice. This includes fair trade, debt cancellation, assistance for sustainable development, a radical cut in carbon emissions, rapidly increased use of renewable energy resources and the development of conflict prevention and conflict resolution policies that avoid the use of force (see Beyond Terror).
The Financial Crisis and Historical Experience
The current crisis has three main characteristics:
* It is global. While most emphasis was initially on the sub-prime market in the United States, the crisis has spread rapidly through the UK and across Europe, has resulted in a 60% fall in the Shanghai stock market in a year, steep stock market falls across much of Latin America and bank crises in Australia and New Zealand.
* It has initially been a crisis of liquidity and confidence in the financial sector rather than a decline in industrial and retail activities, but it is expected to have a substantial effect on industrial and commercial output as sources of investment finance diminish.
* It is likely to last at least two years, with several more years for recovery.
Prior to the sub-prime issue, the international economy was already affected by rapid oil price rises and a more general bull market of rising prices for primary commodities. One early effect was a substantial increase in food prices that had a particular impact on poorer communities across the world (see the May 2008 briefing, Food Poverty and Security).
The 2008 crisis is not directly comparable to the 1929 Wall Street crash, which was not truly global, nor to the 1987 stock market problems in Europe nor even the widespread Asian downturn of the 1990s, even though these had some global ramifications. The only comparable previous global crisis was that of 1973-74. Then, unilateral moves by Arab oil producers during the Yom Kippur/Ramadan War of October 1973 precipitated a remarkable 450% increase in oil prices within ten months, resulting in an unusual combination of economic stagnation and inflation. A parallel issue was a rapid increase food prices.
The worst excesses of the food crisis were averted partly by a decline in food prices because of the onset of the recession, together with some emergency aid coming from some of the newly-rich oil producers. The experience of stagflation in industrial countries resulted less in a move towards mixed economies with a higher level of state planning, and more to the development of free-market ideas, not least in the form of what was later termed “Reaganomics”.
The 25 years from 1980 saw the rapid development of free market globalisation that stimulated substantial economic growth but with a notable lack of socio-economic justice as wealth-poverty divisions widened. Towards the end of the 2000s, the combination of oil price rises and economic overextension, especially in sub-prime markets, resulted in a transnational banking crisis.
Impacts on Poorer Communities
Some aspects of the current crisis will have relatively little impact on poorer communities. For example, oil prices are unlikely to maintain their current levels as demand falls due to a decline in economic activity. It would be possible for oil producers to act together to maintain higher prices but this is unlikely for two reasons. One is that the Organisation of Petroleum Exporting Countries (OPEC) does not have sufficient political unity to exert control over the market, unlike the 1973-74 period. The second is that sovereign wealth funds and other investment vehicles of some oil-rich states depend on buoyant stock markets in North America, Europe and East Asia. Maintaining very high oil prices would therefore tend to damage such investments.
Lower oil prices will be of some help to poorer countries struggling to meet the higher costs of their oil imports. Furthermore, the oil price decline is also likely to have some impact on food prices, resulting in price decreases that will be of some help to the poorest communities.
These, though, are among the few aspects of the current economic environment that might have some limited advantage for poorer people. In almost every other respect the outcome is less positive. For example, weak economies in major countries that normally attract migrant labour mean that remittances from labourers to their home countries will diminish as jobs become scarcer and wages decline. Such remittances are not just important across South and Southeast Asia but are also important for several Latin American economies. Furthermore, increases in unemployment in countries that are destinations for migrant workers will lead to a reaction against such workers, as has been seen recently in South Africa. This can readily extend to increased support for far-right political parties.
Another early consequence of an economic downturn will be a decline in international tourism and travel. Whatever the damaging impact that tourism can have on poorer communities, it is still the case that there is some monetary transfer involved, and some poorer states depend heavily in such earnings.
More importantly, a decline in economic activity will have a substantial impact on commodity prices, affecting the export earnings for poorer countries for a wide range of commodities including copper, tin, coffee, tea, sugar, cotton and hardwoods. Even now, many southern countries depend on such commodity exports for the substantial majority of all their export earnings. It is here that previous experience is particularly relevant to the current crisis and its effects on the majority world.
A New International Economic Order?
In the early 1970s, a substantial increase in commodity prices put the economies of most industrialised countries under some strain, especially as they were also experiencing the oil price rises. The UN Conference on Trade and Development (UNCTAD) had already been attempting to bring a degree of planning into world commodity markets, encouraging individual commodity agreements for products such as coffee and tin that were designed to provide stability along with some slow but steady increases in prices. Such agreements were seen as helping to alter the terms of trade between third world and industrialised states in a manner that would greatly improve the development prospects of the former.
By early 1974 the wild fluctuations in commodity markets were so marked that industrialised countries such as the US, UK, France and Japan were ready to accept the need for international market planning, and a Declaration on a New International Economic Order was agreed at a special session of the UN General Assembly in April 1974. The core of this proposal was the Integrated Programme for Commodities (IPC) which would bring in a series of linked commodity agreements backed by a Common Fund to finance the setting up of the necessary commodity buffer stocks. At the time many development economists believed that the IPC could provide a really valuable boost to the development prospects of many poorer countries, helping to bring in a new era of fair trade. However, that it was even proposed was mainly due to the temporary problems being faced by the world’s wealthy economies.
In the event, the increase in oil prices resulted in a decrease in industrial activity, a fall in primary commodity prices and, almost immediately, a general loss of interest in the IPC by the major industrial powers. What was eventually established, later in the 1970s, was a pale shadow of the original programme, and this had little impact as the era of the free market unfolded in the 1980s. The loss of that programme is a reminder that, in times of economic downturn, the prospects for poorer communities rarely loom large in the recovery policies of the world’s wealthy states.
Such behaviour has reached almost grotesque proportions in the current crisis, with wealthy states willing to commit more than a trillion dollars to rescue their own banking system in crisis. These are financial outlays that are enormous when compared with those that are being committed to achieving the United Nations Millennium Development Goals.
Responding to the Current Crisis
Although the current crisis does not have direct historical parallels, the marked tendency will therefore be for the most powerful economies to engage primarily in responding to their own problems. Much of this will be at the level of individual states, such as recent US Government intervention in the mortgage and insurance markets and numerous interventions across Europe. There is also likely to be some degree of cooperation between the more wealthy states of the North Atlantic community, drawn mainly from the members of the OECD.
Previous experience indicates that the emphasis will be almost entirely on domestic concerns rather than the wider global community. While this might provide some relief among the poorer sectors of the populations of wealthy states, it will do nothing to help the much larger numbers of impoverished people of the majority world. Moreover, further action to limit third world debt is unlikely and there will almost certainly be pressure on aid budgets. Even key issues such as climate change and the risk of resource conflict are likely to slip down the political agenda.
The implications of this are serious, in that any hindrance to facilitating sustainable development across the countries of the South will increase human insecurity and suffering. Furthermore, any limitation in addressing the urgent issue of climate change will just add to the problems of the South as the damaging effects of climate change increase their impact. Some of the most fragile of the world’s economies, from much of Africa through to Southwest Asia, will suffer most from economic recession and the impact of climate change. More generally, the bitterness that already exists across continents will be reinforced by a perception that the dominant economies have little or no interest in the majority of the world’s people.
Even so, it is just possible that the current crisis will be seen to necessitate a serious reconsideration of how the world economy has evolved in the past three decades. In essence, the nature of the globalised free market is being called into question amidst demands for considerable reforms. The reason for this may well be the manner in which the free market has allowed the current crisis of liquidity and confidence to develop in the wealthy economies, rather than that the free market has increased socio-economic divisions. The extent to which the reforms will be instituted will depend to some extent on the depth and duration of the current crisis but at the time of writing (early October) there are indications that it could well be severe and prolonged.
What could come out of this might be reforms that not only respond to the crisis in the western banking system but also address the deeper global inequalities that have developed in recent years. For that to happen there will need to be a degree of political wisdom on the part of some national governments, accompanied by visionary proposals by intergovernmental agencies, such as some of the specialised agencies of the United Nations. There are notable past examples of this, not least the Prebisch Plan on trade and development in 1963 that prompted UNCTAD’s early work, the UN Environment Programme’s work on ozone depletion in the mid-1980s and recent intergovernmental work on climate change.
However, there is little prospect of effective change if it is left solely to governments and inter-governmental agencies. The richer states will look to their own predicaments, and their influence in intergovernmental organisations may limit new proposals. What is essential is the sustained action of nongovernmental organisations as part of a wider civil society. Responding to the current crisis can either be a process limited to the narrow domestic concerns of the most powerful states or it can be seen as an opportunity for reform of the world’s economic system that will benefit the majority world. The timescale is the next two to five years, the likely duration of the current crisis, and the stakes are high.
Link til pdf-filen.
The global economic crisis: An historic opportunity for transformation
An initial response from individuals, social movements and non-governmental organisations in support of a transitional programme for radical economic transformation Beijing, 15 October 2008
Preamble
Taking advantage of the opportunity of so many people from movements gathering in Beijing during the Asia-Europe People’s Forum, the Transnational Institute and Focus on the Global South convened informal nightly meetings between 13 and 15 October 2008. We took stock of the meaning of the unfolding global economic crisis and the opportunity it presents for us to put into the public domain some of the inspiring and feasible alternatives many of us have been working on for decades. This statement represents the collective outcome of our Beijing nights. We, the initial signatories, mean this to be a contribution towards efforts to formulate proposals around which our movements can organise as the basis for a radically different kind of political and economic order. Please sign on to this statement by adding your name in the comments section.
The Crisis
The global financial system is unravelling at great speed. This is happening in the midst of a multiplicity of crises in relation to food, climate and energy. It severely weakens the power of the US and the EU, and the global institutions they dominate, particularly the International Monetary Fund, the World Bank and the World Trade Organisation. Not only is the legitimacy of the neo-liberal paradigm in question, but the very future of capitalism itself.
Such is the chaos in the global financial system that Northern governments have resorted to measures progressive movements have advocated for years, such as nationalisation of banks. These moves are intended, however, as short-term stabilisation measures and once the storm clears, they are likely to return the banks to the private sector. We have a short window of opportunity to mobilise so that they are not.
The challenge and the opportunity
We are entering uncharted terrain with this conjuncture of profound crises – the fall out from the financial crisis will be severe. People are being thrown into a deep sense of insecurity; misery and hardship will increase for many poorer people everywhere. We should not cede this moment to fascist, right wing populist, xenophobic groups, who will surely try to take advantage of people’s fear and anger for reactionary ends.
Powerful movements against neo-liberalism have been built over many decades. This will grow as critical coverage of the crisis enlightens more people, who are already angry at public funds being diverted to pay for problems they are not responsible for creating, and already concerned about the ecological crisis and rising prices – especially of food and energy. The movements will grow further as recession starts to bite and economies start sinking into depression.
There is a new openness to alternatives. To capture people’s attention and support, they must be practical and immediately feasible. We have convincing alternatives that are already underway, and we have many other good ideas attempted in the past, but defeated. Our alternatives put the well-being of people and the planet at their centre. For this, democratic control over financial and economic institutions are required. This is the “red thread” connecting up the proposals presented below.
Proposals for debate, elaboration and action
Finance
* Introduce full-scale socialisation of banks, not just nationalisation of bad assets.
* Create people-based banking institutions and strengthen existing popular forms of lending based on mutuality and solidarity.
* Institutionalise full transparency within the financial system through the opening of the books to the public, to be facilitated by citizen and worker organisations.
* Introduce parliamentary and citizens’ oversight of the existing banking system
* Apply social ( including labour conditions) and environmental criteria to all lending, including for business purposes
* Prioritise lending, at minimum rates of interest, to meet social and environmental needs and to expand the already growing social economy
* Overhaul central banks in line with democratically determined social, environmental and expansionary (to counter the recession) objectives, and make them publicly accountable institutions.
* Safeguard migrant remittances to their families and introduce legislation to restrict charges and taxes on transfers
Taxation
* Close all tax havens
* End tax breaks for fossil fuel and nuclear energy companies
* Apply stringent progressive tax systems
* Introduce a global taxation system to prevent transfer pricing and tax evasion
* Introduce a levy on nationalised bank profits with which to establish citizen investment funds (see below)
* Impose stringent progressive carbon taxes on those with the biggest carbon footprints
* Adopt controls, such as Tobin taxes, on the movements of speculative capital
* Re-introduce tariffs and duties on imports of luxury goods and other goods already produced locally as a means of increasing the state’s fiscal base, as well as a means to support local production and thereby reduce carbon emissions globally
Public Spending and Investment
* Radically reduce military spending
* Redirect government spending from bailing out bankers to guaranteeing basic incomes and social security, and providing universally accessible basic social services such as housing, water, electricity, health, education, child care, and access to the internet and other public communications facilities.
* Use citizen funds (see above) to support very poor communities
* Ensure that people at risk of losing their homes due to defaults on mortgages caused by the crisis are offered renegotiated terms of payment
* Stop privatisations of public services
* Establish public enterprises under the control of parliaments, local communities and/or workers to increase employment
* Improve the performance of public enterprises through democratising management - encourage public service managers, staff, unions and consumer organisations to collaborate to this end
* Introduce participatory budgeting over public finances at all feasible levels
* Invest massively in improved energy efficiency, low carbon emitting public transport, renewable energy and environmental repair
* Control or subsidise the prices of basic commodities
International Trade and Finance
* Introduce a permanent global ban on short-selling of stock and shares
* Ban on trade in derivatives
* Ban all speculation on staple food commodities
* Cancel the debt of all developing countries – debt is mounting as the crisis causes the value of Southern currencies to fall
* Support the United Nations call to be involved in discussions about how the to resolve the crisis, which is going to have a much bigger impact on Southern economies than is currently being acknowledged
* Phase out the World Bank, International Monetary Fund, and World Trade Organisation
* Phase out the US dollar as the international reserve currency
* Establish a people’s inquiry into the mechanisms necessary for a just international monetary system.
* Ensure aid transfers do not fall as a result of the crisis
* Abolish tied aid
* Abolish neo-liberal aid conditionalities
* Phase out the paradigm of export-led development, and refocus sustainable development on production for the local and regional market
* Introduce incentives for products produced for sale closest to the local market
* Cancel all negotiations for bilateral free trade and economic partnership agreements
* Promote regional economic co-operation arrangements, such as UNASUR, the Bolivarian Alternative for the Americas (ALBA), the Trade Treaty of the Peoples and others, that encourage genuine development and an end to poverty.
Environment
* Introduce a global system of compensation for countries which do not exploit fossil fuel reserves in the global interests of limiting effects on the climate, such as Ecuador has proposed.
* Pay reparations to Southern countries for the ecological destruction wrought by the North to assist peoples of the South to deal with climate change and other environmental crises.
* Strictly implement the “precautionary principle” of the UN Declaration on the Right to Development as a condition for all developmental and environmental projects.
* End lending for projects under the Kyoto Protocol’s “Clean Development Mechanism” that are environmentally destructive, such as monoculture plantations of eucalyptus, soya and palm oil.
* Stop the development of carbon trading and other environmentally counter-productive techno-fixes, such as carbon capture and sequestration, agrofuels, nuclear power and ‘clean coal’ technology.
* Adopt strategies to radically reduce consumption in the rich countries, while promoting sustainable development in poorer countries
* Introduce democratic management of all international funding mechanisms for climate change mitigation, with strong participation from Southern countries and civil society.
Agriculture and Industry
* Phase out the pernicious paradigm of industry-led development, where the rural sector is squeezed to provide the resources necessary to support industrialisation and urbanisation
* Promote agricultural strategies aimed at achieving food security, food sovereignty and sustainable farming.
* Promote land reforms and other measures which support small holder agriculture and sustain peasant and indigenous communities
* Stop the spread of socially and environmentally destructive mono-cultural enterprises.
* Stop labour law reforms aimed at extending hours of work and making it easier for employers to fire or retrench workers
* Secure jobs through outlawing precarious low paid work
* Guarantee equal pay for equal work for women – as a basic principle and to help counter the coming recession by increasing workers’ capacity to consume.
* Protect the rights of migrant workers in the event of job losses, ensuring their safe return to and reintegration into their home countries. For those who cannot return, there should be no forced return, their security should be guaranteed, and they should be provided with employment or a basic minimum income.
Conclusion
These are all practical, common sense proposals. Some are initiatives already underway and demonstrably feasible. Their successes need to be publicised and popularised so as to inspire reproduction. Others are unlikely to be implemented on their objective merits alone. Political will is required. By implication, therefore, every proposal is a call to action.
We have written what we see as a living document to be developed and enriched by us all. Please sign on to this statement at the bottom of the page.
A future occasion to come together to work on the actions needed to make these ideas and others a reality will be the World Social Forum in Belem, Brazil at the end of January 2009.
We have the experience and the ideas - let’s meet the challenge of the present ruling disorder and keep the momentum towards an alternative rolling!!
Preamble
Taking advantage of the opportunity of so many people from movements gathering in Beijing during the Asia-Europe People’s Forum, the Transnational Institute and Focus on the Global South convened informal nightly meetings between 13 and 15 October 2008. We took stock of the meaning of the unfolding global economic crisis and the opportunity it presents for us to put into the public domain some of the inspiring and feasible alternatives many of us have been working on for decades. This statement represents the collective outcome of our Beijing nights. We, the initial signatories, mean this to be a contribution towards efforts to formulate proposals around which our movements can organise as the basis for a radically different kind of political and economic order. Please sign on to this statement by adding your name in the comments section.
The Crisis
The global financial system is unravelling at great speed. This is happening in the midst of a multiplicity of crises in relation to food, climate and energy. It severely weakens the power of the US and the EU, and the global institutions they dominate, particularly the International Monetary Fund, the World Bank and the World Trade Organisation. Not only is the legitimacy of the neo-liberal paradigm in question, but the very future of capitalism itself.
Such is the chaos in the global financial system that Northern governments have resorted to measures progressive movements have advocated for years, such as nationalisation of banks. These moves are intended, however, as short-term stabilisation measures and once the storm clears, they are likely to return the banks to the private sector. We have a short window of opportunity to mobilise so that they are not.
The challenge and the opportunity
We are entering uncharted terrain with this conjuncture of profound crises – the fall out from the financial crisis will be severe. People are being thrown into a deep sense of insecurity; misery and hardship will increase for many poorer people everywhere. We should not cede this moment to fascist, right wing populist, xenophobic groups, who will surely try to take advantage of people’s fear and anger for reactionary ends.
Powerful movements against neo-liberalism have been built over many decades. This will grow as critical coverage of the crisis enlightens more people, who are already angry at public funds being diverted to pay for problems they are not responsible for creating, and already concerned about the ecological crisis and rising prices – especially of food and energy. The movements will grow further as recession starts to bite and economies start sinking into depression.
There is a new openness to alternatives. To capture people’s attention and support, they must be practical and immediately feasible. We have convincing alternatives that are already underway, and we have many other good ideas attempted in the past, but defeated. Our alternatives put the well-being of people and the planet at their centre. For this, democratic control over financial and economic institutions are required. This is the “red thread” connecting up the proposals presented below.
Proposals for debate, elaboration and action
Finance
* Introduce full-scale socialisation of banks, not just nationalisation of bad assets.
* Create people-based banking institutions and strengthen existing popular forms of lending based on mutuality and solidarity.
* Institutionalise full transparency within the financial system through the opening of the books to the public, to be facilitated by citizen and worker organisations.
* Introduce parliamentary and citizens’ oversight of the existing banking system
* Apply social ( including labour conditions) and environmental criteria to all lending, including for business purposes
* Prioritise lending, at minimum rates of interest, to meet social and environmental needs and to expand the already growing social economy
* Overhaul central banks in line with democratically determined social, environmental and expansionary (to counter the recession) objectives, and make them publicly accountable institutions.
* Safeguard migrant remittances to their families and introduce legislation to restrict charges and taxes on transfers
Taxation
* Close all tax havens
* End tax breaks for fossil fuel and nuclear energy companies
* Apply stringent progressive tax systems
* Introduce a global taxation system to prevent transfer pricing and tax evasion
* Introduce a levy on nationalised bank profits with which to establish citizen investment funds (see below)
* Impose stringent progressive carbon taxes on those with the biggest carbon footprints
* Adopt controls, such as Tobin taxes, on the movements of speculative capital
* Re-introduce tariffs and duties on imports of luxury goods and other goods already produced locally as a means of increasing the state’s fiscal base, as well as a means to support local production and thereby reduce carbon emissions globally
Public Spending and Investment
* Radically reduce military spending
* Redirect government spending from bailing out bankers to guaranteeing basic incomes and social security, and providing universally accessible basic social services such as housing, water, electricity, health, education, child care, and access to the internet and other public communications facilities.
* Use citizen funds (see above) to support very poor communities
* Ensure that people at risk of losing their homes due to defaults on mortgages caused by the crisis are offered renegotiated terms of payment
* Stop privatisations of public services
* Establish public enterprises under the control of parliaments, local communities and/or workers to increase employment
* Improve the performance of public enterprises through democratising management - encourage public service managers, staff, unions and consumer organisations to collaborate to this end
* Introduce participatory budgeting over public finances at all feasible levels
* Invest massively in improved energy efficiency, low carbon emitting public transport, renewable energy and environmental repair
* Control or subsidise the prices of basic commodities
International Trade and Finance
* Introduce a permanent global ban on short-selling of stock and shares
* Ban on trade in derivatives
* Ban all speculation on staple food commodities
* Cancel the debt of all developing countries – debt is mounting as the crisis causes the value of Southern currencies to fall
* Support the United Nations call to be involved in discussions about how the to resolve the crisis, which is going to have a much bigger impact on Southern economies than is currently being acknowledged
* Phase out the World Bank, International Monetary Fund, and World Trade Organisation
* Phase out the US dollar as the international reserve currency
* Establish a people’s inquiry into the mechanisms necessary for a just international monetary system.
* Ensure aid transfers do not fall as a result of the crisis
* Abolish tied aid
* Abolish neo-liberal aid conditionalities
* Phase out the paradigm of export-led development, and refocus sustainable development on production for the local and regional market
* Introduce incentives for products produced for sale closest to the local market
* Cancel all negotiations for bilateral free trade and economic partnership agreements
* Promote regional economic co-operation arrangements, such as UNASUR, the Bolivarian Alternative for the Americas (ALBA), the Trade Treaty of the Peoples and others, that encourage genuine development and an end to poverty.
Environment
* Introduce a global system of compensation for countries which do not exploit fossil fuel reserves in the global interests of limiting effects on the climate, such as Ecuador has proposed.
* Pay reparations to Southern countries for the ecological destruction wrought by the North to assist peoples of the South to deal with climate change and other environmental crises.
* Strictly implement the “precautionary principle” of the UN Declaration on the Right to Development as a condition for all developmental and environmental projects.
* End lending for projects under the Kyoto Protocol’s “Clean Development Mechanism” that are environmentally destructive, such as monoculture plantations of eucalyptus, soya and palm oil.
* Stop the development of carbon trading and other environmentally counter-productive techno-fixes, such as carbon capture and sequestration, agrofuels, nuclear power and ‘clean coal’ technology.
* Adopt strategies to radically reduce consumption in the rich countries, while promoting sustainable development in poorer countries
* Introduce democratic management of all international funding mechanisms for climate change mitigation, with strong participation from Southern countries and civil society.
Agriculture and Industry
* Phase out the pernicious paradigm of industry-led development, where the rural sector is squeezed to provide the resources necessary to support industrialisation and urbanisation
* Promote agricultural strategies aimed at achieving food security, food sovereignty and sustainable farming.
* Promote land reforms and other measures which support small holder agriculture and sustain peasant and indigenous communities
* Stop the spread of socially and environmentally destructive mono-cultural enterprises.
* Stop labour law reforms aimed at extending hours of work and making it easier for employers to fire or retrench workers
* Secure jobs through outlawing precarious low paid work
* Guarantee equal pay for equal work for women – as a basic principle and to help counter the coming recession by increasing workers’ capacity to consume.
* Protect the rights of migrant workers in the event of job losses, ensuring their safe return to and reintegration into their home countries. For those who cannot return, there should be no forced return, their security should be guaranteed, and they should be provided with employment or a basic minimum income.
Conclusion
These are all practical, common sense proposals. Some are initiatives already underway and demonstrably feasible. Their successes need to be publicised and popularised so as to inspire reproduction. Others are unlikely to be implemented on their objective merits alone. Political will is required. By implication, therefore, every proposal is a call to action.
We have written what we see as a living document to be developed and enriched by us all. Please sign on to this statement at the bottom of the page.
A future occasion to come together to work on the actions needed to make these ideas and others a reality will be the World Social Forum in Belem, Brazil at the end of January 2009.
We have the experience and the ideas - let’s meet the challenge of the present ruling disorder and keep the momentum towards an alternative rolling!!
torsdag den 16. oktober 2008
10 Years of the Pinochet Principle by Philippe Sands
The arrest warrant served on the Chilean head of state in 1998 changed history and has implications for the US government now
On October 16 1998, a magistrate signed a warrant for the arrest of Senator Augusto Pinochet and changed the course of history. The former Chilean head of state was arrested a few hours later, at the request of a Spanish prosecutor who charged him with a raft of international crimes, some dating back to the early 1970s. Over the next 18 months, one dramatic development followed another. The House of Lords rendered three landmark judgments in the space of five months; home secretary Jack Straw defied expectations by giving a green light to the continuation of proceedings that could lead to Pinochet's removal to Madrid; Pinochet made a dramatic appearance in the dock at Belmarsh magistrate's court; and eventually Straw decided that Pinochet was too unhealthy to stand trial and he was returned to Chile in April 2000. For the rest of his life he was dogged by legal proceedings.
One central question lay at the heart of the whole affair: was a former head of state entitled to claim immunity before the English courts, where it was alleged that he had participated in crimes, in violation of international conventions, such as torture? This question had never before been decided. It pitted two competing views of international relations against each other: traditionalists argued that the maintenance of serene relations between states required the courts of one state to refrain from sitting in judgment over the highest officials of another; the modernists argued that no person was above the law where the most serious international crimes were involved, and that the system of human rights laws put in place after the second world war substituted a rule of immunity with a new rule against impunity.
In March 1999, the House of Lords came down strongly in favour of the modernist view. It did so carefully, and in a way that was both reasonable and sustainable. The majority ruled that Pinochet's loss of immunity arose not from some unstated general rule of international law, but rather from the terms of a treaty to which Britain, Chile and Spain were party - the 1984 convention outlawing torture - the terms of which were inconsistent with immunity for a former head of state. It is impossible to overstate the significance of that ruling, which reflected a new balance of global priorities, a shift in favour of principle over pragmatism. It has been followed by international indictments against other former heads of state - Slobodan Milosevic and Charles Taylor - and the coming into force of the international criminal court and possible proceedings against the serving president of Sudan. It has also given rise to criminal proceedings before national courts in other parts of the world. The Pinochet judgment has withstood the test of time. It has not been overruled in the court of international opinion, and it has not brought international relations to a grinding halt.
Nevertheless, it seems that Pinochet's case caused concerns at the highest levels of the Bush administration, as described in a revealing account by a former lawyer in the Bush administration, Jack Goldsmith. He describes how, during 2002, Henry Kissinger found himself on the sharp end of the Pinochet case. Reportedly livid, a rattled Kissinger complained to his old chum Donald Rumsfeld, who was already worrying about "lawfare" (the use of law to achieve operational objectives). Rumsfeld instructed the chief lawyer at the Pentagon, Jim Haynes, to address the problems posed by this "judicialisation of international politics". Haynes passed the assignment on to Goldsmith, whose memo reached the National Security Council, which also worried about the threat of foreign judges. According to Goldsmith, the NSC couldn't work out what to do about the problem.
We now know that while this was going on, Rumsfeld and Haynes and others at the Pentagon were secretly circumventing international laws like the Geneva conventions and the torture convention and removing international constraints on the interrogation of detainees at Guantánamo and in Iraq. Torture and other international crimes followed. So did the Abu Ghraib photos. Amid the welter of legal opinions received by the administration none, it seems, bothered to examine the consequences of the House of Lords judgment for senior US officials.
The legacy of the arrest warrant signed in Hampstead 10 years today, is the Pinochet principle, that no one is above the law. It may one day come to haunt the very people who sought to set it aside. If, that is, they ever dare to set foot outside the United States.
© Guardian News and Media Limited 2008
On October 16 1998, a magistrate signed a warrant for the arrest of Senator Augusto Pinochet and changed the course of history. The former Chilean head of state was arrested a few hours later, at the request of a Spanish prosecutor who charged him with a raft of international crimes, some dating back to the early 1970s. Over the next 18 months, one dramatic development followed another. The House of Lords rendered three landmark judgments in the space of five months; home secretary Jack Straw defied expectations by giving a green light to the continuation of proceedings that could lead to Pinochet's removal to Madrid; Pinochet made a dramatic appearance in the dock at Belmarsh magistrate's court; and eventually Straw decided that Pinochet was too unhealthy to stand trial and he was returned to Chile in April 2000. For the rest of his life he was dogged by legal proceedings.
One central question lay at the heart of the whole affair: was a former head of state entitled to claim immunity before the English courts, where it was alleged that he had participated in crimes, in violation of international conventions, such as torture? This question had never before been decided. It pitted two competing views of international relations against each other: traditionalists argued that the maintenance of serene relations between states required the courts of one state to refrain from sitting in judgment over the highest officials of another; the modernists argued that no person was above the law where the most serious international crimes were involved, and that the system of human rights laws put in place after the second world war substituted a rule of immunity with a new rule against impunity.
In March 1999, the House of Lords came down strongly in favour of the modernist view. It did so carefully, and in a way that was both reasonable and sustainable. The majority ruled that Pinochet's loss of immunity arose not from some unstated general rule of international law, but rather from the terms of a treaty to which Britain, Chile and Spain were party - the 1984 convention outlawing torture - the terms of which were inconsistent with immunity for a former head of state. It is impossible to overstate the significance of that ruling, which reflected a new balance of global priorities, a shift in favour of principle over pragmatism. It has been followed by international indictments against other former heads of state - Slobodan Milosevic and Charles Taylor - and the coming into force of the international criminal court and possible proceedings against the serving president of Sudan. It has also given rise to criminal proceedings before national courts in other parts of the world. The Pinochet judgment has withstood the test of time. It has not been overruled in the court of international opinion, and it has not brought international relations to a grinding halt.
Nevertheless, it seems that Pinochet's case caused concerns at the highest levels of the Bush administration, as described in a revealing account by a former lawyer in the Bush administration, Jack Goldsmith. He describes how, during 2002, Henry Kissinger found himself on the sharp end of the Pinochet case. Reportedly livid, a rattled Kissinger complained to his old chum Donald Rumsfeld, who was already worrying about "lawfare" (the use of law to achieve operational objectives). Rumsfeld instructed the chief lawyer at the Pentagon, Jim Haynes, to address the problems posed by this "judicialisation of international politics". Haynes passed the assignment on to Goldsmith, whose memo reached the National Security Council, which also worried about the threat of foreign judges. According to Goldsmith, the NSC couldn't work out what to do about the problem.
We now know that while this was going on, Rumsfeld and Haynes and others at the Pentagon were secretly circumventing international laws like the Geneva conventions and the torture convention and removing international constraints on the interrogation of detainees at Guantánamo and in Iraq. Torture and other international crimes followed. So did the Abu Ghraib photos. Amid the welter of legal opinions received by the administration none, it seems, bothered to examine the consequences of the House of Lords judgment for senior US officials.
The legacy of the arrest warrant signed in Hampstead 10 years today, is the Pinochet principle, that no one is above the law. It may one day come to haunt the very people who sought to set it aside. If, that is, they ever dare to set foot outside the United States.
© Guardian News and Media Limited 2008
Additional Thoughts on the Bailout
"We hang the petty thieves and appoint the great ones to public office" - Aesop
By Paul Craig Roberts.
Just as the Bush regime’s wars have been used to pour billions of dollars into the pockets of its military-security donor base, the Paulson bailout looks like a Bush regime scheme to incur $700 billion in new public debt in order to transfer the money into the coffers of its financial donor base. The US taxpayers will be left with the interest payments in perpetuity (or inflation if the Fed monetizes the debt), and the number of Wall Street billionaires will grow. As for the US and European governments’ purchases of bank shares, that is just a cover for funneling public money into private hands.
The explanations that have been given for the crisis and its bailout are opaque. The US Treasury estimates that as few as 7% of the mortgages are bad. Why then do the US, UK, Germany, and France need to pour more than $2.1 trillion of public money into private financial institutions?
If, as the government tells us, the crisis stems from subprime mortgage defaults reducing the interest payments to the holders of mortgage backed securities, thus driving down their values and threatening the solvency of the institutions that hold them, why isn’t the bailout money used to address the problem at its source? If the bailout money was used to refinance troubled mortgages and to pay off foreclosed mortgages, the mortgage backed securities would be made whole, and it would be unnecessary to pour huge sums of public money into banks. Instead, the bailout money is being used to inject capital into financial institutions and to purchase from them troubled financial instruments.
It is a strange solution that does not address the problem. As the US economy sinks deeper into recession, the mortgage defaults will rise. Thus, the problem will intensify, necessitating the purchase of yet more troubled instruments.
If credit card debt has also been securitized and sold as investments, as the economy worsens defaults on credit card debt will be a replay of the mortgage defaults. How much debt can the Treasury bail out before its own credit rating sinks?
The contribution of credit default swaps to the financial crisis has not been made clear. These swaps are bets that a designated financial instrument will fail. In exchange for “premium” payments, the seller of a swap protects the buyer of the swap from default by, for example, a company’s bond that the swap buyer might not even own. If these swaps are also securitized and sold as investments, more nebulous assets appear on balance sheets.
Normally, if you and I make a bet, and I welsh on the bet, it doesn’t threaten your solvency. If we place bets with a bookie and the odds go against the bookie, the bookie will fail, as apparently happened to AIG, necessitating an $85 billion bailout of the insurance company, and to Bear Stearns resulting in the demise of the investment bank.
Credit default swaps are a form of unregulated insurance. One danger of the swaps is that they allow speculators to purchase protection against a company defaulting on its bonds, without the speculators having to own the company’s bonds. Speculators can then short the company’s stock, driving down its price and raising questions about the viability of the company’s bonds. This raises the value of the speculators’ swaps which can be sold to holders of the company’s bonds. By ruining a company’s prospects, the speculators make money.
Another danger is that swaps encourage investors to purchase riskier, higher-yielding instruments in the belief that the instruments are insured, but the sellers of swaps have not reserved against them.
Double-counting of assets is also possible if a bank purchases a company’s bonds, for example, then purchases credit default swaps on the bonds, and lists both as assets on its balance sheet.
The $85 billion Treasury bailout of AIG is small compared to the $700 billion for the banks, and the emphasis has been on banks, not insurance companies. According to news reports, the sums associated with credit default swaps are far larger than the subprime mortgage derivatives. Have the swaps yet to become major players in the crisis?
The behavior of the stock market does not necessarily tell us anything about the bailout. The financial crisis disrupted lending and thus comprised a threat to non-financial firms. This threat would reflect in the stock market. However, the stock market is also predicting a recession and declining earnings. Thus, people sell stocks hoping to get out before share prices adjust to the new lower earnings.
The bailout package is a result of panic and threats, not of analysis and understanding. Neither Congress nor the public knows the full story. If the problem is the mortgages, why does the bailout leave the mortgages unaddressed and focus instead on pouring vast amount of public money into private financial institutions?
The purpose of regulation is to restrain greed and to prevent leveraged speculation from threatening the wider society. Congress needs to restore financial regulation, not reward those who caused the crisis.
By Paul Craig Roberts.
Just as the Bush regime’s wars have been used to pour billions of dollars into the pockets of its military-security donor base, the Paulson bailout looks like a Bush regime scheme to incur $700 billion in new public debt in order to transfer the money into the coffers of its financial donor base. The US taxpayers will be left with the interest payments in perpetuity (or inflation if the Fed monetizes the debt), and the number of Wall Street billionaires will grow. As for the US and European governments’ purchases of bank shares, that is just a cover for funneling public money into private hands.
The explanations that have been given for the crisis and its bailout are opaque. The US Treasury estimates that as few as 7% of the mortgages are bad. Why then do the US, UK, Germany, and France need to pour more than $2.1 trillion of public money into private financial institutions?
If, as the government tells us, the crisis stems from subprime mortgage defaults reducing the interest payments to the holders of mortgage backed securities, thus driving down their values and threatening the solvency of the institutions that hold them, why isn’t the bailout money used to address the problem at its source? If the bailout money was used to refinance troubled mortgages and to pay off foreclosed mortgages, the mortgage backed securities would be made whole, and it would be unnecessary to pour huge sums of public money into banks. Instead, the bailout money is being used to inject capital into financial institutions and to purchase from them troubled financial instruments.
It is a strange solution that does not address the problem. As the US economy sinks deeper into recession, the mortgage defaults will rise. Thus, the problem will intensify, necessitating the purchase of yet more troubled instruments.
If credit card debt has also been securitized and sold as investments, as the economy worsens defaults on credit card debt will be a replay of the mortgage defaults. How much debt can the Treasury bail out before its own credit rating sinks?
The contribution of credit default swaps to the financial crisis has not been made clear. These swaps are bets that a designated financial instrument will fail. In exchange for “premium” payments, the seller of a swap protects the buyer of the swap from default by, for example, a company’s bond that the swap buyer might not even own. If these swaps are also securitized and sold as investments, more nebulous assets appear on balance sheets.
Normally, if you and I make a bet, and I welsh on the bet, it doesn’t threaten your solvency. If we place bets with a bookie and the odds go against the bookie, the bookie will fail, as apparently happened to AIG, necessitating an $85 billion bailout of the insurance company, and to Bear Stearns resulting in the demise of the investment bank.
Credit default swaps are a form of unregulated insurance. One danger of the swaps is that they allow speculators to purchase protection against a company defaulting on its bonds, without the speculators having to own the company’s bonds. Speculators can then short the company’s stock, driving down its price and raising questions about the viability of the company’s bonds. This raises the value of the speculators’ swaps which can be sold to holders of the company’s bonds. By ruining a company’s prospects, the speculators make money.
Another danger is that swaps encourage investors to purchase riskier, higher-yielding instruments in the belief that the instruments are insured, but the sellers of swaps have not reserved against them.
Double-counting of assets is also possible if a bank purchases a company’s bonds, for example, then purchases credit default swaps on the bonds, and lists both as assets on its balance sheet.
The $85 billion Treasury bailout of AIG is small compared to the $700 billion for the banks, and the emphasis has been on banks, not insurance companies. According to news reports, the sums associated with credit default swaps are far larger than the subprime mortgage derivatives. Have the swaps yet to become major players in the crisis?
The behavior of the stock market does not necessarily tell us anything about the bailout. The financial crisis disrupted lending and thus comprised a threat to non-financial firms. This threat would reflect in the stock market. However, the stock market is also predicting a recession and declining earnings. Thus, people sell stocks hoping to get out before share prices adjust to the new lower earnings.
The bailout package is a result of panic and threats, not of analysis and understanding. Neither Congress nor the public knows the full story. If the problem is the mortgages, why does the bailout leave the mortgages unaddressed and focus instead on pouring vast amount of public money into private financial institutions?
The purpose of regulation is to restrain greed and to prevent leveraged speculation from threatening the wider society. Congress needs to restore financial regulation, not reward those who caused the crisis.
Top Ex-Diplomats Slam 'Militarisation' of Foreign Policy
While the Pentagon's budget has risen to heights not seen since World War II, U.S. diplomatic and foreign aid assets have largely atrophied and must be quickly rebuilt by any new administration that takes office in January, according to a new report released here this week by former senior foreign service officers.
The report by the American Academy of Diplomacy (AAD) and the Henry L. Stimson Centre is calling for a nearly 50 percent increase in the number of diplomats and aid and development specialists recruited into the foreign service over the next five years. This would cost about three billion dollars -- or approximately what the Pentagon is currently spending every 10 days on military operations in Iraq -- over current budget estimates.
''Since the fall of the Berlin Wall, the diplomatic capacity of the United States has been hollowed out,' according to the 26-page report, 'A Foreign Affairs Budget for the Future'. 'The status quo cannot continue without serious damage to our vital interests.'
The vacuum created by the lack of diplomatic resources -- particularly in comparison to the Pentagon's budget and manpower -- has translated into the militarisation of U.S. foreign policy, warns the report.
''Today, significant portions of the nation's foreign affairs business simply are not accomplished,'' it says. 'The work migrates by default to the military that does have the necessary people and funding but neither sufficient experience nor knowledge. The 'militarisation' of diplomacy exists and is accelerating.'
To that end, the report calls for the State Department to take over control from the Defence Department (DOD) of nearly 800 million dollars a year budgeted for several security assistance programmes, including humanitarian aid, created in the aftermath of the 9/11 terrorist attacks to help friendly militaries prosecute the 'global war on terrorism'.
'Our view is that the Secretary of State has and should have responsibility for assuring that all foreign and security assistance is carried out in accord with U.S. foreign policy, including setting overall policy, approving countries to receive assistance, and setting the budget for such assistance,' the report said.
'DOD's expanded policy responsibility for security assistance programs risks the additional atrophy of the civilian agencies' ability to plan and conduct foreign policy and foreign assistance and raises serious concerns that such programs could conflict with broader U.S. strategic and foreign policy interests.'
'Moreover, these expanded missions are not the core competence of the military and thus may detract from the readiness to perform more central military missions,' it added. 'Finally, it is important for the U.S. to ensure that its non-military international presence and engagement be carried out primarily by civilians, not by the military.'
Indeed, the latest report echoes the views -- albeit in more diplomatic language -- of a growing number of non-governmental organisations and foreign policy experts that the Pentagon, simply by virtue of its enormous budget and its worldwide presence with nearly 800 overseas bases, has become far too dominant in policy making.
Even Pentagon chief Robert Gates a former senior intelligence officer, has complained about the imbalance between U.S. military and diplomatic resources. 'Funding for non-military foreign affairs programmes...remains disproportionately small relative to what we spend on the military,' he declared in a much-discussed speech last November. 'What is clear for me is that there is a need for a dramatic increase in spending on the civilian instruments of national security.'
'Our diplomatic leaders -- be they in ambassadors' suites or on the State Department's seventh [top] floor -- must have the resources and political support needed to fully exercise their statutory responsibilities in leading American foreign policy,' he said in July.
He has also noted ruefully that there are more people serving in military bands than in the entire State Department.
Despite his support, however, Gates' views have not yet substantially altered the political equation in Congress, which has routinely approved or even increased the Bush administration's budgetary requests for the Pentagon over the last eight years while casting a far more sceptical eye on requests for the State Department, which lacks a comparably broad-based geographic, commercial, or demographic constituency.
The Defence Department is slated to receive well over 527 billion dollars for 2009 -- not including some 15 billion dollars a month for operations in Iraq and Afghanistan -- or roughly 13 times more than the State Department's budget of less than 40 billion dollars.
Moreover, despite his concerns, Gates has asked -- so far without success -- that substantially more money be allocated to the new discretionary accounts that the Pentagon currently may disburse for allies in the war on terror, a request which, to the dismay of most foreign service officers, Secretary of State Condoleezza Rice supported in hearings before Congress earlier this year.
Last week, the Pentagon submitted a new estimate for defence spending that is 450 billion dollars more over the next five years than it had previously announced, according to Congressional Quarterly, beginning with a nearly 10-percent increase in its 2010 budget to nearly 600 billion dollars.
Compared to that request, the recommendation by the AAD-Stimson report to increase the State Department's planned budget by roughly 3.3 billion dollars over the next five years seems paltry, indeed.
According to the report, which was put together by a task force of 14 former senior foreign service officers with the help of an advisory group chaired by former U.N. Amb. Thomas Pickering, the State Department currently suffers serious shortages in personnel in virtually all of its operations, from consular activity to development assistance and public diplomacy.
The report noted the decline in the foreign service and State Department spending began at the end of the Cold War when the international affairs budget was reduced by roughly 30 percent in real terms. Former Secretary of State Colin Powell succeeded in creating more than 1,000 new State Department posts between 2001 and 2004, according to the report, but these increases were quickly absorbed by diplomatic surges in Iraq and Afghanistan, leaving other key areas and global issues with significant staff shortfalls.
It called for total State Department staffing to increase from roughly 10,000 today to nearly 15,000 by 2014.
By Jim Lobe,
The report by the American Academy of Diplomacy (AAD) and the Henry L. Stimson Centre is calling for a nearly 50 percent increase in the number of diplomats and aid and development specialists recruited into the foreign service over the next five years. This would cost about three billion dollars -- or approximately what the Pentagon is currently spending every 10 days on military operations in Iraq -- over current budget estimates.
''Since the fall of the Berlin Wall, the diplomatic capacity of the United States has been hollowed out,' according to the 26-page report, 'A Foreign Affairs Budget for the Future'. 'The status quo cannot continue without serious damage to our vital interests.'
The vacuum created by the lack of diplomatic resources -- particularly in comparison to the Pentagon's budget and manpower -- has translated into the militarisation of U.S. foreign policy, warns the report.
''Today, significant portions of the nation's foreign affairs business simply are not accomplished,'' it says. 'The work migrates by default to the military that does have the necessary people and funding but neither sufficient experience nor knowledge. The 'militarisation' of diplomacy exists and is accelerating.'
To that end, the report calls for the State Department to take over control from the Defence Department (DOD) of nearly 800 million dollars a year budgeted for several security assistance programmes, including humanitarian aid, created in the aftermath of the 9/11 terrorist attacks to help friendly militaries prosecute the 'global war on terrorism'.
'Our view is that the Secretary of State has and should have responsibility for assuring that all foreign and security assistance is carried out in accord with U.S. foreign policy, including setting overall policy, approving countries to receive assistance, and setting the budget for such assistance,' the report said.
'DOD's expanded policy responsibility for security assistance programs risks the additional atrophy of the civilian agencies' ability to plan and conduct foreign policy and foreign assistance and raises serious concerns that such programs could conflict with broader U.S. strategic and foreign policy interests.'
'Moreover, these expanded missions are not the core competence of the military and thus may detract from the readiness to perform more central military missions,' it added. 'Finally, it is important for the U.S. to ensure that its non-military international presence and engagement be carried out primarily by civilians, not by the military.'
Indeed, the latest report echoes the views -- albeit in more diplomatic language -- of a growing number of non-governmental organisations and foreign policy experts that the Pentagon, simply by virtue of its enormous budget and its worldwide presence with nearly 800 overseas bases, has become far too dominant in policy making.
Even Pentagon chief Robert Gates a former senior intelligence officer, has complained about the imbalance between U.S. military and diplomatic resources. 'Funding for non-military foreign affairs programmes...remains disproportionately small relative to what we spend on the military,' he declared in a much-discussed speech last November. 'What is clear for me is that there is a need for a dramatic increase in spending on the civilian instruments of national security.'
'Our diplomatic leaders -- be they in ambassadors' suites or on the State Department's seventh [top] floor -- must have the resources and political support needed to fully exercise their statutory responsibilities in leading American foreign policy,' he said in July.
He has also noted ruefully that there are more people serving in military bands than in the entire State Department.
Despite his support, however, Gates' views have not yet substantially altered the political equation in Congress, which has routinely approved or even increased the Bush administration's budgetary requests for the Pentagon over the last eight years while casting a far more sceptical eye on requests for the State Department, which lacks a comparably broad-based geographic, commercial, or demographic constituency.
The Defence Department is slated to receive well over 527 billion dollars for 2009 -- not including some 15 billion dollars a month for operations in Iraq and Afghanistan -- or roughly 13 times more than the State Department's budget of less than 40 billion dollars.
Moreover, despite his concerns, Gates has asked -- so far without success -- that substantially more money be allocated to the new discretionary accounts that the Pentagon currently may disburse for allies in the war on terror, a request which, to the dismay of most foreign service officers, Secretary of State Condoleezza Rice supported in hearings before Congress earlier this year.
Last week, the Pentagon submitted a new estimate for defence spending that is 450 billion dollars more over the next five years than it had previously announced, according to Congressional Quarterly, beginning with a nearly 10-percent increase in its 2010 budget to nearly 600 billion dollars.
Compared to that request, the recommendation by the AAD-Stimson report to increase the State Department's planned budget by roughly 3.3 billion dollars over the next five years seems paltry, indeed.
According to the report, which was put together by a task force of 14 former senior foreign service officers with the help of an advisory group chaired by former U.N. Amb. Thomas Pickering, the State Department currently suffers serious shortages in personnel in virtually all of its operations, from consular activity to development assistance and public diplomacy.
The report noted the decline in the foreign service and State Department spending began at the end of the Cold War when the international affairs budget was reduced by roughly 30 percent in real terms. Former Secretary of State Colin Powell succeeded in creating more than 1,000 new State Department posts between 2001 and 2004, according to the report, but these increases were quickly absorbed by diplomatic surges in Iraq and Afghanistan, leaving other key areas and global issues with significant staff shortfalls.
It called for total State Department staffing to increase from roughly 10,000 today to nearly 15,000 by 2014.
By Jim Lobe,
Going Beyond Climate Change
While the financial mayhem continues to draw the headlines, the cost of persistent biodiversity loss has yet to be established. But it is believed to be bigger than that of the meltdown, and in many cases also irreparable.
The International Union for the Conservation of Nature (IUCN) now plans to gather incontrovertible evidence on the value of preserving biodiversity and the cost of losing it. The world's oldest and largest global environmental network will task its scientific commissions for this.
This is one eminent pillar of the immediate and strategic priorities of the IUCN as spelt out by the organisation's new president Ashok Khosla.
The idea, backed by IUCN's ten-day world conservation congress that concluded Tuesday (Oct 14) in Barcelona, is to protect the biosphere, with particular focus on the conservation of biodiversity in all its manifestations.
"This means that we must do what is necessary to bring the issue of biodiversity right into the centre stage of public awareness, media concern and decision-making at the local, national and global levels," Khosla told delegates at the closing session.
Discussions at the congress revealed that there are indeed definite lessons to learn from the debate about climate change. While many doubted the scientific basis of the connection between climate change and human activity, it was the authoritative and unambiguous view of the Inter-governmental Panel on Climate Change (IPCC) reflecting the combined scientific work of over 3,000 scientists that more or less put an end to the debate. Clearly, IUCN is the body that can and must do what IPCC is doing with climate change.
"The clear message coming out of this (Barcelona) meeting is that biodiversity underpins the well-being of human societies and their economies," said IUCN director-general Julia Marton-Lefèvre. "But conservation can only succeed if we attack the underlying causes of biodiversity loss, and action is taken at the same time to reduce the impacts of that loss."
The IUCN programme for 2009-2012 on 'Shaping a Sustainable Future' says the IUCN will contribute directly to targets agreed internationally by governments to reduce the rate of loss of biodiversity.
It will also add an environmental perspective to the achievement of the Millennium Development Goals (agreed in 2000 by 189 countries), the plan for implementation of the World Summit on Sustainable Development (agreed in September 2002 in Johannesburg) and other relevant international commitments.
Established in 1948 in Fontainebleau (Switzerland), three years after the United Nations was founded, the IUCN with about 1,000 members from across the world, including governments and international NGOs, is indeed poised to adjust itself to the changed and fast-changing realities of the globalised world.
Not only does it face the most challenging environmental issues ever in history -- climate change and diminishing biodiversity -- but IUCN members are also asking for fundamental changes in its working.
It is against this backdrop that the election of Khosla is of vital significance. He chairs the India-based Development Alternatives Group, a non-profit organisation established in 1983 "for creating large-scale sustainable livelihoods." He is also president of the Club of Rome, a global think-tank and centre of innovation and initiative.
One of his top priorities is to set up a world commission in collaboration with WWF and the UN Environment Programme (UNEP) to investigate the deeper implications of 'green carbon' such as sequestration, REED (a mechanism for compensating countries for reducing emissions from deforestation and forest degradation) and biofuels.
The proposed commission would, like the World Commission on Dams, bring together people from different walks of life and of different viewpoints who are in a position to look at where the action on climate change and on biodiversity can take place in the most meaningful way.
Another important point on IUCN's agenda in the coming years is to "form new partnerships among the best institutions to bring together their different insights and to generate meaningful solutions that deal effectively with the inter-related issues of population, natural resources, environment and development."
The IUCN will also bring clarity into the basis for establishing appropriate relationships with business. Judging from the debates on several motions on this subject at the Barcelona congress, there would appear to be a considerable consensus that the IUCN must engage with corporations, large, medium and small.
However, the terms of such engagement must be such as to lead to positive conservation outcomes, and ensure that at no time is IUCN's integrity or capacity to fulfil its mission compromised in any way.
Marton-Lefèvre confirmed that perception. "My view has always been that IUCN was set up to influence, encourage and assist society in dealing with nature and natural resources in a most sustainable and socially equitable manner -- and business is a part of society, whether some of our members like it or not. So my feeling is strongly that we must engage, but we don't lose our voice in this engagement," she told IPS.
But Khosla went a step ahead, when he said in his closing remarks: "The national and regional committees will have to be mandated to perform both expert and watchdog roles at the grassroot levels."
A task force to define the terms of such engagement and the changes in function required is expected to be set up by the 32-member council that serves as the board of directors of the organisation.
The congress did some important work to promote improvements in governance on the high seas. As an area outside of national jurisdiction, these are often exploited by all and managed by none.
The rights of vulnerable and indigenous communities received high priority at the Barcelona congress as IUCN members called on governments to take into account human rights implications in all conservation-related activities.
The congress saw the beginning of an ethical framework to guide conservation activities where poverty reduction, rights-based approaches and 'do no harm' principles can be applied to help redefine relating with nature.
With an eye on the UN climate change conference in Poland in December, the IUCN called for more specific goals in line with the Bali Plan of Action -- calling for a 50 to 85 percent reduction in CO2 emissions by 2050 and keeping a rise in temperature below 2 degrees Centigrade.
Several high profile commitments were made during the congress to support the IUCN mission: the MacArthur Foundation will invest 50 million dollars in climate change mitigation and adaptation, and the Mohammed Bin Zayed Species Conservation Fund will invest 25 million euros for worldwide biodiversity.
© 2008 Inter Press Service
The International Union for the Conservation of Nature (IUCN) now plans to gather incontrovertible evidence on the value of preserving biodiversity and the cost of losing it. The world's oldest and largest global environmental network will task its scientific commissions for this.
This is one eminent pillar of the immediate and strategic priorities of the IUCN as spelt out by the organisation's new president Ashok Khosla.
The idea, backed by IUCN's ten-day world conservation congress that concluded Tuesday (Oct 14) in Barcelona, is to protect the biosphere, with particular focus on the conservation of biodiversity in all its manifestations.
"This means that we must do what is necessary to bring the issue of biodiversity right into the centre stage of public awareness, media concern and decision-making at the local, national and global levels," Khosla told delegates at the closing session.
Discussions at the congress revealed that there are indeed definite lessons to learn from the debate about climate change. While many doubted the scientific basis of the connection between climate change and human activity, it was the authoritative and unambiguous view of the Inter-governmental Panel on Climate Change (IPCC) reflecting the combined scientific work of over 3,000 scientists that more or less put an end to the debate. Clearly, IUCN is the body that can and must do what IPCC is doing with climate change.
"The clear message coming out of this (Barcelona) meeting is that biodiversity underpins the well-being of human societies and their economies," said IUCN director-general Julia Marton-Lefèvre. "But conservation can only succeed if we attack the underlying causes of biodiversity loss, and action is taken at the same time to reduce the impacts of that loss."
The IUCN programme for 2009-2012 on 'Shaping a Sustainable Future' says the IUCN will contribute directly to targets agreed internationally by governments to reduce the rate of loss of biodiversity.
It will also add an environmental perspective to the achievement of the Millennium Development Goals (agreed in 2000 by 189 countries), the plan for implementation of the World Summit on Sustainable Development (agreed in September 2002 in Johannesburg) and other relevant international commitments.
Established in 1948 in Fontainebleau (Switzerland), three years after the United Nations was founded, the IUCN with about 1,000 members from across the world, including governments and international NGOs, is indeed poised to adjust itself to the changed and fast-changing realities of the globalised world.
Not only does it face the most challenging environmental issues ever in history -- climate change and diminishing biodiversity -- but IUCN members are also asking for fundamental changes in its working.
It is against this backdrop that the election of Khosla is of vital significance. He chairs the India-based Development Alternatives Group, a non-profit organisation established in 1983 "for creating large-scale sustainable livelihoods." He is also president of the Club of Rome, a global think-tank and centre of innovation and initiative.
One of his top priorities is to set up a world commission in collaboration with WWF and the UN Environment Programme (UNEP) to investigate the deeper implications of 'green carbon' such as sequestration, REED (a mechanism for compensating countries for reducing emissions from deforestation and forest degradation) and biofuels.
The proposed commission would, like the World Commission on Dams, bring together people from different walks of life and of different viewpoints who are in a position to look at where the action on climate change and on biodiversity can take place in the most meaningful way.
Another important point on IUCN's agenda in the coming years is to "form new partnerships among the best institutions to bring together their different insights and to generate meaningful solutions that deal effectively with the inter-related issues of population, natural resources, environment and development."
The IUCN will also bring clarity into the basis for establishing appropriate relationships with business. Judging from the debates on several motions on this subject at the Barcelona congress, there would appear to be a considerable consensus that the IUCN must engage with corporations, large, medium and small.
However, the terms of such engagement must be such as to lead to positive conservation outcomes, and ensure that at no time is IUCN's integrity or capacity to fulfil its mission compromised in any way.
Marton-Lefèvre confirmed that perception. "My view has always been that IUCN was set up to influence, encourage and assist society in dealing with nature and natural resources in a most sustainable and socially equitable manner -- and business is a part of society, whether some of our members like it or not. So my feeling is strongly that we must engage, but we don't lose our voice in this engagement," she told IPS.
But Khosla went a step ahead, when he said in his closing remarks: "The national and regional committees will have to be mandated to perform both expert and watchdog roles at the grassroot levels."
A task force to define the terms of such engagement and the changes in function required is expected to be set up by the 32-member council that serves as the board of directors of the organisation.
The congress did some important work to promote improvements in governance on the high seas. As an area outside of national jurisdiction, these are often exploited by all and managed by none.
The rights of vulnerable and indigenous communities received high priority at the Barcelona congress as IUCN members called on governments to take into account human rights implications in all conservation-related activities.
The congress saw the beginning of an ethical framework to guide conservation activities where poverty reduction, rights-based approaches and 'do no harm' principles can be applied to help redefine relating with nature.
With an eye on the UN climate change conference in Poland in December, the IUCN called for more specific goals in line with the Bali Plan of Action -- calling for a 50 to 85 percent reduction in CO2 emissions by 2050 and keeping a rise in temperature below 2 degrees Centigrade.
Several high profile commitments were made during the congress to support the IUCN mission: the MacArthur Foundation will invest 50 million dollars in climate change mitigation and adaptation, and the Mohammed Bin Zayed Species Conservation Fund will invest 25 million euros for worldwide biodiversity.
© 2008 Inter Press Service
Grøn økonomi kan skabe millioner af job
FN præsenterer sit udspil til 'A New Green Deal' i næste uge
På onsdag i næste uge præsenterer FN's Miljøprogram, UNEP, med støtte fra den tyske og norske regering samt EU-Kommissionen en ambitiøs appel til verdens politiske ledere om at skifte kurs og arbejde for en New Green Deal, der kan afværge miljømæssige katastrofer og samtidig skabe nye arbejdspladser i stort tal, trænge fattigdommen tilbage og hjælpe den syge internationale økonomi på fode.
Appellen præsenteres i London ved fremlæggelsen af The Green Economy Initiative, der henter inspiration fra præsident Roosevelts New Deal-initiativ i 1930'ernes USA.
UNEP påpeger det uholdbare i den eksisterende globale økonomi, der er fordoblet gennem det seneste århundrede, men samtidig bærer ansvar for, at 60 pct. af de naturressourcer, der sikrer grundlaget for mad, drikkevand, energi og ren luft er blevet alvorligt undergravet.
På den baggrund vil UNEP appellere til de globale ledere om at sikre en omdirigering af økonomiske ressourcer bort fra den finansspekulation, der har drevet finansmarkedet til randen af nedsmeltning, og hen mod investeringer i bæredygtig jobskabelse og ny vækst.
Bag initiativet ligger rapporten The Economics of Ecosystem and Biodiversity, udarbejdet af formanden for Deutsche Banks Global Market Centre, Pavan Sukhdev.
"Vi forsøger at navigere i ukendte og turbulente farvande med et gammelt og defekt økonomisk kompas, og det påvirker vores evne til at forme en bæredygtig økonomi i harmoni med naturen," siger den tyske bankøkonom.
Hans pointe er, at dagens økonomi stort set mangler redskaber til at værdisætte de goder, planeten tilbyder i form af økosystemerne og naturens tjenesteydelser. Derfor håndteres de som gratis goder, og derfor overforbruges, udpines og ødelægges de. Ifølge Sukhdevs analyser betyder f.eks. rydningen af skove, at verden p.t. mister - hidtil ikke værdisatte - tjenester og goder på 2.500 milliarder dollar årligt, sammenligneligt med de ca. 3.000 mia., der er gået til verdens kriseramte finanssektor.
En grøn økonomi, der tilskriver naturen dens reelle værdi for menneskeheden, vil lede til anderledes økonomiske dispositioner, der sikrer denne naturkapitals opretholdelse og dermed fastholder grundlaget for varig og bæredygtig anvendelse og jobskabelse, påpeger Sukhdev.
"Før har det været muligt at fare kloden rundt og udnytte den som en mine, hvorfra vi hentede reserverne. Det er tydeligt, at det ikke går længere. Hvor det 20. århundrede var industriens tidsalder, må det 21. århundrede blive biologiens tidsalder, hvor vi omdefinerer, hvad velstand og økonomi betyder," siger UNEP-talsmand Nick Nuttall.
Millioner af jobs
I en anden rapport, udarbejdet for bl.a. UNEP og FN's arbejdstagerorganisation ILO, dokumenteres beskæftigelseseffekten ved at styre de globale investeringer i bæredygtig retning.
"Ændrede mønstre for ansættelser og investeringer som resultat af en indsats for at bremse klimaændringerne og disses effekter skaber allerede nye arbejdspladser i mange sektorer og økonomier og kan skabe millioner flere i både i- og u-lande," hedder det i rapporten Green Jobs: Towards decent work in a sustainable low-carbon world.
"Vedvarende energi skaber flere jobs end beskæftigelse i den fossile energisektor. Projekterede investeringer på 630 mia. dollar i 2030 vil føre til mindst 20 mio. nye job i den vedvarende energisektor (...) En global omstilling til energieffektive bygninger kan skabe millioner af arbejdspladser og samtidig gøre eksisterende jobs grønnere for mange af de 111 mio. mennesker, der allerede arbejder i byggesektoren," konkluderer rapporten.
Source URL: http://www.information.dk/168858
På onsdag i næste uge præsenterer FN's Miljøprogram, UNEP, med støtte fra den tyske og norske regering samt EU-Kommissionen en ambitiøs appel til verdens politiske ledere om at skifte kurs og arbejde for en New Green Deal, der kan afværge miljømæssige katastrofer og samtidig skabe nye arbejdspladser i stort tal, trænge fattigdommen tilbage og hjælpe den syge internationale økonomi på fode.
Appellen præsenteres i London ved fremlæggelsen af The Green Economy Initiative, der henter inspiration fra præsident Roosevelts New Deal-initiativ i 1930'ernes USA.
UNEP påpeger det uholdbare i den eksisterende globale økonomi, der er fordoblet gennem det seneste århundrede, men samtidig bærer ansvar for, at 60 pct. af de naturressourcer, der sikrer grundlaget for mad, drikkevand, energi og ren luft er blevet alvorligt undergravet.
På den baggrund vil UNEP appellere til de globale ledere om at sikre en omdirigering af økonomiske ressourcer bort fra den finansspekulation, der har drevet finansmarkedet til randen af nedsmeltning, og hen mod investeringer i bæredygtig jobskabelse og ny vækst.
Bag initiativet ligger rapporten The Economics of Ecosystem and Biodiversity, udarbejdet af formanden for Deutsche Banks Global Market Centre, Pavan Sukhdev.
"Vi forsøger at navigere i ukendte og turbulente farvande med et gammelt og defekt økonomisk kompas, og det påvirker vores evne til at forme en bæredygtig økonomi i harmoni med naturen," siger den tyske bankøkonom.
Hans pointe er, at dagens økonomi stort set mangler redskaber til at værdisætte de goder, planeten tilbyder i form af økosystemerne og naturens tjenesteydelser. Derfor håndteres de som gratis goder, og derfor overforbruges, udpines og ødelægges de. Ifølge Sukhdevs analyser betyder f.eks. rydningen af skove, at verden p.t. mister - hidtil ikke værdisatte - tjenester og goder på 2.500 milliarder dollar årligt, sammenligneligt med de ca. 3.000 mia., der er gået til verdens kriseramte finanssektor.
En grøn økonomi, der tilskriver naturen dens reelle værdi for menneskeheden, vil lede til anderledes økonomiske dispositioner, der sikrer denne naturkapitals opretholdelse og dermed fastholder grundlaget for varig og bæredygtig anvendelse og jobskabelse, påpeger Sukhdev.
"Før har det været muligt at fare kloden rundt og udnytte den som en mine, hvorfra vi hentede reserverne. Det er tydeligt, at det ikke går længere. Hvor det 20. århundrede var industriens tidsalder, må det 21. århundrede blive biologiens tidsalder, hvor vi omdefinerer, hvad velstand og økonomi betyder," siger UNEP-talsmand Nick Nuttall.
Millioner af jobs
I en anden rapport, udarbejdet for bl.a. UNEP og FN's arbejdstagerorganisation ILO, dokumenteres beskæftigelseseffekten ved at styre de globale investeringer i bæredygtig retning.
"Ændrede mønstre for ansættelser og investeringer som resultat af en indsats for at bremse klimaændringerne og disses effekter skaber allerede nye arbejdspladser i mange sektorer og økonomier og kan skabe millioner flere i både i- og u-lande," hedder det i rapporten Green Jobs: Towards decent work in a sustainable low-carbon world.
"Vedvarende energi skaber flere jobs end beskæftigelse i den fossile energisektor. Projekterede investeringer på 630 mia. dollar i 2030 vil føre til mindst 20 mio. nye job i den vedvarende energisektor (...) En global omstilling til energieffektive bygninger kan skabe millioner af arbejdspladser og samtidig gøre eksisterende jobs grønnere for mange af de 111 mio. mennesker, der allerede arbejder i byggesektoren," konkluderer rapporten.
Source URL: http://www.information.dk/168858
ATTAC: Let's shut down the financial casino
ATTAC udfolder i denne pdf. fil deres tanker om finanskrisens årsag og medicinen md od den.
http://blog.tni.org/wp-content/uploads/2008/10/attac-finance-crisis-15_10_2008.pdf
http://blog.tni.org/wp-content/uploads/2008/10/attac-finance-crisis-15_10_2008.pdf
Abonner på:
Opslag (Atom)