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Introducing The v. U.S. Peace Academy (vUSPA)
Some Highly Suggested Studies & Activities,
including 3 Easy Steps for Documentation of Intentions in Conscientious Objection
are listed in the James George Peterson Library of the Virtual us Peace Academy.
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Below is a sample facebook posting. The links WORK for the noted articles by Karen Vlahos, as well as for most of the fcbk tabs, the Share link, etc.
(Usually these postings are not repeated via the Poly-Psy Mailing List.)
At Right is a WORKING mock-up of my fcbk *NOTES* block [May'10].
My Comment on the above facebook Posting [At my fcbk page, 6-07-10]
[Quoting from the article:] "The number of Guard and reserves as a percentage of the total force in Iraq and Afghanistan has fluctuated over the years. Official estimates in 2005 were at 28 percent; it was about 7 percent in Iraq and 15 percent in Afghanistan at the end of 2008. Manski estimates it's closer to one-third today. ..."
Remember the report on increased military sign-ups? And we were wondering where our priorities went (and other political psych-outs)... Well, check these stats (from Karen Vlahos's article): "So here is the situation. The secretary of defense ordered, and Congress authorized, an expansion in the size of the Army. But the Army reduced the recruitment goal – and reduced the retention goal. The size of the Army is in fact shrinking. It may look as if it's growing – the Pentagon report gives the impression it's growing – but it's growing only in comparison with the officially set goals."
Ahhhhhhh! Karl Rove & students are still at work in the smoke & mirrors factory, not to mention the Project for a New American Century [PNAC] (just in case we forgot).
A History of America's Disappearing Middle Class
Friday 09 March 2007
Economist and New York Times columnist Paul Krugman explains in simple terms how the American economy went from having the world's most dynamic middle class to being on the verge of a rich-poor state in only 30 years.
The following is excerpted from the keynote speech delivered by Paul Krugman at the Economic Policy Institute's recent conference on The Agenda for Shared Prosperity.
... One thing I've been noticing on multiple debates in public policies - climate change is another one - is there seems to be an almost seamless transition from denial to fatalism. That for 15 or 20 years the people would say, "No, what you're saying is not happening." And then almost immediately they'll turn around and say, "Well, yeah, sure it's happening, but there's nothing that can be done about it."
And that's kind of the way a lot of the discussion now goes on inequality. That there is really nothing you can do to arrest this. That it's all the invisible hand driving this growth in inequality, and there's nothing you can do to really change it - well, maybe better education. But while education is very much a good thing, it's the all-American way of dodging problems. Since everybody approves of it, you say we should have better education but wave away the pretty strong evidence that while it's a good thing, it won't make very much difference. So there's this general sense that you can't do anything.
And I don't think that that's what the historical record suggests. That in fact when we look at it, there appears to be quite a lot that the political process can do about inequality. Just to say, there's the obvious. Obviously, even if you look at the United States right now, the tax and social insurance system makes an enormous difference.
But the amount of inequality in the United States is substantially less than it would be if we did not have still at least somewhat progressive taxation, and still a pretty extensive, though not nearly extensive enough, system of social insurance. And that makes a big difference. Certainly if you're looking at say the United States versus Canada, a lot of the difference between the two countries is just that Canada has more of a better safety net financed by somewhat higher taxation.
And if you're looking for a progressive agenda, certainly from my point of view, a large part of that ought to be straightforward orthodox stuff, which is still very hard to do politically. It would be essentially restoring progressivity of the tax system, and using the revenue to improve social insurance and, above all, health care.
So, if you say what would I really like if I went into a Rip Van Winkle sleep and woke up ten years from now, I'd like to wake up and discover that we have a national health care in some version with the necessary funding supplied in part by higher taxes on me, or actually, the top two percent of the income distribution. But people a lot richer than me, of course. But it's not the whole story that the only thing you can do is taxes and social insurance. And the arc of history for the United States suggests that there's actually a lot more that can happen.
If you look back across the past 80 years or so of the United States, what you see is that in the 1920s, we were for practical purposes still in the gilded age. That may not be the way the historians cut it, but in terms of the actual distribution of income, so far as we can measure it in terms of the role of status and general feel of the society, we were still an extremely unequal royalist society.
By the time World War II was over, we had become the middle-class society that the baby boomers in this audience grew up in. We had become a much more equal society. That high degree of equality began to go away - depending on exactly which numbers you look at - during the late 70's, maybe a little earlier than that. And at this point we're basically back to pre-tax and transfer to the levels of inequality that we had in 1929.
So there is this great arc to the middle class, away from gilded age to middle-class society and then back to the new gilded age, which is now what we're living in. And there are really two puzzles about that. One of them is a political puzzle, which is why instead of leaning against these trends, politics has actually reinforced them. Why it is that U.S. politics moved left in the age of a relatively middle-class society, and moved right as society got more unequal?
A naïve view of politics would say that, "Gee, when a few people are winning a lot and most people are lagging behind, people ought to be voting for more social insurance and more progressive taxation, not less." And we have some understanding of why that doesn't happen. It has to do with the role of money, organization and all of these other things that affect politics. That story also helps us understand why politics gets so nasty.
If you actually look at some of the measures - I'm really into quantitative political science these days - of political positions that political scientists calculate, it does look as if what the main thing that moves actually over time is in fact the Republican party. The Democratic Party has not - at least with northern Democrats - gotten significantly more liberal over the past. They haven't moved much at all over the past 30 years.
But the Republican Party, which had largely converged on the Democrats in the age of Eisenhower, has moved sharply to the right. And so that one party, in effect, moves with the income of the top 5 percent or 1 percent of the population. So that seems to be the story. I mean, we can think about reasons why that might be true. But the other puzzle, and this comes to the question of the conference, is what drove these changes? How did we become largely middle class?
Why have we become a much more unequal society once again? And the standard, what economists like to say, is "Well, it's all invisible hand. It's all market forces." The history doesn't seem to look like that, if we ask how did the society we had in 1947, which is when a lot of our data start, come into existence.
Was it a gradual process whereas the economy developed and we got out of the early days of the American industrial revolution, we gradually moved towards middle classness? Well, no, historically it happened in an eye blink. In this Claudia Golden and Bob Margot classic paper, they call it the great compression. As late as the late 30s, the income distribution appears to be highly unequal.
By the time you wake up in 1946 or so, it's highly equal. And how did that happen? A lot of it was more or less deliberate compression of wage differentials during World War II. But if you were or had standards, supply and demand for different types of labor, you'd say that should last only as long as the wage controls lasted. It should have sprung back to where it was, but it didn't. It actually stayed quite equal for another 30 years at least. You ask, what buttressed that? Well, partly it's the rise of a powerful union movement, which is at least in large part a change in the political climate, but then remained in place for several decades more.
Other things we're not sure. But it looks more or less as a leveling of the income distribution. Obviously we want to be careful about the words. No one presumably in this room, and certainly not me, is advocating Cuba. We're not calling for a flat income distribution. But the relative equalization that seems to have taken place was engineered by a combination of top-down politics and grassroots organization that made people want a more equal society in the 30s and the 40s, and they got it.
And it remained for quite a long time. Now, that started to come apart roughly 30 years ago, and there's been a large increase in inequality since then. As people probably know, I've written about the part that is sort of polite to talk about, which is the rising premium for highly educated workers. But that's only part of it. Even more spectacular is the increase in inequality of the far-right tail of the income distribution.
The CEOs and high school teachers who got roughly the same number of years of formal education haven't exactly had the same growth in income over the past 30 years. So, there's this vast increase in inequality at the top. What do we think caused that? I actually just had to do a class on that. It was in my international trade class, but we were doing the trade and inequality stuff.
And the question is what do we think is underlying the rise in inequality in the United States? And searching for metaphor, I actually ended up with the "Murder on the Orient Express." Not for what actually happened but for the way we described it. In "Murder on the Orient Express," somebody is killed and there are 12 suspects. The question is which of them did it and the answer actually is all of them. The official economic story about rising inequality is one in which we have a whole bunch of villains, which all seem to be playing a role.
So we've got skill bias and technological change, which is shifting demand towards highly educated workers. We've got growing international trade with increased imports of labor-intensive products further reducing demand for less educated workers. We have immigration, possibly similar in its effect to trade. We have the falling real value of the minimum wage contributing at the bottom end. We have some affected unionization driving the change in income distribution.
Finally, in terms of at least the after-tax distribution, we have changes in taxes which have, in general, reinforced rising inequality. It could be true, but it's kind of funny that all of these different things should be working in the same direction. In "Murder on the Orient Express," there is an elaborate conspiracy that means that all 12 of the potential suspects were actually in collusion. It's a little hard to see how all of these factors and economics are in collusion.
Okay, I think that what we can say is that the political climate matters more for the distribution of income than the economic models that we know how to work with and would seem to suggest more than our models capture. If you ask me practically what I want done now, I think that the most important agenda thing right now is, in fact, to work on the taxes and social insurance side, because that is concrete and you can get stuff.
But there is a lot of reason to believe that a change in the political climate in various ways can do a lot more than you would think just from looking at the taxes and social insurance. Let me give you two pieces of evidence that I looked at. One is that there is some really interesting, though intellectually disturbing, work by my colleague, Larry Bartell who is in the Princeton Politics Department and has just looked at what happens to income growth at different points in the income distribution under administrations of the two parties.
Now there shouldn't be a big difference really because at any given historical period, the visible policies are not all that different. Certainly there is a pretty significant shift from Clinton to Bush and there was, in fact, a pretty significant shift from Bush to Clinton previously. But it's in taxes and it really shouldn't be very obvious at pre-tax distribution of income. And yet what Bartell finds is actually there is a really striking difference. Inequality on average rises under Republicans. At least in the bottom 80 percent of the income distribution, it's stable or falling under Democrats. The top 1 percent just kept on rising right through, but there is at least a surprising, fairly robust correlation.
The other thing I would say is timing. There's a very clear co-movement over time between income inequality and both the political polarization and the rightward tilt of our politics. It's pretty clear that the rising inequality over the past 30 years has been associated with a rightward shift of the political center of gravity, mainly because of the Republican Party shifting to the right.
You might say that's the causation running from income distribution to politics. But if you actually then just start to look at it through history, the timing actually seems to be reversed. The rise of an aggressive or rightwing movement and the rise of a really major assault on the New Deal great society legacy both come before the big shift in income distribution takes place.
The emergence of the modern right is something that obviously dates back to Goldwater, but really becomes a political force in the '70s. You don't really see the big changes in income distribution until the '80s. So it looks almost as if, just in this crude sense, politics is leading the economic changes. How could that operate? I just want to talk about two things. I suspect that there are quite a few channels that we don't really perceive, but there are two that are fairly clear. One of them is unionization.
Obviously, private sector unions were very important in the U.S. 30 years ago and have very nearly - not completely, but very nearly - collapsed, and they are down to eight percent of private employment. Why did that happen? You will often see people saying - well, that's because of de-industrialization, and because of the decline of manufacturing. But that is actually not right. It's not right in two ways.
First of all, arithmetically, most of the decline in unionization is a result not of the decline in manufacturing share, but of the decline of the unionization of manufacturing itself. So the big thing that happens is that there is a collapse of unionization within the manufacturing sector and then of course also a smaller share of manufacturing in the economy, but it's much more dramatic on the collapse within the sector.
The other is that there is no law that says that unionization should be a manufacturing phenomenon. What it really is, to the extent that there is a story, is that large enterprises are more likely to be to be unionized. The reason why the high tend of unionization was also a period when manufacturing was the core of the union movement, is that at that time, large enterprises were largely a manufacturing phenomenon.
Now we have a service economy in which there are a lot of large service sector enterprises. Not to put too fine a point on it, but why exactly couldn't Wal-Mart be unionized? It doesn't face international competition. There is no obvious reason why it wouldn't be possible to have a strong union in Wal-Mart and in the big box sector and other parts of the economy. And just think of how different the whole political economy would look if the service sector enterprises were unionized.
Not necessarily all the effects would be positive, but it would certainly be very, very different. What happened? Why did manufacturing unionization collapse? Why didn't the emerging service sector get unionized? And the answer is actually pretty straightforward and pretty brutal. It's politics and aggressive employer behavior enabled by politics.
I have seen estimates of a fraction of workers who voted for a union and who were fired in the early '80s. They range from a low of one in 20 to a high of one in eight. There is no question that aggressive, often illegal, union busting is the reason the union movement declined. And the change in the political climate that began in the '70s clearly played a role in making that possible.
Now how important is all of that? You may have seen that there have been a number of estimates of the effects of unions on income distribution. It's funny. People will often say that those estimates are small and actually they typically are roughly comparable in size to typical estimates to the effect of international trade on income distribution. So these are both in secondary and the standard accounting to technological change, but both fairly significant.
What is more, there are a lot of reasons to think that those estimates are not capturing a lot of the story. As the people who do them will concede, what they basically do is say: What if the workers were paid, unionized and non-unionized workers were paid the same as they are now, and just do a sort of shift share analysis. What that doesn't capture - and they know it, but there is just no way to do it better - is the effect of a strong union movement on the bargaining position of workers who are not unionized, but might be.
It doesn't capture the effect of a strong union movement and possibly disciplining insider behavior by executives and so on down the line. So it is likely that that is a much more important story than we typically give it credit for being. Let me just give you my other piece of the story, executive compensation. There's a raging debate now of how much of the soaring executive compensation is insider self-dealing, and how much of it is just market forces.
I went back and was looking at what people said about executive compensation when it was low, just 40 or 50 times the average worker salary. [Here are] some quotes: "Managerial labor contracts are not, in fact, a private matter between employers and employees." "Parties such as employees' labor unions, consumer groups, Congress and the media create forces in the political media that constrain the types of contracts." And so on down the line.
A lot of discussion was of the role of the political climate that was basically hostile to outrageous paychecks and constrained it. Where are these quotes from? They are actually from [economists] Michael Jensen and Kevin Murphy writing, saying people have complained that there are not enough incentives in executive pay. They are saying that what we really need is to have executives get more stock options and stake in the firm - in other words, all of the stuff that has happened since then.
So back when executive pay was low, 40 or 50 times average pay, it was actually the defenders of higher executive pay that complained that it was actually non-market forces that were constraining executive pay. Now of course that disclosing of pay has happened, the same side of the debate says it's ridiculous to claim that social norms and political forces have any role in this. But I think it's actually quite clear that it did. We can argue about which is the natural market outcome. But the point is, in fact, that we had a society 25 years ago in which there were some constraints imposed by public opinion, by strong unions, by a general sense that there were things that you don't do.
And maybe that led firms to make a decision to think of there being a sort of tradeoff between a "let's have a happy high morale" workforce, or let's have a super star CEO and squeeze the workers for all we can. There were some things that tilted the balance in that decision.
Okay, are we going to do another great compression? Hopefully not. The reason I say hopefully not is even FDR needed World War II to be able to carry out that sort of wholesale social engineering that took place. I am not looking forward to having a replay of that. I think that if we get serious, as some of us hope we do, and we actually do have a swing back in the political pendulum that - in addition to the direct stuff - we can do a lot to change the climate in the many small ways that add up to a lot of impact on the bargaining power of workers.
The ability of the bottom 80 percent of the population to get a bigger share of the total pie - I think that if we get there, we may be surprised at just how successful we are at moving ourselves back, at least part of the way, to the kind of middle-class society that people like me grew up in.
[ Top of Page ]
Subject: [snow-news] SFC, LAT, AP: Bechtel bids good-bye to Baghdad
NEWS: Bechtel bids good-bye to Baghdad (SFC, LAT, AP)
BECHTEL ENDS IRAQ REBUILDING AFTER A ROUGH 3 YEARS
San Francisco Chronicle
Bechtel Corp. went to Iraq three years ago to help rebuild a nation torn by war. Since then, 52 of its people have been killed and much of its work sabotaged as Iraq dissolved into insurgency and sectarian violence.
Now Bechtel is leaving.
The San Francisco engineering company's last government contract to rebuild power, water, and sewage plants across Iraq expired on Tuesday. Some employees remain to finish the paperwork, but essentially, the company's job is done.
Bechtel's contracts were part of an enormous U.S. effort to put Iraq back on its feet after decades of wars and sanctions. That rebuilding campaign, once touted as the Marshall Plan of modern times, was supposed to win the hearts of skeptical Iraqis by giving them clean water, dependable power, telephones that worked and modern sanitation. President Bush said he wanted the country's infrastructure to be the very best in the Middle East.
But Bechtel -- which charged into Iraq with American "can-do" fervor --found it tough to keep its engineers and workers alive, much less make progress in piecing Iraq back together.
"Did Iraq come out the way you hoped it would?" asked Cliff Mumm, Bechtel's president for infrastructure work. "I would say, emphatically, no. And it's heartbreaking."
The violence that has gripped Iraq drove up costs and hamstrung the engineers who poured into the country after the U.S.-led invasion.
Bechtel's first reconstruction contract, awarded shortly after Saddam Hussein's overthrow in April 2003, assured the company that it would have a safe environment for its workers. But, by the end, dozens of Bechtel's employees and subcontractors had been killed, some of them kidnapped, others marched out of their office and shot. Forty-nine others were wounded.
Bechtel responded by hiring more guards, driving armored cars, and fortifying its camps. Those steps ate up money that otherwise would have brought electricity and clean water to Iraqis.
The size of Bechtel's contracts also shrank over time, as U.S. officials diverted money from reconstruction and toward security. Instead of the nearly $3 billion originally budgeted, Bechtel finally received about $2.3 billion, a figure that includes money the company spent on projects as well as its undisclosed profit.
Mumm directed Bechtel's work from a bare-bones trailer in Baghdad. He is proud of his people for finding ways to work despite the threat of imminent death. Of 99 projects that the U.S. government directed Bechtel to complete, the company finished 97, abandoning only two for security reasons, the company says.
But Mumm's pride is mixed with frustration. Many of those completed projects later fell victim to collapsing security, which made maintenance dangerous and, in some cases, resulting in damage to plants and equipment.
He once hoped the new Iraqi government would turn into a steady Bechtel client, bringing the company lucrative new contracts in a country where virtually every road, power plant and waterworks needs repair.
"Had Iraq been a calmer place while we were there, amazing things could have been done," he said.
The U.S reconstruction push in Iraq is winding down. About $18 billion in funding that Congress approved three years ago was supposed to be spent or committed to specific projects by the end of September. Two of the U.S. government agencies that have overseen the work are scheduled to close shop early next year. The United States and other countries are discussing another round of aid, but if it comes, Iraqi ministries are supposed to take the lead on rebuilding.
"That's really an under-told story -- we've stopped the reconstruction," said Frederick Barton, co-director of the Post-Conflict Reconstruction Project at the Center for Strategic & International Studies think tank. "There are some things we're still finishing up, but we're wrapping up, and we're stepping back. It's really a tragedy."
What exactly did Bechtel accomplish in its three years in Iraq?
-- The company helped repair 14 electrical generation units, built four new ones, and created 25 substations around Baghdad.
-- It restored eight sewage plants and built one.
-- A canal bringing drinking water to Basra, Iraq's second largest city, was dredged and its pumps restored. Seventy small water treatment plants were installed in rural areas.
-- Airports in Baghdad and Basra were repaired to handle civilian flights. The country's international shipping port -- Umm Qasr -- was dredged and its grain elevator refurbished.
-- Baghdad telephone switching stations knocked out during the war were restored, and the country's phone network was reconnected to the outside world.
-- War-damaged bridges on key highways were rebuilt.
-- Almost 1,240 schools were refurbished with new paint, fans, and in many cases new windows and doors to replace those looters had stolen.
But many of these accomplishments were undone as security evaporated.
For example, Bechtel added 1,280 megawatts to the nation's power grid and improved the reliability of another 480 megawatts. In the United States, that much energy could light more than 1.3 million homes.
But Iraq's entire power system this summer produced 4,400 megawatts, just 442 megawatts more than before the invasion. The country needs about 9,000 megawatts to satisfy demand.
In some cases, the power plants have had trouble getting stable fuel supplies. In others, repaired plants were cut off from the national grid by sabotaged power lines. A series of coordinated attacks [on] Oct. 20, for example, severed Baghdad from power generated in the rest of the country, leaving the city's 7 million residents with only a few hours of electricity each day.
"Infrastructure is assumed by the terrorists, correctly, to be a target," said Michael Izady, a professor at Pace University who has trained U.S. forces in Iraq. "They're not stupid. You just hit the power grid, and you have 120 degrees outside. Ask any American what they'd do after two days of that. Tempers run really high."
Making matters worse, Iraqi workers haven't maintained some of the repaired electrical plants.
U.S. government auditors blame the problem on a lack of funding and the attitudes of Iraqi workers, who in the past rarely did maintenance unless something broke. Auditors visited one plant where new control systems had been bypassed, the blades of new turbines already had oil residue building up on them, and a fire had broken out -- a problem, since the fire extinguishing system was missing key parts.
Similar problems plagued water and sewage projects.
At Baghdad's Kerkh sewage plant, Bechtel spent $5.7 million repairing equipment that hadn't worked in months, maybe years. But the plant's location, on the edge of the city, became increasingly dangerous -- turf for Saddam loyalists and criminal gangs. In November 2004, insurgents issued flyers telling the plant's Iraqi workers to stay home or die, according to Bechtel. Not long after, a power failure hit the plant, and the staff didn't turn on the backup generator. The plant stopped working.
"We'd get it completed, and then the Iraqis would all flee, and it'd get mortared," Mumm said. "It would operate for awhile, then the same thing would happen. . . . As we sit here today, I don't know if Kerkh is running or not."
Some places became too dangerous for Western and Iraqi employees alike. One of the projects Bechtel couldn't complete was a water treatment plant in Baghdad's Sadr City, a poor, crowded neighborhood dominated by Shiite militias. Bechtel's top project supervisors and the project's subcontractor fled to avoid assassination.
Violent intimidation also stopped another project -- a state-of-the-art children's hospital in which First Lady Laura Bush had taken a personal interest.
The project, in Basra, was supposed to cost $50 million. The U.S. Agency for International Development assigned Bechtel the job in August 2004, with a completion date of Dec. 31, 2005. But Bechtel later warned its government supervisors that the hospital would take far more money and time to complete. The project was suspended this summer. Bechtel says the hospital now would cost $98 million. Federal auditors, who blamed USAID for not reporting the project delays and costs to Congress, say the figure is probably higher.
Basra had been quiet immediately after Hussein's fall. Its Shiite population suffered greatly under Hussein and was happy to be rid of him. But the calm was short-lived, as Shiite militias started to exert more and more control over the city.
Bechtel's hospital site security manager was murdered. The site manager received death threats and resigned. Bechtel's senior Iraqi engineer quit after his daughter was kidnapped. Twelve employees of a subcontractor in charge of the hospital's electricity and plumbing were killed in their offices. Eleven workers of another company supplying the project's concrete also died.
As the human cost of reconstruction rose, why didn't Bechtel pull out?
Mumm said the company constantly reviewed security and was convinced that it could keep its people safe.
"We didn't stay under duress," he said. "I think all of our people got in it, got involved in it, and no one wants to leave a job half-done."
He says the work hasn't been for naught. Even electrical or sewage plants that have broken down after Bechtel left can be revived if the country finds a way to quell the violence. If Iraq eventually stabilizes, the people Bechtel worked with may provide another opportunity to work in the country.
"Those people will be there, and I think they'll think favorably of us," Mumm said.
BECHTEL CALLS IT QUITS AFTER MORE THAN 3 YEARS IN IRAQ
** Violence has left few of the company's infrastructure projects in the
Los Angeles Times
SAN FRANCISCO -- Bechtel Corp. helped build the Bay Area subway system, Hoover Dam, and a city for 200,000 in the desert of Saudi Arabia. It likes to boast that it can go anywhere, under any conditions, and build anything.
In Iraq, Bechtel met its match.
A firm that prides itself on its safety record saw dozens of its workers killed. And a company that celebrates achievement won't know for a long time, if ever, exactly what it accomplished.
The assignment Bechtel won from the U.S. government in early 2003 was unique: Apply the brick and mortar needed to restart the long-starved and war-damaged Iraqi economy, allowing the country to blossom into a modern and free industrial state. Rarely had a single corporation been given so much power to affect so many so quickly.
More than three years later, Bechtel says its work on Iraq's water and electrical plants, its bridges, schools and port, is done.
The company said this week at its headquarters here that it had completed 97 of 99 projects for a total of $2.3 billion, a sum that included its undisclosed fee. Only two Bechtel employees are left in the country. At its peak, there were 200 people from Bechtel supervising tens of thousands of Iraqis.
If the story for Bechtel is drawing to a close, this isn't anything like the happy ending it once expected.
The company went to Iraq with a good deal of well-earned swagger. Chairman Riley Bechtel told the firm's employees in April 2003 that Bechtel's record was one "that few, if any, companies in the world can match." The tasks it would undertake in Iraq, he added, were "the kind of work we do best."
The company expected Iraq to develop from an aid recipient to a customer. The biggest U.S. engineering firm would help one of the world's most distressed countries into the 21st century.
That hope receded with each suicide bombing.
"We were told it would be a permissive environment. But to the horror of everyone, it never stabilized. It just went down, down, down, and to this day it continues to go down," said Cliff Mumm, who ran Bechtel's Iraq operation. "I'm proud of what we did, but had law and order prevailed, it would be a different situation."
At one Bechtel project, in the southern city of Basra, the company recorded this toll: The site security manager was murdered; the site manager resigned after receiving death threats; a senior engineer resigned after his daughter was kidnapped; 12 employees of the electrical-plumbing subcontractor were assassinated in their offices; and 11 employees of the concrete supplier were murdered.
All told, 52 workers associated with Bechtel projects were killed, most of them Iraqi. Forty-nine others were wounded.
Bechtel says it completed nearly all its assigned projects, but that doesn't mean they are necessarily operating as planned.
"Once projects were complete, the plant operating crews we trained often lacked the leadership, resources or motivation needed to run and maintain their facilities," Mumm said in September testimony to the House committee on government reform.
If Bechtel gives itself high grades under the circumstances, others aren't so generous.
"They thought, 'We're the world's best, and we can go in and make this happen,'" said Rick Barton, a reconstruction specialist at the Center for Strategic and International Studies, a Washington think tank.
"After all the money that's been invested, the Iraqi people should be able to make it on their own. But we're nowhere near that, let alone creating a shining city on a hill," Barton added.
The looting and vandalism outpaced the rebuilding from the beginning.
In May 2003, the supposed end of open warfare, a survey of Iraq's dilapidated electrical system showed 13 downed transmission towers. Four months later, the total had grown to 623.
"We were trying to hold the infrastructure together and at the same time build a platform to go forward and at the same time cope with a deteriorating security situation," said Mumm, who recently returned to the U.S. "There were a lot of moving parts."
The company's critics give it points for remaining free of corruption, unlike some Iraq contractors. But they say it was too slow in restoring the power grid.
"In the critical years of 2003 and 2004, part of the growing sense in the Iraqi population that Americans were incompetent occupiers rather than effective liberators came because Bechtel hadn't gotten the power grid on in the scorching hot summers," said Charles Tiefer, a professor at the University of Baltimore School of Law and an expert on government contracting. "American corporate reconstruction efforts like Bechtel's failed worse in Iraq than American arms."
The lack of an infrastructure fed the insurgency, which made it its goal to destroy the infrastructure. As time went on, Bechtel spent increasing amounts not on rebuilding but on protecting its workers.
Now that the reconstruction funds are running out, the fate of the Iraq infrastructure, like so much else in the country, is uncertain.
"Bechtel is putting a 'Mission Accomplished' banner over their work in Iraq and then coming home," said Steve Ellis of Taxpayers for Common Sense, a watchdog group. "But the mission has not been accomplished. Iraq still doesn't have enough power, hospitals, clean water."
Most of the bridges and roads and other projects built by Bechtel in the last century are still in use. Mumm hopes that the work the firm did in Iraq will survive.
"All that stuff is there, and available, should the Iraqis find themselves in a stable enough position to use them and take advantage of them," he said. "I believe eventually that will happen."
BECHTEL ENDS PERILOUS IRAQ WORK
SAN FRANCISCO -- Wrapping up more than three years of work that cost the U.S. government $2.3 billion, Bechtel Corp. is leaving Iraq with a subdued sense of accomplishment after suffering through a spree of violence that killed 52 workers.
The departure of the San Francisco-based engineering firm serves as another sobering reminder of how the carnage in Iraq has scrambled the United States' once-grand ambitions to rebuild the devastated country.
The U.S. government hired Bechtel in April 2003, hoping the company behind manmade marvels like the Hoover Dam would be able to bring Iraq into the 21st century as it repaired much of the damage caused by the invasion that overthrew Saddam Hussein.
The daunting task required rebuilding roads and bridges, expanding the power grid, cleaning up the water supply and adding telephone lines.
Although some progress has been made, the efforts of Bechtel and other government contractors have been repeatedly beset by sabotage, corruption and lawlessness that made it difficult to retain workers frightened for their lives.
Bechtel said it completed all but two of the 99 projects on its Iraq to-do list, but at a horrible cost: 52 dead workers and another 49 wounded. At peak times, Bechtel employed more than 40,000 workers -- mostly Iraqi subcontractors -- on the various projects.
Most of the Bechtel workers were killed while off duty, said company spokesman Jonathan Marshall. It's among the greatest losses of life that Bechtel has suffered during any job in the company's 108-year history, possibly exceeded only by the company's Depression-era work on the Hoover Dam, Marshall said.
Bechtel has completed more than 22,000 projects in 140 countries, including perilous jobs like the Channel Tunnel that connects England to France.
Counting bodies was something that Bechtel never envisioned when the company went to Iraq. Within just a few months of arriving in Iraq, Bechtel had started to evacuate some of its workers from Baghdad to Amman, Jordan, for safety reasons.
Despite the adversity, Bechtel said it finished all its jobs except a water treatment plant in Baghdad and a two-story children's hospital in Basra that had been championed by first lady Laura Bush.
The government suspended work on the hospital last summer amid rising security expenses that drove the project well above its original $50 million cost. Bechtel estimated it would have taken at least $98 million to finish the hospital.
Before the hospital was abandoned, Bechtel's onsite security manager was murdered, another manager resigned because of death threats and a senior engineer quit after his daughter was kidnapped. Another 23 workers employed by a subcontractor and a concrete supplier were murdered.
When the government first picked Bechtel for the Iraq work, the decision was blasted by some critics who believed the company benefited from its deep political connections, particularly to the Republican Party.
Bechtel's leadership at various times has included George Shultz, a former cabinet member in the Nixon and Reagan administrations, and Casper Weinberger, the Secretary of Defense in the Reagan administration. Other employees, including Bechtel CEO Riley Bechtel, have connections to the current Bush administration.
The company maintains it won the Iraq business through a competitive bidding process that recognized its vast expertise. The Iraq contracts represented a relatively small portion of Bechtel's revenue, which totaled $51.8 billion from 2003 through 2005. The privately held company doesn't disclose its profits.
Bechtel's exit comes as Kroll, the risk consulting and technology division of Marsh & McLennan Companies Inc., announced it would sell a subsidiary that provides security services in Iraq and Afghanistan.
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Subj: [911-disc] US business group slams Bush 'deception' over Iraq war
US business group slams Bush 'deception' over Iraq war
NEW YORK (AFP) - A US business group that monitors federal spending took out a full-page advert in The New York Times, likening President George W. Bush (news - web sites) to a corrupt chief executive officer who has forfeited public trust.
Timed to coincide with the weekend anniversary of the US-led war against Iraq (news - web sites), the advertisement -- paid for by Business Leaders for Sensible Priorities -- said Bush's case for invasion "was built entirely out of falsehoods."
Highlighting the cost of the war in terms of hundreds of US casualties and tens of billions of dollars, the ad said the "state-sponsored deception" underpinning the conflict dwarfed the damage caused by the series of corporate scandals that recently rocked Wall Street.
"It's past time for finger pointing," it said.
"It's time for someone in this government to step forward and take personal responsibility for the deadly deceptions used to mislead this great nation into war.
"And that someone must be George W. Bush."
Business Leaders for Sensible Priorities was formed in 1996 on concerns that federal government spending priorities were undermining national security.
The group's 500 members include the present or former CEOs of Bell Industries, Eastman Kodak and Goldman Sachs, as well as CNN founder Ted Turner. (follow link)
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Subj:[snow-news] USA 'a country suffering from self-delusion'
INTRO: COMMENTARY: USA 'a country suffering from self-delusion'
[Every country has, and no doubt needs, a national mythology, and there is, no doubt, always a gap between the social, political, and economic realities of a nation and the nature of that nation as portrayed in its mythology. -- But in the case of the United States of America, the gap that has opened in the course of recent generations between myth and reality is attaining the dimensions of an immense, yawning abyss. -- History suggests that when this sort of thing occurs, a national mythology can become a source of delusion and denial rather than a source of inspiration and reaffirmation; a national myth can become a source of danger rather than a source of strength. -- In recent years, essays and books addressing this problem (Christopher Hedges's *Losing Moses on the Freeway* and Jimmy Carter's *Our Endangered Values* come to mind, among many others) have become a minor genre. -- This piece, by Daniel Vallin, is the latest contribution to that genre. -- Thanks to Joe Thompson for sending it. --Mark]
WILL THE REAL UNITED STATES PLEASE STAND UP?
Dissident Voice December 29, 2005
It is amazing the power of mythology over logic -- mythology which people can accept and believe regardless of all facts and evidence to the contrary, mythology about who they are, where they live, what their history is. It seems to me that no industrial nation suffers more under the weight of its own myths than the United States. I remember as a child how in school each morning we would have to repeat a pledge to the American flag, and we heard again and again how great, wealthy, and democratic the United States is. These things were told as eternal truths, and never questioned, while we simultaneously learned about the scientific method and the importance of factual assessment and logical analysis. I would like to expose some of these myths in simple terms.
It seems to me that the general consensus, at least from Americans themselves, is false. Most Americans I know are of the opinion that the United States is the greatest country in the world, the richest, the most democratic, a great force of good in the world. It is the world´s leading country in progressive thinking. It is a generous country that gives so much to poor countries. All of these statements are false.
While the United States is certainly among the richest nations on earth, in terms of material wealth, the standard of living is not amongst the top. The richest countries in terms of per capita income are Luxembourg and Norway. In terms of natural resources, Russia is the undisputed champion. In terms of the quality of life, we must also consider the following facts about the United States. Its citizens are the only Western people who are not guaranteed some sort of health coverage. In fact, more than 45 million Americans have no health insurance, according to the U.S. Census Bureau (see also *Washington Post*, 27 Aug 2004, p. A01). Not surprisingly, then, the United States has the highest infant mortality rate of any Western country, ranking 28th in the world. Similarly, it has the lowest life expectancy of any Western country, ranking 24th in the world, according to the World Health Organization. The United States has the highest percentage of its population living in poverty (of industrialized nations), according to the United Nations Human Development Index. The U.S. Census Bureau has reported that in 2003, the percentage of Americans living in poverty rose to 13.5%. That´s 35 million people living in poverty in the country the Americans call the world´s richest! Low life expectancy, high infant mortality, tens of millions living in poverty and without health insurance. These are not exactly the hallmarks of a wealthy nation. Such is the power of myth.
Similarly, in terms of generosity, the United States again misses the mark wildly. While most Americans would characterize their country as generous, in 1998 it ranked lower than any other industrialized nation in giving development aid to poor countries (as a percentage of GNP), according to the OECD Report. It should be noted here, that one third of the American foreign aid budget goes to Israel. A 2002 index shows no improvement: the United States lands again squarely in last place both in terms of per capita private and government aid to poor countries (Center for Global Development and Carnegie Endowment for International Peace. From Ranking the Rich,’ *Foreign Policy*, May/June 2004). So much for the generosity of the world´s richest’ country.
These facts notwithstanding, every American I talk to seems to insist that this is not representative of the USA. When I point out slums and ghettos, in nearly every large American city from New York to Los Angeles to Denver or Chicago, my American friends seem to think these people do not really count. They aren´t real Americans. They instead point out the wealth in the suburbs as a sort of counterpoint. I get the same response when I point out people living in trailer parks in rural areas. In September of 2005, the world saw image after image of Americans in New Orleans, desperate, poor, begging for help which their own government was not providing. It was clear to any observer that this was not only the result of a natural disaster or of the economic choice to fund wars rather than domestic spending on levees, but also very much the result of poverty, plain and simple. Yet when the world looked on in shock, the Americans themselves seemed unable to accept that something was incorrect with their own self-image of wealth and invulnerability.
This power of myth over logical analysis extends well into the political realm.
Americans generally seem to be convinced of how democratic their system is. Many believe it to be the world´s first democracy, when of course even the word itself goes back to ancient Greece. Others insist that it is the world´s oldest democracy, when in fact Iceland had democracy centuries before the Europeans had even colonized the North American continent. More importantly, no one seems to notice that the presidential elections of 2000 and 2004 have cast the entire system into doubt. Wrought with scandal and widespread reports of fraud, the election of 2000 installed a leader who did not win the vote of the majority of the population, and who was finally put into office not by the result of any election, but by a decision of an appointed court. And yet the attitude seems to be: Sure, the last two elections were clearly fraudulent, but other than that we are very democratic.
I point out that, while most industrialized countries have from three to 12 or more political parties which are both politically viable and represent greatly different viewpoints and interests, the United States has only two parties, both of which have the same basic platform (i.e. pro-war, pro-free trade, pro-surveillance of their own citizens in terms of the Patriotic Act’, etc.), and I get a similar response: Sure, but apart from that. . . .’ None of these facts seem to sway the opinions of the American citizens.
Any perusal of the history of American foreign policy reveals endemic, consistent support for dictatorships; from Pinochet in Chile to Batista in Cuba, from Somoza Debayle in Nicaragua to Mobuto Sese Seko in Zaire (and the list goes on and on). And yet nearly every American, from individual citizens to newspaper editors and political columnists, will insist that the United States is a force for democracy in the world. They speak repeatedly about exporting democracy, even while their own system lacks credibility and their long history suggests the very opposite.
When I mention that the United States has the largest prison population of any country (see International Centre for Prison Studies at King's College London), that it is the only remaining industrial power where the death penalty is accepted (if not to say celebrated, at least by a certain segment of the population), no American seems to find this evidence that the United States is not a particularly progressive thinking country.
All of these myths add up to a country with serious self-image problems, a country suffering from self-delusion. There can be no improvement without first the recognition of the real situation, no moving forward without first an honest assessment of the facts of the matter.
It seems to me that Americans have a very selective perception, a self-perception that is harmful to themselves and the rest of the world. In his eulogy for Rosa Parks, the Reverend Al Sharpton admonished the mourners that it isn´t enough to call it like you see it: a mirror isn´t just to reflect what you see, a mirror is to correct what you see!’ In the interest of both reflection and correction, I think it is now time to start debunking the myths.
--Daniel Vallin is a writer who no longer lives in the United States.
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Subj: Texas Observer Article
CORPORATE DEMOCRACY, CIVIC DISRESPECT
John K. Galbraith
With the events of late in the year 2000, the United States left behind constitutional republicanism, and turned to a different form of government. It is not, however, a new form. It is, rather, a transplant, highly familiar from a different arena of advanced capitalism. This is corporate democracy. It is a system whereby a Board of Directors - read Supreme Court - selects the Chief Executive Officer. The CEO in turn appoints new members of the Board. The shareholders, owners in title only, are invited to cast their votes in periodic referenda. But their franchise is only symbolic, for management holds a majority of the proxies. On no important issue do the CEO and the Board ever permit themselves to lose.
The Supreme Court clarified this in a way that the Florida courts could not have. The media have accepted it, for it is the form of government to which they are already professionally accustomed. And the shameless attitude of the George W. Bush high command merely illustrates, in unusually visible fashion, the prevalent ethical system of corporate life. Al Gore's concession speech was justly praised for grace and humor. It paid due deference to the triumph of corporate political ethics, but did not embrace them. It thus preserved Gore for another political day - the obvious intention. But Gore also sent an unmistakable message to American democrats: Do not forget [DO NOT FORGET].
It was an important warning, for almost immediately forgetting became the media order of the day. Overnight, it became almost un-American not to accept the diktat of the Court. Or to be precise, Gore's own distinction became holy writ: One might disagree with the Court, but not with the legitimacy of its decision. Press references from that moment forward were to President-elect Bush, an unofficial title and something that the Governor from Texas (President-select-President-designate?) manifestly is not.
The key to dealing with the Bush people, however, is precisely not to accept them. Like most Americans, I have nothing personal against Bush, Dick Cheney, nor against Colin Powell and the others now surfacing as members of the new administration. But I will not reconcile myself to them. They lost the election. Then they arranged to obstruct the count of the vote. They don't deserve to be there, and that changes everything. They have earned our civic disrespect, and that is what we, the people, should accord them.
In social terms, civic disrespect means that the illegitimacy of this administration must not be allowed to fade from view. The conventions of politics remain: Bush will be president; Congress must work with him. But those of us outside that process are not bound by those conventions, and to the extent that we have a voice, we should use it.
In political practice, civic disrespect means drawing lines around the freedom of maneuver of the incoming administration. In many areas, including foreign policy, there will be few major changes; in others, such as annual budgets and appropriations, compromises will have to be reached. But Bush should be opposed on actions whose reach will extend beyond his actual term.
First, the new president should be allowed lifetime appointments only by consensus. The public should oppose - and 50 Senate Democrats should freely block - judicial nominations whenever they carry even the slightest ideological taint. That may mean most of them, but no matter. And as for the Supreme Court especially, vacancies need not be filled.
Second, the Democrats should advise Bush not to introduce any legislation to cut or privatize any part of Social Security or Medicare.
Third, Democrats should furiously oppose elimination of the estate tax - a social incentive for recycling wealth to the non-profit sector, to foundations and universities, that has had a uniquely powerful effect on the form of American society. Once gone, this ingenious device will never be reenacted.
Fourth, the people must unite to oppose the global dangers of National Missile Defense - a strategic nightmare on which Bush campaigned - that threatens for all time the security of us all.
Fifth, Congress should enact a New Voting Rights Act, targeted precisely at the Florida abuses. This should stipulate: mandatory adoption of best-practice technology in all federal elections; a 24-hour voting day; a ban on private contractors to aid in purging voter rolls; and mandatory immediate hand count of all under-votes in federal elections.
With those steps taken, Democrats must also recognize and adapt to the new political landscape that emerged from this election. Outside of Florida, Democrats are finished in the South. But they have excellent prospects of consolidating a narrow majority of the Electoral College - so long as, in the next election, there is no Ralph Nader defection.
What can prevent such a thing? Only a move away from the main Clinton compromises that so infuriated the progressive left. Nader's voters were motivated passionately by issues like the drug war, the death penalty, consumer protection and national missile defense - issues where New Democrats took Republican positions in their effort to woo the South. Clinton the Southerner succeeded at this - but against Republicans who were only weakly "Southern" at best.
Gore, on the other hand, was principally a Northern candidate, strongly backed by the core Democrats, who ran against, and defeated so far as ballots were concerned, a wholly Southern Republican. Future Republicans almost surely also will be "Southern"; for that is where the base of the party now lies. And future Democrats, if they are Northern candidates too, can beat them - all the more so if they bring the Greens back into the Democratic fold.
In short, Al Gore's campaign proved that there is an electoral majority in the United States for a government that is truly a progressive coalition, and not merely an assemblage of sympathetic lawyers, professors and investment bankers. Rather, Americans will elect a government that firmly includes and effectively represents labor, women, minorities - and Greens. This is the government we must seek to elect - if we get another chance.
And for that, the first task is to assure that the information ministries of our new corporate republic do not successfully cast a fog of forgetting over the crime that we have all just witnessed, with our own eyes.
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Subj: [snow-news] 'The New Rome theory of US economic performance'
-- But according to this 2002 piece by Henry C.K. Liu, the second in a series billed by the *Asia Times Online* web site as "The Complete Henry C.K. Liu," (http://www.atimes.com/atimes/others/Henry.html) "The productivity boom in the U.S. was as much a mirage as the money that drove the apparent boom." --"While published government figures of the productivity index show a rise of nearly 70 percent since 1974," says Liu, "the actual rise is between zero and 10 percent in many sectors if the effect of imports is removed from the equation."
THE ECONOMICS OF A GLOBAL EMPIRE
Asia Times Online
The productivity boom in the U.S. was as much a mirage as the money that drove the apparent boom. There was no productivity boom in the U.S. in the last two decades of the 20th century; there was an import boom. What's more, this boom was driven not by the spectacular growth of the American economy; it was driven by debt borrowed from the low-wage countries producing this wealth. Or, to put it a tad less technically, the economic boom that made possible the current U.S. political hegemony was fueled by payments of tribute from vassal states kept perpetually at the level of subsistence poverty by their own addiction to exports. Call it the New Rome theory of U.S. economic performance.
True, exports can be beneficial to an economy if they enable that economy to import needed goods and services in return. Under mercantilism and a gold standard, for example, an economy that incurred recurring trade surpluses was essentially accumulating gold which could reliably be used for paying for imports in the future.
In the current international trade system, however, trade surpluses accumulate dollars, a fiat currency of uncertain value in the future. Furthermore, these dollar-denominated trade surpluses cannot be converted into the exporter's own currency because they are needed to ward off speculative attacks on the exporter's currency in global financial markets.
Aside from distorting domestic policy, the export sector of the Chinese economy has been exerting disproportionate influence on Chinese foreign policy for more than a decade. China has been making political concessions on all fronts to the U.S. for fear of losing the U.S. market from whence it earns most of its foreign reserves, which it is compelled to invest in U.S. government debt. This is ironic because according to trade theory, a perpetual trade surplus accompanied with a perpetual capital account deficit is not in the economic interest of the exporting nation. China is not unique in this dilemma. Most of the world's export economies face similar problems. This is the economic basis of US unilateralism in foreign affairs.
When Chinese exporters invest China's current account surplus in dollar financial assets, the Chinese economy will see no benefit from exports as more goods leave China than come in to offset the trade imbalance. True wealth is given away by Chinese exporters for paper, at least until a future trade deficit allows China to import an equivalent amount of goods in the future. But China cannot afford a balanced trade, let alone a trade deficit, because trade surpluses are necessary to keep the export sector growing and for maintaining the long-term value of its currency in relation to the dollar. The bulk of China's trade surpluses, then, must be invested in U.S. securities. This is the economic reality of U.S.-China trade.
The gap between the perceived value of the accumulated fiat currency (U.S.) of the importing economy (U.S.) and the value of that currency when dollar-denonimated investments are finally cashed in at market price represents the ultimate difference in the quantity of goods and services eventually received between the trading economies. Since the drivers of trade imbalances are overvalued currencies of the importer or undervalued currencies of exporters, obviously the one-sided trade can only end when the exporter has wasted away all its expandable wealth, or the importer has run deficits to levels that exceed the willingness of the exporter to accept more of the importer's debt. Interest rate policies of central banks are usually the culprit in this matter as they drive investment flows in the direction of a high interest economy, making necessary the perpetual trade imbalance. Other forms of waste of wealth, such as pollution, low wages and worker benefits, neglect of domestic development, and rising poverty in both export and non-export sectors, are penalties assumed by the exporter.
China exported 4.07 billion pairs of shoes in 2001, up 2.55 percent from the previous year. But the value of those exports, US$10.1 billion, was an increase of only 2.48 percent over 2000. Actual value growth per unit, then, was a negative. Guangdong province is China's largest shoe-making region, with annual production at around three billion pairs, accounting for almost a third of the world's total. Assuming the number of Chinese workers making shoes to be constant, Chinese productivity dropped in the shoe industry in 2001. The only way productivity could have remained the same or improved would have been if the Chinese shoe industry had cut workers, thus contributing to China's growing unemployment problem.
Imports from China are resold in the U.S. at a greater profit margin for U.S. importers than that enjoyed by Chinese exporters in production for export. In part, this has to do with the inflated distribution costs in the importing country (U.S.) because of overvaluation of its currency, and the higher standard of living in the U.S. made possible partly by Chinese exporter credit. Thus a $2 toy leaving a Chinese factory is a $3 part of a shipment arriving at San Diego. By the time a U.S. consumer buys it for $10, the U.S. economy registers $10 in final sales, less $3 in imports, for a $7 addition to gross domestic product (GDP). The GDP gain to import ratio is greater than two, in this case two-and-a-third. The GDP gain to export ratio is zero if the $2 export price becomes part of the importer's capital account surplus. If 50 percent of the $2 export price is used for paying return to foreign capital, then the ratio is in fact negative.
The numbers for other product types vary greatly, but the pattern is similar. The $1.25 trillion of imports to the U.S. in 2000 are directly responsible for some $2.5 trillion of U.S. GDP, almost 28 percent of its $9 trillion economy.
The $400 billion of Chinese exports are directly responsible for a loss of $800 billion in Chinese GDP of $1 trillion as compared to a GDP if that export were consumed domestically. In other words, if it were to not export at all, China would almost double its GDP by redirecting the equivalent productivity toward domestic development. On a purchasing power parity basis (PPP), the GDP loss to exports would be four times greater. The higher the trade surplus in China's favor, meaning more goods and services leaving China than entering, the more serious its adverse impact on China's GDP.
Viewing the greater margins available in the importing country as a result of a currency valuation imbalance and understanding that retailing and distribution are operationally less efficient relative to manufacturing, it can be observed that imports raise apparent productivity because sales per employee increase as one goes from the factory floor towards the final consumer. Also, the closer in function the factory floor is to the retail space, the higher its apparent productivity. Through marketing and proximity to customer, a seller can gain advantage in the assembly of imported major parts to order.
Thus a U.S. assembler who out-sources its content parts can win final sales away from the offshore integrated manufacturer who makes the same parts and assembles them abroad. In the high technology arena, time to market of design innovation is key. By hiding costs through the use of employee stock options for compensation (an issue of current debate in U.S. corporate governance), a local in the importing country can use the high valuation of his stock, driven by creative accounting and artificially low production costs and interest rates at the exporter country, to raise funds to further subsidize the production costs of the final product, be it software or hardware. The content of the product will increasingly come from low-wage, low-margin exporting nations, and the out-sourcing assembler's manufacturing involvement may be little beyond snapping out-sourced parts in place, advertised ad nauseum as a U.S. brand. Dell is a classic example, as is Disney's licensing empire.
To quantify the order of magnitude of the effect of imports on apparent U.S. aggregate productivity, a direct relationship to the trade deficit can be observed. The productivity gain observed is not as strong as presented by aggregate data. The 4 percent productivity rise cited in U.S. government statistics can be primarily attributable to sharp import increases. The gain in net productivity is much smaller, on the order of 1.8 percent, since the technology revolution began affecting the economy a whole decade earlier. Much of the rest of the improvement has to do with normal cyclical behavior of productivity, the result of normal rise in capacity utilization during boom times from a bubble economy.
There is another measure of increases in trade flow volume that stems from the appreciation of the trade-weighted dollar. The trade-weighted dollar measure shows improvement consistently because of the attempts of European, OPEC, and Japanese holders of U.S. debt to retain value in the dollar by creating dollar-denominated debt in emerging economies that actually produce something, as opposed to the U.S. which gains foreign income primarily through the use of international protections for intellectual property.
For the purpose of this discussion, one need focus only on the broad trade-weighted dollar index being put in an upward trend, as highly indebted emerging market economies attempt to extricate themselves from dollar-denominated debt through the devaluation of their currencies. The purpose is to subsidize exports, ironically making dollar debts more expensive in local currency terms. The moderating impact on U.S. price inflation also amplifies the upward trend of the trade-weighted dollar index despite persistent U.S. expansion of monetary aggregates, also known as monetary easing or money printing.
Adjusting for this debt-driven increase in the value of dollars, the import volume into the U.S. can be estimated in relationship to these monetary aggregates. The annual growth of the volume of goods shipped to the U.S. has remained around 15 percent for most of the 1990s. The U.S. enjoyed a booming economy when the dollar was gaining ground, and this occurred at a time when interest rates in the U.S. were higher than those in its creditor nations. This led to the odd effect that raising U.S. interest rates actually prolonged the boom in the U.S. rather than threatened it, because it caused massive inflows of liquidity into the U.S. financial system, lowered import price inflation, increased apparent productivity, and prompted further spending by U.S. consumers enriched by the wealth effect despite a slowing of wage increases.
This was precisely what Federal Reserve Board chairman Alan Greenspan did in the 1990s in the name of pre-emptive measures against inflation. Dollar hegemony enabled the U.S. to print money to fight inflation, causing a debt bubble. For those who view the U.S. as the New Roman Empire with an unending stream of imports as the spoils of war, this data should come as no surprise. This was what Greenspan meant by U.S. "financial hegemony."
The transition to offshore production is the source of the productivity boom of the "New Economy" in the U.S. The productivity increase not attributable to the importing of other nation's productivity is much less impressive. While published government figures of the productivity index show a rise of nearly 70 percent since 1974, the actual rise is between zero and 10 percent in many sectors if the effect of imports is removed from the equation. The lower values are consistent with the real-life experience of members of the blue collar working class and the white collar middle class.
This era of declining reward for manual effort coincides with the Reagan shift to having workers pay for their social benefits, while promoting heavy subsidies of corporations, particularly in the earlier stages of corporate growth, through pro-business tax policies and regulatory indulgence.
Historical timelines for the actual levels of productivity in the U.S. may be traced back to the introduction of computer-assisted accounting by IBM and later EDS in the late 1960s. This cleared the labor-intensive accounting pools of the large corporations and mammoth government agencies. Automation of scientific work began even earlier and entered mainstream engineering by the mid 1970s. By 1980, the ordering-inventory and inter-corporate billing systems were computerized to a great extent, as had occurred in banking and finance in the 1970s. By the 1990s, computerized trading and market modeling actually transformed market efficiency into systemic risk of unprecedented dimensions.
The current process is one of standardization and inclusion, as well as reintroduction of regulatory restraint. Inventory management in the current "just in time" manner was not attractive until high U.S. real interest rates made the holding of inventory unattractive. Prior to this, during periods of real inflation, inventory was a profit center, not a cost problem, thanks to FIFO (first in, first out) accounting where inflation would produce an annual statement of higher ending inventory value, a lower cost of goods sold and a higher gross profit. Now that the world has organized away the inventory that cushions supply disruptions and price inflation, we are quite defenseless against them. Never before has Murphy's Law (if something can go wrong, it will) a better chance to demonstrate itself with a cruel spate of price inflation.
The result of this distortion driven by the monetary system is a decline in real living standards of producers in all of the exporting and indebted world, and in the U.S. Indeed, reward has been divorced from real effort and reassigned to manipulators. There have been enormous strides in productivity around the globe, but few of them came in the U.S. It has been the seigniorage of the dollar reserve system granted to the U.S. without economic discipline that allowed the import of productivity from abroad and the superficial appearance of prosperity in the U.S. economy.
World trade has been shrinking. The conventional wisdom of market fundamentalism is that the global economy is slowing to work off excess debt, causing global trade to shrink temporarily. The world is waiting for a rebound in the U.S. economy so that other countries can again export themselves out of recession.
Yet a case can be made that global trade is shrinking because it transfers wealth from the have-nots to the have-too-muches, and after two decades, the unsustainable rate of wealth transfer has slowed, leading to slower economic growth worldwide. Those economies that have been dependent on exports for growth will do well to understand that the recent drop in exports in more than a cyclical phenomenon. It is a downward spiral unless balanced trade is restored so that trade is a supplement to domestic development rather than a deterrent. Regions like Asia and Latin America should restructure their export policies to focus on intra-regional trade that aim at development instead of those that transfer wealth out of the region. Places like Shanghai, Hong Kong, Singapore, and Tokyo should stop looking for predatory competitive advantage and move toward symbiotic trade policies to enhance regional development.
The purpose of the $30 billion IMF loan of Brazil -- an unprecedented figure -- is not so much to help the Brazilian economy escape its debt trap as it is to bail out U.S. transnational banks holding Brazilian debt. The net result is to force the Brazilian economy to export more wealth to the tune of $30 billion plus interest on top of the mountains of debt it already has and could not service. Brazil would be better off defaulting as Russia did. Economist Paul Krugman lamented in his *New York Times* column that he mistakenly bought into the Washington consensus and now his confidence that market fundamentalists had been "giving good advice is way down."
The line between honest mistakes in pushing the regulatory envelope and fraud is now debated regarding corporate finance and governance in the U.S., and many executives and their financial advisors are being charged with criminal liability. Are economists who knowingly pushed the ideological envelope beyond the limits of reality above the laws of conscience?
--Henry C K Liu is chairman of the New York-based Liu Investment Group.
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Subj: [snow-news] M. Auerbeck: As House of Saud pulls away, an oil shock looms
NO "OCTOBER SURPRISE" COURTESY OF THE SAUDIS
PrudentBear.com April 20, 2004
--"When we first got here, we tried making friends. We did everything we could to make friends with these people. Then I started evacuating my friends [who had been killed or injured], and it wasn't cool anymore." -- US Marine Jeremy Heidrick in Iraq, *St. Louis Post-Dispatch*, 19 April 2004
Worried about $40 per barrel oil? You needn't be, if Bob Woodward is anyone to go by. According to Woodward, Saudi Arabia's ambassador to the United States, Prince Bandar bin Sultan, promised President Bush the Saudis would cut oil prices before November to ensure the U.S. economy is strong on Election Day. In an interview with CBS's "60 Minutes "about his new book *Plan of Attack* on the Bush administration's preparations for the Iraq war, Woodward, a senior editor at the *Washington Post*, said Prince Bandar pledged that the Saudis would try to fine-tune oil prices to prime the U.S. economy for the election -- a move they understood would favor Bush's reelection.
It sounds wonderful, but if such a pledge was ever given, Saudi actions in the past year suggest that it has been revoked, largely in response to the growing geopolitical morass that is developing in the Middle East. In the aftermath of Gulf War II, it was felt that mobilization against Iraq would give the United States a renewed opportunity to expand its power and influence in the region -- this time potentially to use its new Persian Gulf bases to establish even more bases in the ancient territories between the Tigris and Euphrates rivers in Iraq, while remaking a hitherto backward region into a bastion of Anglo-American liberal-democracy. More importantly, many of the neo-cons who now dominate Administration thinking felt that the oil fields seized as a by-product of this invasion would give the United States a de facto seat in OPEC, and control over a huge cash-generating asset required to fund its massive domestic and overseas debt build-up. At the same time, it was also hoped that President Bush would use his expanded leverage to press for a comprehensive settlement of the Palestinian-Israeli conflict.
All of these blithe assumptions look questionable today, to say the least --none more so than the assumptions about oil.
After the end of the Iraq invasion, the oil price fell sharply to $26 (WTI), although little of this can be ascribed to the Saudis, who have been producing at roughly the same capacity of between 8.5 and 9.4mmbd of crude oil, natural gas, and gas liquids for the past ten years, according to figures collated by independent oil analysts, Groppe, Long & Littell (GLL). These price forecasts, made by a number of prominent Wall Street banks such as Citicorp, were based on two assumptions: precautionary inventories built prior to the Middle East hostilities would be liquidated and, under the U.S. occupation, Iraqi oil would flow soon and copiously. In turn, that Iraqi oil would at least pay for the occupation and reconstruction of Iraq -- so believed neoconservative planners in Washington and in the new Coalition Provisional Authority set up by the Bush administration in Baghdad.
Since the U.S. occupation of Iraq began, the pipelines north of Haditha have been the targets of repeated sabotage. The result, according to GLL, is a shortage of natural gas and the inability to use all of the capacity of Iraq's refineries. Consequently, the country is still producing well below its current estimated capacity of 2.5mmbd of crude oil production. Equally problematic from the Americans' perspective is the increasingly unaccommodating policy stance of the Saudis, who had hitherto been relied upon to offset looming oil shortages. As it now stands, the Israel-Palestine conflict has no direct impact on Middle Eastern oil supplies. However, it has led to a movement of solidarity among Middle Eastern states against the Bush administration's perceived one-sided support of Israel and in addition has led the Saudis, fearing their "special relationship" with America to be under threat, to play the oil card in a manner highly inimical to American economic interests.
It is not as if the Bush Administration wasn't warned: Before his visit to Bush's ranch near Crawford, Texas, Crown Prince Abdullah (through his interpreter) told the press that allowing the Israeli-Palestinian conflict "to spiral out of control will have grave consequences for the United States and its interests." On June 10th last year, the Saudi oil minister, sent letters to the companies negotiating contracts for participation in the natural gas industry of the Kingdom. Subsequent to those letters, the following has occurred:
*July, 2003 -- The Saudi government announces gas agreements with Shell (Anglo-Dutch) and Total (French)
*August -- State visit to Moscow by Crown Prince ‘Abd' Allah-al-Saud
*September -- OPEC ministers adopt Saudi Arabia's proposals to reduce production quotas, despite of expectations in advance of the meeting that the status quo would be maintained.
*January, 2004 -- Saudi Arabia announces gas agreements with Lukoil (Russian), Sinopec (Chinese), Agip (Italian), and Repsol (Spanish)
*February -- OPEC Ministers adopt another Saudi proposal to reduce production quotas.
Note the complete exclusion of U.S. energy companies in all prominent new Saudi energy ventures; this is hardly consistent with an ostensible pledge to flood the market with oil around October to guarantee the election of a President viewed to be fundamentally hostile to Islamic interests by the vast majority of OPEC nations. It is equally salient that the officially stated OPEC price range of $22-$28 per barrel has largely been ignored by virtually all OPEC members (judging from the extent to which they are producing above agreed quota numbers) -- not only because higher prices can be sustained in spite of this widespread "cheating" on quotas, but also because of growing opposition among its members to American policies in the Middle East.
The new, largely unarticulated high oil price strategy should be viewed in the context of Saudi promises to invest billions in the development of the Russian energy industry, and suggestions of an emerging Russo-Saudi oil alliance. Last December, the Russian government announced that its policy for production is to stay under 9.0mmbd for the next five years. Five years is also the term of the oil and gas co-operation agreement signed with Saudi Arabia on September 2, 2003, at the end of the state visit by Crown Prince Abdullah.
The significance of this alliance for the oil market lies in the fact that, in 1998, the value of Russian oil exports was a mere $16bn. In 2003, their value was over $63bn -- second only to the $80bn worth of exports by Saudi Arabia. This increasing cohesion of Russian and Saudi energy policies is occurring against a backdrop in which the oil supply/demand balance is tighter than usual and long-term depletion rates are much higher than is generally recognized. Although Saudi Aramco (the state oil company) has historically done what is required to offset declines in existing oil fields and maintain an estimated capacity of approximately 10mmbd through new projects, the higher production required to generate a sharp fall in oil prices cannot be achieved without more personnel and investment, according to both GLL and Houston-based oil analyst Matt Simmons of Simmons & Co, who has recently undertaken an extensive study of the Saudi oil fields.
In fact, given that most OPEC members are already producing close to full capacity (and well in excess of official quota figures), without significant new discoveries in Russia, the effects of more rapid depletion dynamics will manifest themselves much earlier than currently envisaged by the market. From a peak of 11.06mmbd in 1988, Russia's actual crude oil production in 2003 had fallen to a little less than 8.0mmbd, according to GLL. Much of the new technology introduced to develop Russia's energy fields will only accelerate rates of depletion in existing fields, leaving remote areas of Siberia as the key variable in determining whether the Putin administration can achieve its publicly stated goal of 9.0mmbd production, let alone get anywhere near the peaks sustained during the late 1980s.
Given that the Saudis and the Russians are two of the world's largest oil suppliers, the effects of their de facto alliance cannot be overestimated. In early 2003, Saudi Arabia facilitated the invasion of Iraq by temporarily increasing oil production, but all actions subsequent to a June 10th Saudi decision to end negotiations with U.S. companies on the development of the Saudi natural gas fields have been consistent with a broader Saudi reassessment of its respective relations with both the U.S. and Russia.
In 2002, the OPEC oil ministers met 4 times. In 2003, they met 7 times. Thus far in 2004, they have already met twice. The significance of the increased frequency of these meetings over the past 18 months (at least in contrast to the comparative paucity of meetings from the early 1990s through 2002) is that it has allowed OPEC member states to better minimize the risks of overproduction relative to quota allowances. The monitoring of overproduction can be more accurately calibrated with more frequent meetings, note Groppe, Long, & Littell. In fact, GLL argues that OPEC has in effect moved closer to the old model of the Texas Railroad Commission, which still sets monthly allowances for production in Texas. As GLL notes: "The genius of the monthly meetings of the Railroad Commission is that the commissioners did not have to depend on their ability to forecast accurately. Any mistakes made -- and some were -- could be corrected at the next meeting."
The goal here appears clear: limit overproduction and keep oil prices high, not flood the market with cheap oil. And with the Saudis clearly not playing ball on oil, one can only surmise that their hitherto almost reflexive move to recycle petrodollar surpluses back into the dollar has likely dissipated as well, removing an important marginal bid in the bond market, at a time when inflationary pressures are intensifying and 10-year bond yields have headed north of 5%. The broader economic and geopolitical implications are enormous: the House of Saud, which has cultivated a special relationship with successive U.S. administrations since the days of FDR, seems to have effectively decided that politically and economically distancing itself from at least the present American government provides a much better means of ensuring its long-term survival.
All of this implies an increasingly precarious backdrop for U.S. financial assets and the dollar, the rallies in which do not fully reflect today's deteriorating geopolitical and economic variables. Consumers have reached debt saturation with short-term rates at 1%. What happens as rates rise and the oil price explodes? A further price spike in energy could well exacerbate a growing inflationary psychology now predominant in the credit markets, which in turn could undermine the Fed's recent efforts to "talk down" yields on long-term interest rates.
An oil shock potentially endangering U.S. national security and economic interests is the last thing a debt-saturated America, embarking on expensive overseas ventures, needs right now. Yet that appears to be where we are headed today, the consequences of which are not yet fully reflected in the markets.
--Marshall Auerback is an international portfolio strategist for David W. Tice & Associates, a US money management firm with approximately $1 billion in assets. His weekly "International Perspective" can be seen at PrudentBear.com
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Subj: Pentagon budget ensures global domination
'Pentagon budget ensures global domination'
The Pentagon's hunger for money seems to be insatiable. The Bush Administration has requested a whopping $439.3 billion to feed its appetite the next fiscal year, an increase of seven percent.
This is just the regular military budget. There will be an estimated $50 billion in supplemental spending for Iraq and Afghanistan. And then there's the money proposed to be spent on nuclear weapons, $16 billion, which is separately tallied in the Department of Energy budget. This brings the total to at least $506 billion or so, provided the "supplemental" demand does not reach higher.
What is the reason for this unrestrained expenditure? To maintain U.S. global supremacy in the years to come. Don't take my word for it. Read the primary military strategy document of the Bush Administration, made public in September 2002. "Our forces will be strong enough to dissuade potential adversaries for pursuing a military buildup in hopes of surpassing, or equaling the power of the United States," states the National Security Strategy. No wonder The Washington Post said that the doctrine "gives the United States a nearly messianic role."
It is determined to play this role, which provides an easy cover for advancing U.S. corporate interests.
Amazingly, U.S. military spending is now almost equal to that of the rest of the world combined!
"The major determinant of the world trend in military expenditure is the change in the USA, which makes up 47 per cent of the world total," states the Stockholm International Peace Research Institute, a group that does invaluable work in tracking global military expenditures.
US military expenditure has increased rapidly during the period 20022004 as a result of massive budgetary allocations for the ‘global war on terrorism´, primarily for military operations in Afghanistan and Iraq.’
As the group points out, much of U.S. spending has been not as part of the regular military budget, but as supplemental spending requests.
"The supplementary appropriations for this purpose allocated to the Department of Defense for financial years 2003-2005 amounted to approximately $238 billion and exceeded the combined military spending of Africa, Latin America, Asia (except Japan but including China) and the Middle East in 2004 ($193 billion in current dollars), that is, of the entire developing world," states SIPRI. "Thus, while regular military spending has also increased in the USA as well as in several other countries and regions, the main explanation for the current level of and trend in world military spending is the spending on military operations abroad by the USA, and to a lesser extent by its coalition partners."
And Donald Rumsfeld had the gall last October to question China's defense expenditure!
"I think it's interesting that other countries wonder why they China would be increasing their defense effort at the pace they are and yet not acknowledging it," Rumsfeld said. "It is almost as interesting as the fact that it is increasing at the pace it is."
But the Pentagon's own estimate shows that Chinese military spending to be $90 billion, a fraction of the U.S. budget. The Pentagon's analysts seem as unfazed by this fact as Rumsfeld.
Over the long term, says the Pentagon, if current trends persist, the Chinese military could pose a credible threat to other modern militaries operating in the region,’ the BBC reports. According to the BBC's Pentagon correspondent Adam Brookes, this is code for American forces in Asia.’
What will be the economic impact of this uncontrolled Pentagon spending? Certainly, there will be winners and losers. Defense companies are salivating at the prospect of fatter contracts, and defense stocks have moved up after the budget announcement.
But since all this spending has to come from budgetary resources made scarce from Bush´s tax cuts, there will, of course, be losers, too. A lot of them, actuallyranging from the needy abroad to Medicare recipients at home, as Jim Lobe documents in a piece for the Inter Press Service.
But, hey, what's a bit of deprivation when the goal is global domination?
Source: The Progressive
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September 22, 2006
When Steve and Leslie Shaeffer´s daughter, Selah, was diagnosed at age 4 with a potentially fatal tumor in her jaw, they figured their health insurance would cover the bulk of her treatment costs.’ But shortly after Selah´s medical bills hit $20,000, Blue Cross stopped covering them and eventually canceled her coverage retroactively.’
So begins a recent report in The Los Angeles Times titled Sick but Insured? Think Again,’ which offers a series of similar horror stories, and suggests that these stories represent a growing trend: more and more health insurers are finding ways to yank your insurance when you get sick.
This trend helps explain something that has been puzzling me: why is the health insurance industry growing rapidly, even as it covers fewer Americans?
Between 2000 and 2005, the number of Americans with private health insurance coverage fell by 1 percent. But over the same period, employment at health insurance companies rose a remarkable 32 percent. What are all those extra employees doing?
Now we know at least part of the answer: they´re working harder than ever at identifying people who really need medical care, and ensuring that they don´t get it. In the past, they mainly concentrated on screening out applicants likely to get sick. Now, it seems, they´re also devoting a lot of effort to finding pretexts for revoking insurance after they´ve already granted it. They typically do this by claiming that they weren´t notified about some pre-existing condition, even if the insured wasn´t aware of that condition when he or she bought the policy.
Welcome to the ugly world of American health care economics.
Health care is poised to become America´s largest industry. Employment in manufacturing, which once dominated the economy, has fallen 18 percent since 2000, to 14.2 million. Meanwhile, employment in the private health services industry has risen 16 percent, to 12.6 million. Another 1.3 million people are employed at government hospitals. So we´re quickly approaching the point at which more Americans will be employed delivering health care than are employed producing manufactured goods.
Yet even as health care becomes the core of the American economy, our system of paying for health care remains sick, and is getting sicker.
Because everyone faces some risk of incurring huge medical costs, only the superrich can afford to be without health insurance. Yet private insurers try to refuse coverage to those most likely to need it, and deny payment whenever they can get away with it.
The point isn´t that they´re evil or greedy (although you do wonder how the people who cut off the Schaeffers can look themselves in the mirror). The fact is that cruelty and injustice are the inevitable result of the current rules of the game. Blue Shield of California is a nonprofit insurance provider, yet as a spokesman put it, if his organization doesn´t follow the for-profit practice of selectively covering only the healthiest people, we will end up with all the high-risk people.’
Now, before you panic about the state of your own coverage, you should know that the horror stories in The Los Angeles Times article all involve individual insurance; if your coverage comes via your employer, you´re reasonably secure against sudden cancellation.
But employment-based insurance is in rapid decline, as employers balk at the cost and more and more companies adopt Wal-Mart-style minimal-benefit policies. That´s why many people are turning to individual insurance only to find out, in some cases, that they didn´t get what they thought they paid for.
And here´s the thing: it´s all unnecessary.
Every other wealthy nation manages to provide almost all its citizens with guaranteed health insurance, while spending less on health care than we do. And there´s no mystery why: we´re paying the price for pointless, destructive reliance on private insurers. Medicare, which is a universal health insurance program for older Americans, spends less than 2 cents of every dollar on administrative costs, leaving 98 cents to pay for medical care. By contrast, private insurance companies spend only around 80 cents of each dollar in premiums on medical care; much of the remaining 20 cents is spent denying insurance to those who need it.
If we had a universal system Medicare for everyone there would be no more horror stories like those reported by The Los Angeles Times. And we´d almost certainly spend less on health care than we do now.
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INTRO: NEWS & ANALYSIS: Iraqi oil: hiding the crime
[On Saturday, the *New York Times* devoted its lead story to Iraqi oil, saying that "Iraqi officials are near agreement on a national oil law." -- The *Times* portrayed both the U.S. administration and the Iraq Study Group as devoted to "an equitable distribution of revenues" from Iraq's petroleum, a catchphrase twice repeated in the article. -- But the *New York Times* failed to report that the law in question would "reverse the 1972 nationalization of the [Iraqi oil] industry," as the *Financial Times* of London noted in an article posted on the subscribers-only part of its web site (but reproduced on UFPPC's web site http://www.ufppc.org/content/view/5381/). -- Both the *New York Times* and the *Financial Times* turned a blind eye to the question of production sharing agreements (PSAs). -- The *New York Times* ignores, and the *Financial Times* mentions PSAs only in passing. -- The PSAs that are being imposed on Iraq were characterized by author Richard W. Behan, in an article posted Wednesday on the CounterPunch web site, as "a euphemism for legalized theft." -- PSAs have been analyzed in detail in a November 2005 report (http://www.ufppc.org/content/view/3705/) issued by the London group PLATFORM. -- While arguably appropriate for oil exploration when costs are high and results uncertain, PSAs are impossible to justify in Iraq, where petroleum reserves are among the largest and the most easily accessible in the world. -- Better not to mention them at all, then. --Better to focus on how the U.S. is amicably trying to persuade selected Iraqi elites to accept their cut in in an eminently "equitable distribution of revenues." -- As Richard Behan explained on Wednesday: "It is true our country depends on oil and gas, but it is not the American people who need to corner Mideast oil and gas by force. Dozens of oil companies around the world . . . can supply us with Iraqi oil or Caspian Basin gas, and would be pleased to do so. There is no reason not to rely on them: we are buying more and more Toyotas and Volvos, and fewer Chevrolets and Fords, with no apparent damage to our national security. Why not do the same with gasoline, diesel, and LNG, and avoid armed conflict? Why not? Because the bottom lines of Exxon-Mobil, Unocal and other domestic oil companies, in the eyes of the Bush Administration, are sacrosanct. It is not the American consumers, then, but only the American oil companies who benefit from George Bush's premeditated wars." --(Behan forgets, or loses sight of, the fact that these are no longer American but rather multinational oil companies. -- The multinational corporation more than a generation ago broke free of the bonds of the nation-state; Richard Barnet, http://en.wikipedia.org/wiki/Richard_Barnet author of *Global Reach: The Power of the Multinational Corporations* (1974) and co-founder of the Institute for Policy Studies, http://en.wikipedia.org/wiki/Institute_for_Policy_Studies, was among the first to analyze what has come to be known as globalization.) --Mark]
IRAQIS NEAR DEAL ON DISTRIBUTION OF OIL REVENUES
New York Times
PHOTO (http://graphics8.nytimes.com/images/2006/12/08/world/600_oil.jpg) CAPTION: An oil pipeline running from Kirkuk to the southwest after an attack last year. The Kurds have dropped a demand to ensure that regional governments have the power to collect and distribute revenues from future fields.
BAGHDAD -- Iraqi officials are near agreement on a national oil law that would give the central government the power to distribute current and future oil revenues to the provinces or regions, based on their population, Iraqi and American officials say.
If enacted, the measure, drafted by a committee of politicians and ministers, could help resolve a highly divisive issue that has consistently blocked efforts to reconcile the country´s feuding ethnic and sectarian factions. Sunni Arabs, who lead the insurgency, have opposed the idea of regional autonomy for fear that they would be deprived of a fair share of the country´s oil wealth, which is concentrated in the Shiite south and Kurdish north.
The Iraq Study Group report stressed that an oil law guaranteeing an equitable distribution of revenues was crucial to the process of national reconciliation, and thus to ending the war.
Without such a law, it would also be impossible for Iraq to attract the foreign investment it desperately needs to bolster its oil industry.
Officials cautioned that this was only a draft agreement, and that it could still be undermined by the ethnic and sectarian squabbling that has jeopardized other political talks. The Iraqi Constitution, for example, was stalled for weeks over small wording conflicts, and its measures are often meaningless in the chaos and violence in Iraq today.
But a deal on the oil law could be reached within days, according to officials involved in the drafting. It would then go to the cabinet and Parliament for approval.
The major remaining stumbling block, officials said, concerns the issuing of contracts for developing future oil fields. The Kurds are insisting that the regions reserve final approval over such contracts, fearing that if that power were given to a Shiite-dominated central government, it could ignore proposed contracts in the Kurdish north while permitting them in the Shiite south, American and Iraqi officials said.
The national oil law lies at the heart of debates about the future of Iraq, particularly the issue of a strong central government versus robust regional governments. The oil question has also inflamed ethnic and sectarian tensions. Sunni Arabs, who preside over areas of the country that apparently have little or no oil, are adamant about the equitable distribution of oil revenues by the central government.
On the drafting committee, Sunni Arabs have allied with the Shiites against the Kurds, who have sought to maintain as much regional control as possible over the oil industry in their autonomous northern enclave. Iraqi Kurdistan has enjoyed de facto independence since 1991, when the American military established a no-flight zone above the mountainous region to prevent raids by Saddam Hussein.
Gen. George W. Casey Jr., the senior American commander here, and Zalmay Khalilzad, the American ambassador, have urged Iraqi politicians to put the oil law at the top of their agendas, saying it must be passed before the year´s end.
The drafting committee is made up of ministers and politicians from the main Shiite, Sunni Arab, and Kurdish blocs in government. They began talks months ago, but the pace picked up recently, said an American official tracking the negotiations, who spoke on condition of anonymity because he did not want to give the appearance of Western interference in sovereign Iraqi matters.
At the start of the talks, the Kurds fought to ensure that regional governments have the power to collect and distribute revenues from future fields, Iraqi, and American officials said. They also proposed that revenues be shared among the regions based on both population and crimes committed against the people under Mr. Hussein´s rule. That would have given the Kurds and Shiites a share of the oil wealth larger than the proportions of their populations.
But the Kurds dropped those demands, said Barham Salih, a deputy prime minister who is a Kurd and the chairman of the committee.
Revenue sharing is an accepted principle by all the constituent elements of the Iraqi government, including the Kurds, and that is the unifying element that we´re all hoping for in the oil law,’ Mr. Salih said in an interview.
The American official said the Kurds were willing to make concessions because a national oil law could attract more foreign oil companies to exploration and development in Kurdistan. A large foreign oil company would have more confidence in signing a contract with the Kurds if it were to operate under the law of a sovereign country rather than just the law of an autonomous region.
Some Kurdish leaders also believe that the concessions are a worthwhile price to pay for having a stake in the much larger revenue pool of the country´s oil industry, the American official said. The southern fields accounted for 85 percent of total Iraqi crude production last year, partly because northern production was hampered by insurgent sabotage. The south has an estimated 65 percent of the country´s 115 billion barrels of proven reserves.
But the Kurds are still holding out on the issue of oil contracts, arguing that the Constitution guarantees the regions absolute rights in those matters. The Kurds recently discovered two new oil fields after signing exploration contracts with a Turkish company and a Norwegian company.
There are those among us who say we cannot go back to the former days of centralization, which were not conducive to good business practice and to the idea of federalism that is enshrined in the Constitution,’ Mr. Salih said.
In its recommendations released Wednesday, the Iraq Study Group took the opposite tack, to the anger of the Kurds. The report said that no formula that gives control over revenues from future fields to the regions or gives control of oil fields to the regions is compatible with national reconciliation.’ Though the Kurds have ceded their position on the issue of future revenues, they are fighting for control over the development of future fields.
The drafting committee met Thursday night to try to resolve the contract issue, but could not reach an agreement.
Distributing revenues by population could be a difficult matter without a reliable census, which Iraq lacks. Sunni Arabs often claim they are at least 60 percent of the population, not the 20 percent that is commonly cited. The Shiites are generally estimated to be 60 percent of the population, and the Kurds 20 percent. The American official said a national census expected to be taken next year should determine the share of revenue that goes to each province or region.
If doing a census next year is too politically fraught, or if security conditions prevent it, then revenues could be distributed to provincial or regional governments according to the household counts used by Mr. Hussein´s government to distribute rations in the 1990s.
The Kurds have insisted that revenues collected by the central government should be put into an account that automatically redistributes the money into sub-accounts dedicated to the provinces or regions. This approach could be written into the national oil law or into a separate law, the American official said.
The working draft of the oil law re-establishes the state-run Iraq National Oil Company, which was founded in 1964 to oversee oil production but was shut down by Mr. Hussein in 1987. The company would operate using a business model and not through a government budget process. Iraqi and American officials say that would make management of oil production more efficient and separate it from the Oil Ministry, which has been rife with corruption.
The North and South Oil Companies, which currently manage production in their regions, would fall under the umbrella of the Iraq National Oil Company. Any exports would still be sold through a state marketing company.
The law also sets production thresholds for creating new regional companies. A province or region, for example, might have to show it can produce 100,000 barrels a day before a company can be created there. Officials in Maysan Province in the south have already said they want to start a company.
OIL, WAR, AND OTHER INCONGRUITIES By Richard W. Behan
** The Surreal Politics of Premeditated War **
CounterPunch December 6, 2006
George W. Bush, who proudly claimed the mantle of "war president," was keenly rebuked in the recent mid-term election. The event was notable, but it merely continued the surreal politics of premeditated war -- a politics that has dominated the last six bizarre, hideous years of our nation's history.
Two elements of the repudiation seem unreal, indeed. Not the fact of it, but the amazing length of its gestation period -- those six years -- and how tepid it was. Given the documented record of the Bush Administration -- lying us into war, torturing prisoners, rewarding cronies with no-bid contracts, spying secretly on the nation's citizens, selling public policy to Jack Abramoff's clients, stating even their intent to ignore laws with dozens of "signing statements" -- one would expect the political about-face to have occurred far sooner, and the protest to have been a firestorm. Bush loyalists in Congress (and George Bush) should have been turned out angrily and en masse two years ago.
The victorious Democrats' response was even more surprising, and also unreal. "Impeachment is off the table" quickly became the mantra: let us instead proceed with raising the minimum wage. Apparently the Bush Administration's record is flawless, showing nothing remotely approaching a high crime or a misdemeanor. Impeachment would be a "waste of time."
There is a good reason for these strange results: we practice a politics of surrealism, and have done so since George Bush was first put in office.
Ron Suskind of the *New York Times* learned how the Bush Administration works, from a "senior advisor to Bush" (Karl Rove is a suspect): "We're an empire now, and when we act, we create our own reality." They have done that, incessantly, and it is the source of the surrealism. Spins, evasions, omissions, jingoisms, distortions, "perception management" (i.e., propaganda), and deliberate lying all contribute to a political discourse adrift from what is honest, true, and reliable.
The Clear Skies Act allowed more pollution, the Healthy Forests Act caused more trees to be cut down, the Patriot Act scarred the Bill of Rights, No Child Left Behind was a step toward privatizing public education, the Medicare Prescription Drug, Improvement, and Modernization Act was a bonanza for the pharmaceutical industry and began the process of dismantling Medicare, the Military Commissions Act fostered torture and suspended habeas corpus.
But no such manufactured reality is more misleading, fraudulent, and damaging than the "global war on terror."
It took six years for a tardy and mild electoral protest of the Iraq war to surface, because the trusting American people believed the "war on terror" was the just and moral response of an innocent nation to a brutal terrorist attack. They handily reelected the President who was prosecuting it, proudly supported the troops, and accepted as necessary evils the Bush Administration excesses. But gradually that acceptance weakened, and on November 7, 2006 it was withdrawn.
The recent electoral turnaround was generated largely by the horrific conditions in Iraq today, the savage bloodletting of insurgency and civil war suffered by Americans and Iraqis alike. These conditions finally exceeded public tolerance. But the rationale for the war, its purpose, went unquestioned, because the Bush Administration obscurantism has been so successful.
We need to strip away the created reality of the "war on terror" to see the true nature of it instead, or our weird, unreal politics will continue.
The wars in both Afghanistan and Iraq were not simply justified and honorable retaliations to the terrorist attacks in New York and Washington. They couldn't possibly have been that, because both of them were premeditated -- conceived, planned, and prepared long before September 11, 2001.
(Yes, there have been premeditated military incursions in the past --Panama, Grenada, and Kosovo come to mind -- but none was of the magnitude and duration of the Afghan and Iraqi wars. Never before have we unleashed full-scale combat, unprovoked, on sovereign foreign nations, and then installed permanent military bases to occupy them.)
Though it has not been addressed in the mass media, the factual story of the President's premeditated wars is clearly visible, and when the story is read at one sitting, the dreamlike quality of our politics is apparent.
The story to follow will not be a great revelation to anyone who has read, perhaps a bit more than casually, about our recent political, military, and diplomatic past, and has spent some time searching the Internet for corroboration and details. On the other hand, it is far from common knowledge, because in the manufactured reality crafted by the Bush Administration, it does not exist.
Two strands of history converged in the Bush years. One led to the invasion of Afghanistan, the other to the invasion of Iraq, and the strands came together on September 11, 2001.
The opening chapter of the story reveals a photograph dating to the Reagan years of Donald Rumsfeld cordially shaking hands with Saddam Hussein. We supported Saddam in his war with Iran. But history convulses: on January 26, 1998, Mr. Rumsfeld and 17 others, members of the Project for a New American Century, wrote a letter to President Clinton, urging the military overthrow of Saddam Hussein's regime. If we fail to do so, they were candid in asserting, "a significant portion of the world's supply of oil will be put at hazard."
This could be considered the fountainhead of our surreal politics. The PNAC proposed premeditated war explicitly, in a bizarre retrogression to the centuries of unapologetic European imperialism. Since World War II and the birth of the United Nations, however, the world has been seeking to surpass imperialism, struggling to settle international difficulties peaceably -- and here was an open, sad, and radical rebuff.
(In addition to Mr. Rumsfeld, 10 others of the signatories would serve in the Bush Administration: Elliott Abrams, Richard Armitage, John Bolton, Paula Dobriansky, Robert Kagan, Zalmay Khalilzad, Richard Perle, William Schneider, Jr., Robert Zoellick, and Paul Wolfowitz.)
When George W. Bush took office, a concern for the "significant portion of the world's oil supply" was never far from view, because the Administration's personal linkages to the oil industry were intimate, historic, and numerous. The president and vice president were just the first examples: eight cabinet secretaries and the national security advisor were recruited directly from the oil industry, and so were 32 others in the secretariats of Defense, State, Energy, Agriculture, Interior, and the Office of Management and Budget.
The Bush Administration came to power anxious, we know from published sources, to fulfill the PNAC's vision of regime change in Iraq.
In his second week in office, President Bush appointed Vice President Cheney to chair a National Energy Policy Development Group. The supersecret "Energy Task Force," as it came to known, was composed of officials from the relevant federal agencies and beyond question heavily attended by energy industry executives and lobbyists. (The full membership has yet to be revealed, but Enron's Kenneth Lay was conspicuously present.)
One brute fact had to be apparent to the Task Force: in the Caspian Basin, and beneath the Iraqi deserts there are 125 billion barrels of proven oil reserves, and the potential for 433 billion barrels more. Anyone controlling that much oil could break OPEC's stranglehold overnight.
By early March 2001, the Task Force was poring over maps of the Iraqi oilfields, pipelines, tanker terminals, and oil exploration blocks. It studied an inventory of "Foreign Suitors for Iraqi Oilfield Contracts" --dozens of oil companies from 30 different countries, in various stages of exploring and developing Iraqi crude. (These documents were forced into view several years later by a citizen group, Judicial Watch, with a Freedom of Information Act proceeding. It wasn't easy -- the Bush Administration appealed the lawsuit all the way to the Supreme Court --but the maps and documents can now be seen and downloaded.)
Not a single U.S. oil company, however, was among the "suitors," and that was intolerable. Mr. Cheney's task force concluded, "By any estimation, Middle East oil producers will remain central to world security. The Gulf will be a primary focus of U.S. international energy policy."
Condoleezza Rice's National Security Council, meanwhile, was directed by a top secret memo to "cooperate fully with the Energy Task Force as it considered melding two seemingly unrelated areas of policy." The NSC was ordered to support "the review of operational policies towards rogue states such as Iraq and actions regarding the capture of new and existing oil and gas fields."
The Bush Administration seemed clearly to be drawing a bead on Iraqi oil -- long before the "global war on terror" was envisioned and marketed. But how could the "capture of new and existing oil fields" be made to seem less aggressive, less baldly in violation of international law?
At the State Department, a policy-development initiative called "The Future of Iraq" was undertaken which would accomplish this. The date was April 2002, almost a full year before the invasion. The "Oil and Energy Working Group" provided the cover. Iraq, it said in its final report, "should be opened to international oil companies as quickly as possible after the war. The country should establish a conducive business environment to attract investment in oil and gas resources."
"Capture" would take the form of "investment," and the vehicle for doing so would be the "production sharing agreement." In exchange for investing in development costs, oil companies would "share" in the subsequent production. What would happen, though, if the companies' investments were only minimal, but their shares of the production were disproportionately, obscenely large?
That's the way it will work out. Production sharing agreements (PSAs) are in place covering 75% of the undeveloped Iraqi fields, and the oil companies, soon to sign the contracts, will earn as much 162% on their "investments." The "foreign suitors" are not quite so foreign now: the players on the inside tracks are Exxon-Mobil, Chevron, Conoco-Phillips, BP-Amoco and Royal Dutch-Shell.
The use of PSAs, instead of alternative methods of financing infrastructure, however, will cost the Iraqi people hundreds of billions of dollars in just the first few years of the "investment" program.
PSAs are favored by the oil companies because the term "production sharing agreement" is a euphemism for legalized theft. PSAs were not adopted voluntarily by the Iraqis, however: their use was specified by the U.S. State Department and institutionalized by Paul Bremer's Coalition Provisional Authority.
So a line of dots begins to point at Iraq, though nothing illegal or unconstitutional has yet taken place. We are still in the policy-formulation stage, but two "seemingly unrelated areas of policy" --national security policy and international energy policy -- have become indistinguishable.
Another line of dots begins with the Carter Administration encouraging and arming the Taliban and Osama Bin Laden, in Afghanistan, to fend off the Russian invasion there.
And so the next chapter in the story of George Bush's wars is underway.
The strategic location of Afghanistan can scarcely be overstated. The Caspian Basin contains some $16 trillion worth of oil and gas resources, and the most direct pipeline route to the richest markets is through Afghanistan.
After the fall of the Soviet Union, the first Western oil company to express interest and take action in the Basin was the Bridas Corporation of Argentina. It acquired production leases and exploration contracts in the region, and by November of 1997 had signed an agreement with General Dostum of the Northern Alliance and with the Taliban to build a pipeline across Afghanistan.
Not to be outdone, the American company Unocal fought Bridas at every turn, even spurning an invitation from Bridas to join an international consortium in the Basin. Unocal wanted exclusive control of the trans-Afghan pipeline, and hired a number of consultants in its conflict with Bridas: Henry Kissinger, Richard Armitage (now Deputy Secretary of State in the Bush Administration), Zalmay Khalilzad (a signer of the PNAC letter to President Clinton) and Hamid Karzai. (Eventually Bridas sued Unocal in the U.S. courts, and won.)
Unocal stayed on the attack until 1999, frequently wooing Taliban leaders at its headquarters in Texas, and hosting them in meetings with federal officials in Washington, D.C.
Unocal and the Clinton Administration hoped to have the Taliban cancel the Bridas contract, but were getting nowhere. Mr. John J. Maresca, a Unocal vice president, testified to a House Committee of International Relations on February 12, 1998, asking politely to have the Taliban removed and a stable government inserted. His discomfort was well placed.
Six months later terrorists linked to Osama bin Laden bombed the U.S. embassies in Kenya and Tanzania, and two weeks after that President Clinton launched a cruise missile attack into Afghanistan. Clinton issued an executive order on July 4, 1999, freezing the U.S. held assets and prohibiting further trade transactions with the Taliban.
Mr. Maresca could count that as progress. More would follow.
Immediately on taking office, the new Bush Administration actively took up negotiating with the Taliban once more, seeking still to have the Bridas contract vacated in favor of Unocal. The parties met three times, in Washington, Berlin, and Islamablad, but the Taliban wouldn't budge.
Behind the negotiations, however, planning was underway to take military action against the Taliban. The State Department sought and gained concurrence from both India and Pakistan to do so, and in July of 2001 three American officials met with Pakistani and Russian intelligence people to inform them of planned military strikes against Afghanistan the following October.
State Department official Christina Rocca told the Taliban, at their last pipeline negotiation in August of 2001, just five weeks before 9/11, "Accept our offer of a carpet of gold, or we bury you under a carpet of bombs."
Common to both the Afghan and Iraqi lines of dots are energy resources, both oil and gas. It is true our country depends on oil and gas, but it is not the American people who need to corner Mideast oil and gas by force. Dozens of oil companies around the world -- the "foreign suitors," for example -- can supply us with Iraqi oil or Caspian Basin gas, and would be pleased to do so. There is no reason not to rely on them: we are buying more and more Toyotas and Volvos, and fewer Chevrolets and Fords, with no apparent damage to our national security. Why not do the same with gasoline, diesel, and LNG, and avoid armed conflict?
Why not? Because the bottom lines of Exxon-Mobil, Unocal and other domestic oil companies, in the eyes of the Bush Administration, are sacrosanct. It is not the American consumers, then, but only the American oil companies who benefit from George Bush's premeditated wars.
Also common to both lines of dots, and integral to the overall story, is the historic, intimate, and profitable relationship across several generations between the Bush family and the royal family of Saudi Arabia. It can be seen today in the Carlyle Group, a Washington-based investment company focused primarily in the arms, security, and energy industries. Both George H.W. and George W. Bush have been deeply involved in Carlyle, and so have a number of the Saudi royalty. (And so, incidentally, has the family of Osama Bin Laden.)
Carlyle has profited immensely from the Afghanistan and Iraqi wars. Its legal matters are handled by Baker, Botts -- James Baker's law firm in Texas. Mr. Baker also has a personal interest in Carlyle, amounting to some $180 million. (Baker, Botts defended Prince Sultan bin Abdul Aziz, the Defense Minister of Saudi Arabia, who was sued by the families of Trade Tower victims for alleged complicity in the attacks.) Another client of Baker, Botts is Exxon-Mobil.
In September of 2000, with the Presidential election approaching, the Project for a New American Century published a report, "Rebuilding America's Defenses." The PNAC once more advocated pre-emptive war, i.e., premeditated war, something unprecedented in the U.S. history, but it realized what a radical departure that would represent. Moving to such a mindset would be long and difficult, in the absence of "some catastrophic and catalyzing event, like a new Pearl Harbor."
When President Bush assumed office three other members of the Project for a New American Century joined his administration: Richard Cheney, Douglas Feith, and Lewis Libby. Pre-emptive, premeditated war was formally adopted when the President signed the National Security Strategy early in his tenure.
So the twists and turns, convulsions, and complexity of people and ideas continued, and so did the jockeying for the world's oil wealth, but still nothing illegal or unconstitutional had been done.
The rationale, the urge, and the planning, however, for attacking both Afghanistan and Iraq were in place. But to attack a sovereign nation unprovoked would enrage the American people -- and much of the world, as well. The Bush Administration bided its time.
The preparations had all been done secretly, wholly within the executive branch. The Congress was not informed until the endgame of the premeditation, when President Bush, making his dishonest case for the "war on terror," asked for and was granted the discretion to use military force. The American people were equally denied information of critical public importance. Probably never before in our history was such a drastic and momentous action undertaken with so little knowledge or oversight: the dispatch of America's armed forces into five years of violence.
The story of George Bush's premeditated wars now enters its final chapter.
The catastrophic event takes place. A hijacked airliner probably en route to the White House crashes in Pennsylvania, the Pentagon is afire, and the Twin Towers of the World Trade Center are rubble.
In the first hours of frenetic response, fully aware of al Qaeda's culpability, both President Bush and Secretary Rumsfeld seek frantically to link Saddam Hussein to the attacks, we know from on-site witnesses. They are anxious to proceed with their planned invasion. And less than a week later, at a meeting of the National Security Council, President Bush ordered the Defense Department to be ready to handle Iraq, "possibly occupying Iraqi oil fields."
The controversies rage on yet today about the events of September 11, 2001. No steel building has ever collapsed from fire alone. Buildings falling precisely into their footprints are the marks of deliberate (and expert) demolition. The faulty construction/foreshortened lifespan/insurance angle. The collapse of a third building that was not hit at all. The short-selling of airline stock in previous days. The Pentagon hit by a missile, not a civilian airliner. Michael Rupert's book *Crossing the Rubicon* lays the blame for 9/11 directly at Dick Cheney's feet. Senator Robert Dole's former chief of staff, Mr. Stanley Hilton, claims he can prove George Bush signed an order authorizing the attacks. Half the people polled in New York City believe the Bush Administration had prior knowledge of the attack, and "consciously failed" to act. Et cetera.
(Conspiracy is forever easier to see than to find, but that does not obviate the need to seek thoroughly the whole truth about 9/11, and that has yet to be done.)
Involving the Bush Administration in the execution of 9/11, or even accommodating their informed inaction, is almost too appalling to contemplate. But if they needed a reason to proceed with their planned invasions, they could not have been handed a more fortuitous and spectacular excuse.
9/11 was a criminal act of terrorism, not a violation of our entire nation's security. Comparing it, as the Bush Administration immediately did, to Pearl Harbor was ludicrous: the hijacked airliners were not the vanguard of a formidable naval armada, an air force, and a standing army ready to engage in all-out war, as the Japanese were prepared to do and did in 1941. 9/11 was a shocking event of unprecedented scale, but to characterize it as an invasion of national security was criminal. It was creating reality. It was also, and in the extreme, surreal, because the Bush Administration chose consciously to frighten the American people beyond any conceivable necessity. It adopted fear mongering as a mode of governance.
As not a few disinterested observers noted at the time, international criminal terrorism is best countered by international police action, which Israel and other nations have proven many times over to be effective.
Then why was a "war" declared on "terrorists and states that harbor terrorists?"
The pre-planned attack on Afghanistan, as we have seen, was meant to nullify the contract between the Taliban and the Bridas Corporation, to assure access to the Caspian Basin riches for American oil companies. It was a pure play of international energy policy. It had nothing to do, as designed, with apprehending Osama bin Laden -- a pure play of security policy.
But the two "seemingly unrelated areas of policy" had been "melded," so here was an epic opportunity to bait-and-switch -- and the opportunity was not missed for a moment. Conjoining the terrorist and the state that harbored him made a "war" plausible: it would be necessary to overthrow the Taliban as well as to bring Osama bin Laden to justice. (As it turned out, of course, the Taliban were overthrown instead of bringing Osama bin Laden to justice, but the energy policy goal was achieved, at least. And years later President Bush was astonishing in his candor, when he admitted "Osama bin Laden isn't important.")
The first monstrous and intentional deception -- the declaration of a "war on terror" -- took place. There was no talk of contracts, pipelines, or Argentinian oil companies. Osama bin Laden and the Taliban were cleverly, ingeniously conflated, and there was only talk of war.
On October 7, 2001, the carpet of bombs is unleashed over Afghanistan. Hamid Karzai, the former Unocal consultant, is installed as head of an interim government. Subsequently he is elected President of Afghanistan, and welcomes the first U.S. envoy -- Mr. John J. Maresca, Vice President for International Relations of the Unocal Corporation, who had implored Congress three years previously to have the Taliban overthrown. Mr. Maresca was succeeded by Mr. Zalmay Khalilzad -- also a former Unocal consultant. (Mr. Khalilzad has since become Ambassador to Iraq.)
With the Taliban banished and the Bridas contract moot, Presidents Karzai of Afghanistan and Musharraf of Pakistan meet on February 8, 2002, sign an agreement for a new pipeline, and the way forward is open for Unocal once more.
The Bridas contract was breached by U.S. military force, but behind the combat was Unocal. Bridas sued Unocal in the U.S. courts for contract interference, and in 2004 it won, overcoming Richard Ben Veniste's law firm. That firm had multibillion dollar interests in the Caspian Basin, and shared an office in Uzbekistan with the Enron Corporation. In 2004, Mr. Ben Veniste was serving as a 9/11 Commissioner.
About a year after the Karzai/Musharraf agreement was signed, an article appeared in *Alexander's Gas and Oil Connections*, an obscure trade publication. It described the readiness of three U.S. federal agencies to finance the prospective pipeline, and how "the United States was willing to police the pipeline infrastructure through permanent stationing of it troops in the region." The article appeared on February 23, 2003.
The objective of the first premeditated war was now achieved. The Bush Administration stood ready with financing to build the pipeline across Afghanistan, and with a permanent military presence to protect it.
Within two months President Bush sent the military might of America sweeping into Iraq.
The second round of deliberate deception was more egregious by far.
Alleging a relationship between bin Laden's al Qaeda and the Taliban in Afghanistan had at least some basis in fact. Alleging a link between al Qaeda and Saddam Hussein simply did not. And the weapons-of-mass-destruction argument was equally fraudulent, we know now. But the bait-and-switch "war on terrorism" would continue. "Cakewalk." The staging of the Jessica Lynch rescue. The toppling of the statue in Baghdad. Mission accomplished. The orchestrated capture of Saddam Hussein. And the barrage of managed perception continues to this day.
The smokescreen includes the coverup of the 9/11 attacks on the Trade Towers and the Pentagon. Initially and fiercely resisting any inquiry at all, President Bush finally appoints a 10-person "9/11 Commission." Its report places the blame on "faulty intelligence." President Bush and Vice President Cheney are accorded breathtaking courtesies in the inquiry: they are not required to testify under oath, and they need not even testify separately. At the insistence of the White House, they are "interviewed" together in the Oval Office, with no transcription permitted.
The apparent manipulation of pre-war intelligence is not addressed by the 9/11 Commission, the veracity President Bush's many statements is assumed without question, and the troubling incongruities of 9/11 are ignored.
Many of the 10 commissioners, however, were burdened with stunning conflicts of interest -- Mr. Ben Veniste, for example -- mostly by their connections to the oil and defense industries, both of which were benefited beyond measure (and doubt) by the Mid East conflicts.
Then the Abu Ghraib horrors came to the surface. Then the spectacular cronyism of the no-bid contracts, with Mr. Cheney and his former company, Halliburton, becoming the icons of corruption. Then the domestic spying issue. Torrents of exposés were published, while Iraq descended into the hellish quagmire of insurgency and civil war"with Afghanistan belatedly following suit.
On November 7, 2006, the American people said, "Enough!" By any measure -- by public acclaim -- the last six years have been a national tragedy and a national disgrace.
In spite of the Democrats' united message rejecting it, many citizens are calling actively for the impeachment of President Bush, Vice President Cheney, Secretary of State Condoleezza Rice, and perhaps others. (Secretary Rumsfeld has left the Administration, but faces prosecution under German law.)
The story told here has to be considered "circumstantial." None of it results from testimony under oath, none of it has been admitted as legal evidence in a jurisprudential undertaking, and the presumption of innocence until guilt is proven remains axiomatic. And we might well reiterate the humane and civil plea, heard frequently after 9/11: what we need is justice, not vengeance.
We should not proceed directly to impeachment. At the very least, however, the story of George Bush's premeditated wars raises questions of presidential dereliction as grave as any in our history.
We need to know the truth and all the truth. The time has come, as well as the opportunity, for formal, Congressional investigations, based on subpoenas, sworn testimony, and direct evidence about 9/11 and about the created reality of the "war on terror."
The new Congress has no greater constitutional duty than to find this truth and display it, if our nightmarish politics is to end. If such inquiries clearly exonerate the Bush Administration, the nation can breathe deeply and go on. If they do not, then but only then should impeachment be undertaken.
To fail in this responsibility is to condone the surreal political discourse the Bush Administration has imposed. That could render it the permanent condition of American governance.
--Richard W. Behan's last book was *Plundered Promise: Capitalism, Politics, and the Fate of the Federal Lands* (Island Press, 2001). Behan is currently working on a more broadly rendered critique, "To Provide Against Invasions: Corporate Dominion and America's Derelict Democracy." He can be reached by email at firstname.lastname@example.org.
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Date: Sun, 25 Aug 2002
Linking the Bank and the War: Why go To Washington?
In November of 1969, President Nixon was preparing to use nuclear weapons against Hanoi and Haiphong. What stopped him were the anti-war mobilizations of that autumn. There were 'too many people in the street.' This September, as Bush continues to push for an invasion of Iraq, to support Sharon's seige of Palestine, and to reinforce the endless 'war on terror', the streets of Washington DC will again be filled with protestors. A mass mobilization has been called for September 25-29, when the World Bank and International Monetary Fund hold their annual Fall meetings.
The protests will focus on issues of economic justice, but they are also a general expression of our opposition to the Bush gang and their policies. If they are large and successful, they too could serve as a deterrent to Bush's escalation of his various wars, provided that we make clear connections between the issues of economic justice and peace.
What does global justice have to do with peace? Everything. The war on terror and the threatened war in the Middle East are integral outgrowths of the global corporate capitalist agenda.
That system has based its legitimacy on a fiction: that by opening the world's resources and peoples to unchecked corporate exploitation, removing governments from their responsibilities as regulators and providers of social services, and releasing corporations from any community accountability, it can provide the good life for all. Endlessly expanding wealth will bring universal democracy and harmony-and you can be a part of it!
But in reality, most people in the world are worse off than they were twenty years ago. The environment deteriorates and governments prove unable to grapple with serious issues such as global warming. Third world countries struggle under crushing loads of debt, and suffer further from IMF policies that enforce privatization of state resources and services and cutbacks in health, social welfare and education. Argentina, the IMF's 'poster child', is in economic ruin. Africa is more deeply impoverished than it was twenty years ago. In industrialized countries, policies of privatization, deregulation, corporate license and withdrawal of public support for social programs result in reduced services, increased prices, blackouts, brownouts, and unemployment, not to mention Enron, WorldCom, and all the rest. The promise now rings false to more and more people. Its legitimacy has successfully been eroded by campaigns of education, public information, demonstrations and direct action, and by its own flaws.
The system requires a new basis of legitimacy in order to retain power. Since September 11, that basis has been fear. If the promises of the system no longer seduce us, we may still cling to it out of fear of a larger enemy. An enemy is such a useful thing. It justifies the erosion of our freedoms and huge expenditures on armaments and the military. It keeps us from looking too closely at what our own leaders are doing, and focuses our anxieties and discontents on a foreign menace. An enemy allows us to periodically demonstrate the scope and firepower of the US Military, just in case anyone in the world still had lingering doubts about who is the top global superpower.
It is no accident that the enemy now wears a Muslim face. The power base of the Bush gang is oil. Oil is the life blood of the global corporate capitalist system. Only cheap oil can subsidize the transport of goods that make it possible for corporations to roam the globe in search of the cheapest labor and most lax regulations. An endlessly expanding economy requires endless oil reserves.
To maintain their control, the oil barons need to maintain our dependence on oil, undercutting the development of alternative fuels and renewable sources of energy, denying the facts of global warming and of oil's environmental costs. Much of the world's oil is under the Middle East, so American control must be maintained there. The world's largest untapped reserves of oil are in central Asia: hence the invasion of Afghanistan. Israel acts as a surrogate for U.S. military power, maintaining a harsh and humiliating control over Palestine as an ongoing warning to the rest of the Arab and Muslim world. A new mythology postulating a 'clash of civilizations' reworks old stereotypes of a progressive, democratic West in conflict with a regressive, primitive, autocratic East-when in reality, repressive forces can be found on both sides.
The mobilization needs to make these connections.
How do we delegitimize fear in a world in which we have real enemies? Not by pretending the world is safe, or by denying that there are regimes that pose the threat of violence. But by challenging the idea that safety can be assured by military backing for systems that create gross inequalities and mass despair. People's desires for lives of dignity and hope cannot be stamped out by force. Real security cannot be achieved by the hegemony of U.S. military might backing global corporate control. Global justice is the solution to global security These issues need to be faced on a global stage. Some voices in the movement have been suggesting that resources are better used locally than in going to mass mobilizations. While local organizing is always important, now is not the moment to pull back into a local focus. For this is the historic moment when the Bush forces will either win overarching control or be stymied. We are facing national and global policies that threaten our basic liberties and undermine anything we can achieve on a local level. It's a global system-its center of power is in Washington, DC, and that is the place to confront it. And the time to confront it is now.
Now-when the false promises of corporate globalization are more and more evident and its legitimacy is faltering. Now-when the Bush junta is pushing its warmongering agenda on an increasingly unsympathetic public. Now-when we most need to show the power holders and the world that there is a strong US movement that is not willing to march lockstep into the war frenzy. Now-when we still have a chance to prevent the next round of slaughter. Now is the moment to fill the streets in an exuberant uprising against the politics of fear and the policies of greed-and to recognize that they are two faces of the same system, and to disrupt it in as many unruly and joyful ways as our imaginations can conceive. For systems that depend on fear are on shaky ground.
We can refuse to be ruled by fear ourselves, to let fear narrow our choices and constrict our imagination. Courage feels good. When we act in spite of fear, we feel good about ourselves. When we plan and act with courage, when we choose our boldest and most creative visions, we evoke the opposite of fear, which is love, the tremor that can bring the fortress down.
For more information, see:
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[Related essay, "State of the Union's Empty Chairs & Oil Economics" follows below]
Bush Didn't Bungle Iraq, You Fools
Get off it. All the carping, belly-aching and complaining about George Bush's incompetence in Iraq, from both the Left and now the Right, is just dead wrong.
On the third anniversary of the tanks rolling over Iraq's border, most of the 59 million Homer Simpsons who voted for Bush are beginning to doubt if his mission was accomplished.
But don't kid yourself -- Bush and his co-conspirator, Dick Cheney, accomplished exactly what they set out to do. In case you've forgotten what their real mission was, let me remind you of White House spokesman Ari Fleisher's original announcement, three years ago, launching of what he called,
"Operation Iraqi Liberation."
O.I.L. How droll of them, how cute. Then, Karl Rove made the giggling boys in the White House change it to "OIF" -- Operation Iraqi Freedom. But the 101st Airborne wasn't sent to Basra to get its hands on Iraq's OIF.
"It's about oil," Robert Ebel told me. Who is Ebel? Formerly the CIA's top oil analyst, he was sent by the Pentagon, about a month before the invasion, to a secret confab in London with Saddam's former oil minister to finalize the plans for "liberating" Iraq's oil industry. In London, Bush's emissary Ebel also instructed Ibrahim Bahr al-Ulum, the man the Pentagon would choose as post-OIF oil minister for Iraq, on the correct method of disposing Iraq's crude.
And what did the USA want Iraq to do with Iraq's oil? The answer will surprise many of you: and it is uglier, more twisted, devilish and devious than anything imagined by the most conspiracy-addicted blogger. The answer can be found in a 323-page plan for Iraq's oil secretly drafted by the State Department. Our team got a hold of a copy; how, doesn't matter. The key thing is what's inside this thick Bush diktat: a directive to Iraqis to maintain a state oil company that will "enhance its relationship with OPEC."
Enhance its relationship with OPEC??? How strange: the government of the United States ordering Iraq to support the very OPEC oil cartel which is strangling our nation with outrageously high prices for crude.
Specifically, the system ordered up by the Bush cabal would keep a lid on Iraq's oil production -- limiting Iraq's oil pumping to the tight quota set by Saudi Arabia and the OPEC cartel.
There you have it. Yes, Bush went in for the oil -- not to get MORE of Iraq's oil, but to prevent Iraq producing TOO MUCH of it.
You must keep in mind who paid for George's ranch and Dick's bunker: Big Oil. And Big Oil -- and their buck-buddies, the Saudis -- don't make money from pumping more oil, but from pumping LESS of it. The lower the supply, the higher the price.
It's Economics 101. The oil industry is run by a cartel, OPEC, and what economists call an "oligopoly" -- a tiny handful of operators who make more money when there's less oil, not more of it. So, every time the "insurgents" blow up a pipeline in Basra, every time Mad Mahmoud in Tehran threatens to cut supply, the price of oil leaps. And Dick and George just LOVE it.
Dick and George didn't want more oil from Iraq, they wanted less. I know some of you, no matter what I write, insist that our President and his Veep are on the hunt for more crude so you can cheaply fill your family Hummer; that somehow, these two oil-patch babies are concerned that the price of gas in the USA is bumping up to $3 a gallon.
No so, gentle souls. Three bucks a gallon in the States (and a quid a litre in Britain) means colossal profits for Big Oil, and that makes Dick's ticker go pitty-pat with joy. The top oily-gopolists, the five largest oil companies, pulled in $113 billion in profit in 2005 --compared to a piddly $34 billion in 2002 before Operation Iraqi Liberation. In other words, it's been a good war for Big Oil.
As per Plan Bush, Bahr Al-Ulum became Iraq's occupation oil minister; the conquered nation "enhanced its relationship with OPEC;" and the price of oil, from Clinton peace-time to Bush war-time, shot up 317%.
In other words, on the third anniversary of invasion, we can say the attack and occupation is, indeed, a Mission Accomplished. However, it wasn't America's mission, nor the Iraqis'. It was an Mission Accomplished for OPEC and Big Oil.
********** On June 6, Penguin Dutton will release GREG PALAST'S NEW BOOK, "ARMED MADHOUSE: DISPATCHES FROM THE FRONT LINES OF THE CLASS WAR." Order it today -- and view his investigative reports for Harper's Magazine and BBC television's Newsnight -- at www.GregPalast.com.
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State of the Union's Empty Chairs & Oil Economics
Subj: [snowqueenanne] Who was missing
State of the Union's Empty Chairs
There were no surprises in President Bush's address to Congress, except maybe the firm statement that within a month our country will be at war. The State of the Union is less a blueprint for the future than a series of metaphors and symbols, be they words like "resolve" or the empty chair in the President's box representing the dead of Sept. 11. 2001.
Sitting in that box was a firefighter hero from the 9/11 attack on the Pentagon, as well as an Afghanistan veteran. But absence can be a powerful symbol as well, and there were numerous metaphorical blank spots in the tier of seats that surrounded the President's family
There were not many allies in that box: no France, no Germany, no Canada, no Russia, no China.
There were no representatives of the 160,000 veterans suffering from Gulf War Syndrome. There were none of the 13 million Iraqi children that, according to Eric Hoskins, leader of the Independent Study Team, "are at a grave risk of starvation, disease, death and psychological trauma." The Team is in Iraq examining the possible impact of war,
There were no governors, whose states are going bankrupt while the White House cuts domestic spending, jacks up the deficit to $315 billion, and gets ready to spend $100 billion plus on a new war.
There was no one representing the 42 million Americans without health care, or college students, whose average educational debt is now $27,600.
Some would have showed up if they could have.
Prime Minister Silvio Berlusconi might have made it, but not many Italians. Most of them are deeply opposed to the upcoming war. Tony Blair would have been there, but not the 68 percent of the British who take exception to his war policy. Spanish Prime Minister Jose Maria Aznar would have made a solo appear ance: The Spanish church, non-governmental organizations and the opposition issued a blistering "no to war" statement Jan. 26.
Secretary of Defense Rumsfeld's "new Europe" would have had seats--- Poland, Rumania, Hungary and Bulgaria---but given that their combined Gross Domestic Product couldn't spring for a single B-2 bomber, it's hard to imagine how they will be of much help.
The oil companies could have had their own section, although they didn't really need it. They are the Administration, including the President (Arbusto Energy and Harkin Oil); Vice-President Dick Cheney (Halliburton Oil); Army Secretary Thomas White (Enron); Commerce Secretary Don Evans (Tom Brown Inc., an oil exploration company); and National Security Advisor, Condoleezza Rice (Chevron).
Lest anyone dismiss the oil connection as "cynical," keep the following in mind: According to Cheney's National Energy Policy Development Group, U.S. domestic oil production wi ll decline 12 percent over the next 20 years, while oil consumption will increase by one-third, two-thirds of which must be imported. Since the Middle East has 65 percent of the world's oil reserves, and Iraq might just have as much as-- or more than--Saudi Arabia, is it "cynical" to suggest that oil is a big part of this? As one unnamed U.S. diplomat told the Sunday Herald (Scotland), "the impending U.S. regime change in Baghdad is a strategic necessity."
Also notably missing from the box were the majority of economists who think the Administration's $674 billion tax cut for the wealthy is seriously loopy and will have virtually no effect on stimulating the economy.
While growth is up slightly (just over 2 percent) so is joblessness, and if unemployment doesn't start coming down from its present 6 percent, consumers may stop using their plastic. Watch out then. "The American consumer has been the last gasp for the U.S. economy, "says Stephen Ro ach, Chief Economist for Morgan Stanley, "If the consumer weakens further, there is not a whole lot left."
If the war goes wrong (and with war, one can never tell), the Center for Strategic and International Studies projects that the jobless rate could jump to 7.5 percent and the price of gasoline to $3 a gallon. That would tank the economy.
As the $10 trillion American economy goes, so goes most the world.
Europe's financial situation is delicate, Japan is recession-bound, Indonesia, the Philippines and Singapore are in trouble, and Latin America is still on life support. "This is not a good time for the world to be able to absorb the cost of war," says Brian Fabbri, an economist with the French bank BNP Paribas.
And yet we go to war regardless of the domestic and international consequences and without even a dim idea of what of lies at the other end. "War destroys any conception of goals, including any conception of the goals o f war," the writer/philosopher Simone Weil once noted, "It even destroys the idea of putting an end to war."
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Subj: [snow-news] FT: French business leaders gloomy after France's rejection of EU Constitution
FRENCH BUSINESS MAY REGRET ITS SILENCE
Financial Times (UK)
France's business leaders will have much soul-searching to do if the No camp triumphs in Sunday's EU constitution referendum. Most have kept silent, fearing their interventions would be unhelpful to the Yes side, but if the treaty is rejected they will have let their case go by default.
It is easy to see why MEDEF [NOTE: The Mouvement des entreprises de France dates from 1998; it was formerly known as the CNPF (Conseil national du patronat français), constituted in 1946 to represent French business interests, which was the reconstitution, after the fall of the Vichy régime (which had dissolved it), of an organization comparable to the CGPF (Confédération générale de la production française), created following the end of the First World War. --J.R.], the employers' federation, chose not to campaign publicly even though most members support the treaty. Business is distrusted by voters and seen as the embodiment of "Anglo-Saxon free market reforms."
The silence was broken a week ago when 100 business leaders led by Michel Pébéreau, chairman of BNP Paribas, put their names to a manifesto urging the country to vote Yes.
Too often, though, the case has been put defensively, reassuring voters that France's social model will not be threatened. This contributes to a climate in which liberal reforms are too controversial even to discuss, let alone implement.
Claude Bébéar, head of the Institut Montaigne think tank, was franker in his *FT* interview yesterday. He warned that a No would hurt business by slowing the pace of reform in France and the rest of Europe, and criticized President Jacques Chirac for missing the opportunity for more ambitious measures.
He is right. The EU treaty, despite the heat generated, does not move Europe closer to or further from economic liberalism. But its steps to speed up decisions would be lost, potentially slowing completion of the single market, and the anti-reformist tenor of a No vote would surely be felt.
DUTCH WOULD SUFFER TOO
If there are few reasons for French business to welcome a No vote, that is equally true of the Dutch referendum on June 1. Outsiders will be baffled that one of Europe's most open traders -- which sells 80 per cent of its exports to EU neighbours -- should reject the treaty.
The Dutch have, in fact, been out of the love with the EU for some time. They are the biggest net contributor per head but many fear loss of sovereignty, domination by bigger countries, and an increase in Muslim immigration.
Gerrit Zalm, finance minister, warns that a No vote would damage the business and economic climate. The problem is, that climate is already poor as the Netherlands struggles out of a four-year downturn. In addition, voters distrust the unpopular center-right government, whose belated campaigning for the treaty may have boosted the No rather than the Yes.
An old controversy over whether the Dutch guilder entered the euro at too high a rate in 1999 has reawakened. A poll last November found that only 39 per cent of the Dutch believe adoption of the single currency was advantageous for the Netherlands.
Two businessmen are even raising funds for a legal challenge to win compensation over the way the exchange rate was fixed. An exasperated Mr. Zalm said the government's think tank had concluded the guilder was correctly valued against all euro currencies except the German mark, to which it had been pegged since 1979.
Nout Wellink, Dutch central bank chief, plays down fears that rejection of the treaty would have a direct impact on the economy. That may be true short term, but if paralysis of EU decision-making held back measures to deepen the single market, that would work against Dutch interests.
MORE FRANK IN ITALY
While France's business leaders have been reluctant to air their views, Luca di Montezemolo, chairman of Confindustria, Italy's employers' federation, has no such qualms about laying into politicians. Silvio Berlusconi, prime minister, sat stony-faced in the front row of Confindustria's annual assembly as the Fiat chairman warned the economy was in crisis and urged "courageous" measures to reform its outdated model.
Mr. Berlusconi, who in previous years waxed eloquent, confined himself to a brief statement that he was "deeply convinced we can all get out of this difficult situation."
Mr. Montezemolo's outspokenness is welcome from an organisation whose members have in the past sometimes been ambivalent about competition. Even if governments get their act together on reform, business must play its part.
Too many companies have depended on devaluation and anti-competitive regulation.
The clusters of artisan industries admired from abroad have not all kept up with the needs of research and marketing. They must be quicker to get out of low-value areas and into innovative ones.
GLUM MOOD AMONG EUROPEAN BUSINESS LEADERS
Financial Times (UK)
MEDEF, the French employers´ federation, on Monday morning warned of heavy consequences’ after the rejection of the European Union constitutional treaty, claiming that it would weaken the French economy.
Ernest-Antoine Seillière, MEDEF president, demanded the government begin a program of economic reform and modernization without delay.
MEDEF claimed the French economy would suffer after the triumphant No vote because of intensified competition between businesses within the EU. The rejection of the treaty weakened France in Europe and harmed its image internationally, Mr Seillière added.
He also claimed that the ballot result would make it more uncertain that the European Union would realize its Lisbon agenda’ of improving productivity to better compete with the U.S. and emerging economies.
The rejection prevents Europe from better organizing itself’ to promote its interests internationally and defend its economic and social model, he added.
Alain Bokobza, an equity strategist at SG Corporate Investment Banking, part of Société Générale, said European-based assets would deserve a wider risk premium if the EU did not update the way it runs itself.
Mr. Bokobza also suggested that some investors may have underestimated how much of an effect the referendum result will have on some shares, even though the market had plenty of warning that a No was likely.
Alcan, the Montreal-based aluminium and packaging group, said: We have a very clear strategy for France, and we´re going to continue that strategy. We ´re sticking to our game plan.’ Alcan became one of the biggest foreign investors in France last year when it bought Pechiney for 4 billion euros.
The glum mood among French business leaders was reflected across Europe.
Unice, Europe´s biggest employers body, descibed the No vote as an important setback for the continent in its bid to face off fierce competition in the global economy and insisted that the EU push on with its business strategy.
I call on all the decision-makers at EU and national level to find solutions to this important setback and in the meantime to make sure . . . that the work continues on implementation of the growth and Jobs strategy,’ said Jurgen Strübe, president of Unice, which represents 20m companies employing more than 120m European workers.
Arcelor, the world´s largest steelmaker, said it was disappointed’ but not surprised’ at the decision and also urged politicians to not to give up in their efforts to broker a new constitution.
Europe will not, and must not, stop with this No. Of course, the Treaty of Nice is not adapted to our new enlarged perimeter and to our needs of transparency and democracy. We will have to live with it, though, hoping that very soon, our political representatives will find a response to the fundamental questions that will determine Europe´s future in the world,’ said Guy Dollé, chief executive of the Luxembourg-based group.
Maria Livanos Cattaui, secretary general of the International Chamber of Commerce, identified a divergence between attitudes in the older established powers in Europe and some of the others -- especially the new entrants in eastern Europe.
What you see in Germany and you see in France is not necessarily indicative of what you see everywhere. There are also other countries where the people have a more aggressive feeling towards their future, where they look at it with a much more ‘we can do it´ attitude. People in some parts of Europe are fed up with some of the status quo and the entrenched way of doing things in some of the larger areas. It is going to be interesting to see which vision of Europe triumphs,’ she said.
--Additional reporting by Bernard Simon
Financial Times (UK)
While Paris was licking its wounds yesterday after its referendum thrashing, French bosses were wasting little time in attempting to do something radically different to improve the popular image of business.
For one of the main reasons for the French rejection of the constitution appears to have been deep-rooted fears the treaty would lead to a more liberal Europe, giving French companies more flexibility with inevitable repercussions on jobs and long established social benefits.
The French 'No' now threatened to weaken the economy, warned Ernest-Antoine Seillière, the outgoing president of MEDEF, the French employers federation. MEDEF is responding with a campaign to show that profits are not only good for companies but for the entire country.
MEDEF's executive committee is also proposing to appoint for the first time a woman as its president. That is significant in a country were business has traditionally been dominated by men connected through closely-knit power networks.
But by choosing Laurence Parisot as its preferred candidate, MEDEF's ruling body has also picked a representative of the service sector rather than opting again for an industrialist. This too is an important cultural shift, considering the other candidates included such heavyweights as Francis Mer, the former finance minister and steel boss, and Yvon Jacob, head of a diversified industrial group.
Paris should take heed. Rather than give in to anti-market scaremongers, the next government should use the referendum fiasco to start changing popular attitudes towards business and the economy.
MIXED MOTIVES IN REJECTION CLOUD WAY FORWARD ON JOBS AND GROWTH
Financial Times (UK)
Jobs and growth are the two priorities that the French government must address after voters' rejection of the European constitutional treaty, say economists.
But they warn that the strong anti-capitalism message behind many of the No votes has increased the risk that the government may back away from ambitious and potentially unpopular reforms and lurch towards a more protectionist economic policy.
"It is difficult to analyze the causes of the vote, as they are totally mixed," said Christian de Boissieu, the head of the Council of Economic Analysis, a government advisory body. "But one of the big causes is the 10 per cent unemployment rate and, in particular, the youth unemployment rate for people aged 18 to 25, which is twice as high."
Mr. de Boissieu said the government's big problem would be financing any new measures to stimulate job creation, as France is already seen as almost certain to break the European budget deficit limit of 3 per cent for a fourth consecutive year.
MEDEF, the French employers' federation, warned yesterday of "heavy consequences" of the No vote, claiming that it would further weaken the French economy, after a smaller-than-expected 0.2 per cent expansion in gross domestic product in the first quarter. Ernest-Antoine Seillière, MEDEF's president, demanded that the government begin a programme of economic reform and modernisation "without delay."
The referendum came at a sensitive time for MEDEF, which is in the process of choosing Mr. Seillière's successor. Whoever takes over will face the daunting challenge of improving the dire image of business leaders among the French public.
Bruno Cavalier, an economist at Crédit Agricole, said the eclectic reasons that drove people to vote No on Sunday -- from a rejection of globalization to a fear of an influx of workers from cheaper countries -- made it difficult for politicians to know how to respond.
However, Mr. Cavalier said the main impact of the vote was "negative in the mid- to long term," as France would have an "institutional crisis, on top of the existing problems of underperforming growth and high budget deficits" that was likely to slow substantial policy efforts to boost growth.
Maria Livanos Cattaui, the secretary-general of the International Chamber of Commerce, said: "If there are going to be setbacks it's going to be because of a rise of a very unsavoury populism with its protectionist tendencies." Mrs Livanos Cattaui argued that this would be "most unfortunate," since "the more closed a society, the more vulnerable is its economy."
In an attempt to look on the bright side, Marc Touati, chief economist at Natexis Banques Populaires, said the drop in the euro, which fell 0.9 per cent to a seven-month low of $1.25 against the dollar, would make life easier for French exporters and could boost growth.
While saying he hoped the vote would create "a positive electric shock" spurring fresh economic reform in France, Mr. Touati feared the government would "interpret it as a need to spend more" to deflect public dissatisfaction. "I hope they do not turn the tap of public spending. We are running out of time in France. In 10 years the pay-as-you go public pension system will have fallen into deficit at a huge cost for the state. They must act to cut public spending and trim the administration before then."
MEDEF claimed that the French economy would suffer after the No vote because of intensified competition between businesses within the EU. The rejection of the treaty weakened France in Europe and harmed its image internationally, Mr Seillière added.
He also claimed that the ballot result would make it yet more uncertain that the EU would realise its "Lisbon agenda" of improving productivity, the better to compete with the U.S. and emerging economies.
The constitution's rejection "prevents Europe from better organizing itself" to promote its interests internationally and defend its economic and social model, he said.
The CAC 40 index of leading French shares was up very slightly in trading
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Subj:[snow-news] 'Energy is everything. Literally,' says Richard Heinberg
INTRO: [What's your policy choice: (A) War? (B) Powerdown? © Snooze? Richard Heinberg says there aren't any other options, so you'd better pick one. --Mark]
PLAN WAR AND THE HUBBERT OIL CURVE
** An interview with Richard Heinberg **
Richard Heinberg is a professor at the Santa Rosa branch of the New College of California, where he teaches courses on Culture, Ecology and Sustainable Community. In 1994, his monthly on-line newsletter, called *MuseLetter* (http://www.museletter.com), received an Alternative Press Award from Utne Reader. He is the author of five books including, *A New Covenant with Nature: Notes on the End of Civilization and the Renewal of Culture* and *Cloning the Buddha: The Moral Impact of Biotechnology*. His latest book is titled, *The Party´s Over: Oil, War, and the Fate of Industrial Societies* (2003).
David Ross: How important is oil to industrial societies?
Richard Heinberg: It´s about as important to industrial societies as water is to fish. We wouldn´t be talking right now if it weren´t for oil. The industrial revolution was, basically, all about fossil fuels. Coal came first, but when oil was harnessed things really heated up. With oil humankind discovered the cheapest, most abundant source of energy ever.
Energy is everything. Literally. I happen to teach ecology, and in my field we study population and resource balances in nature -- which is really just another way of talking about energy. Human societies, like ecosystems, are fundamentally just energy processing systems. With the industrial revolution, human beings discovered an energy subsidy like no species has ever found before in the history of our planet.
As a result, we´ve increased our human population from just a few hundred million, at the start of the industrial revolution, to over six billion, three hundred million now. And of course the total is still growing: we´re adding about a billion people every twelve years at current rates. This is something that´s never been seen before. We´ve added more people just since 1999 than even existed in the world just a few hundred years ago. This is an indication of the incredible impact that fossil fuels have had on human societies.
Additionally, we´ve invented all sorts of technologies to take advantage of this energy subsidy through transportation, communications, manufacturing, etc. Machines now do things that were formally done by human or animal muscle power. We also do all sorts of things with machines that we didn´t do at all before. So fossil fuels have changed our way of life, our view of the world, how many of us live on the planet, how we live, and where we live.
Think of the Arizona desert, for example. How many people could live there without fossil fuels? Not many. But with the enlarged scope and speed of transportation resulting from oil, we can transport materials and resources from where they´re abundant to where they´re scarce and support a city like Phoenix. We can cut down forests in British Columbia and use the wood in Southern California, or transport water over long distances, wherever we need it. So, we end up with cites in places where nature ordinarily would not permit very many people to live. All these things together have created our way of life as we know it today, and oil is central to that way of life.
Can you talk about the Hubbert oil curve and its implications?
M. King Hubbert was a petroleum geologist whose life spanned most of the twentieth century. He was the most famous and renowned petroleum geologist of his time. He worked for Shell Oil Company and also taught at Massachusetts Institute of Technology, UC Los Angeles, and a number of other schools. He was the first geologist to make a fairly accurate estimate of the total ultimately recoverable quantity of oil, first in North America, and then later on, in the world as a whole. He also was the first petroleum geologist to understand the principles of oil depletion.
Hubbert realized that, for any given oil province, when about half the oil is gone production tends to peak. The reason for that is that we naturally we go after the easy, cheap oil first, and by the time about half of the total amount of oil is gone, the cheap, easy stuff tends to run out; then it becomes more difficult to extract what´s left. So there´s a bell-shaped curve to production that seems to apply across the board. Economic and political factors can change the shape of that curve: if there´s a war or the price of oil changes or a country voluntarily decides to restrict exports, those can alter the oil extraction profile. But even so, what goes up must eventually come down, and so depletion can be mathematically modeled even if the graph is fairly bumpy.
When Hubbert applied his methods to the United States, which was the world´s foremost oil producing nation for many decades, he determined that the halfway point of extraction would occur around 1970. Sure enough, just as Hubbert predicted, U.S. oil production peaked in 1970, and it´s been going down ever since. We´re extracting about as much conventional onshore oil in the U.S. now as we were in 1940, which is much less than was being extracted in 1970, and that´s the reason that we´re more and more dependent upon imported oil from places like Saudi Arabia, Venezuela, and Iraq.
Using Hubbert´s method, it´s also possible to predict when global oil production will peak. The scary thing is, the peak is likely not that far off. No one is absolutely sure, because it is impossible to determine exactly how much oil is yet to be discovered. Some countries have political motives for underreporting or overreporting their reserves. But the best guesses are that we´re only a few years away from the global oil production peak.
What will happen when we pass the peak of the Hubbert oil curve?
Once we hit the peak, every year thereafter we will be unable to find and pump more oil. If the demand continues at the present rate or grows, the supply will be inadequate. And that will have tremendous economic implications for the whole world. As I explained earlier, our whole industrial way of life is largely based on petroleum. So either we have to find other energy sources to make up for what we lose from petroleum as it begins to run out, or else we will go into permanent economic decline with vast implications for the economy, food production, transportation, and so on.
Can we find alternative energy sources in time that could replace oil?
That´s a surprisingly tough question because there are very few scientists out there who are really doing good comparative studies of the various energy alternatives. We have companies that are invested in particular energy alternatives, that are doing their own studies, but they understandably have a certain bias. What we need are really objective studies comparing the alternatives on the basis of a series of clear, transparent criteria, like: Are they renewable? What´s their environmental cost? What´s their energy profit ratio?
You see, it takes energy to get energy. It takes energy to drill an oil well, it takes energy to manufacture a photovoltaic solar panel. But the energy profit ratio is different for each of the alternatives, and that figure needs to be objectively determined. Suppose we were to invest $100 billion dollars over the next ten years in making a transition to a hydrogen economy, and then discovered that, in fact, hydrogen has a lot of hidden costs. Well, we can´t afford to lose ten years and $100 billion dollars going down the wrong road at this point.
So: Are there alternatives that can replace oil? Well, the answer is: We don´t know for sure, but there´s little cause for complacent assurance right now. The reason I say that is that most of the renewable alternatives like nuclear, wind, and solar have various drawbacks.
Nuclear power is expensive and dangerous, and the problem of radioactive waste storage has not been solved. With wind, you can only place turbines in certain places (wind is probably the best of the alternatives, by the way, in my view). With solar, the sun only shines part of the day, and some regions are often cloudy. Photovoltaics, right now, are still quite expensive. I speak from experience: I´ve got PV panels on the roof of my house right now. I´m glad I installed that system, but it´s an expensive way to go and not very many people are willing to make the investment.
Hydrogen is not even an energy source; it´s just an energy storage medium. Yes, we could run cars on hydrogen, but where are we going to get enough hydrogen to run millions of autos? Either it has to be made either from fossil fuels -- which are the source of nearly all commercially available hydrogen today -- or from water using electrolysis. But making hydrogen from water takes a lot of electricity; in fact, it takes more energy in the form of electricity than the hydrogen will give you later on.
Again: where will we get all of this extra electricity? We´re not going to get it from natural gas, because we in North America are starting to run out of natural gas. Are we going to get it from nuclear, solar, or wind? If we choose any of these alternatives, it means dramatically increasing our energy budget for electricity production at a time when we´re going to be suffering from the economic effects of petroleum and natural gas depletion. We´re not prepared to make a huge investment in new electrical generating capacity now, and we will be even less prepared then.
How does human carrying capacity fit into the context of the Hubert oil curve?
We have artificially increased the carrying capacity for human beings on planet earth. Carrying capacity is how many individuals of a given species can be supported by the environment. That number tends to vary, depending on weather, rainfall, etc. Carrying capacity changes for just about every species from year to year. Well, we human beings have found a way to artificially -- and probably only temporarily -- enlarge our carrying capacity with industrial agriculture, expanded transportation networks, technology, better sanitation, better medical care, etc.
The problem is that this expanded carrying capacity is dependent on a non-renewable resource, namely, fossil fuels. So this is not permanent carrying capacity that we´ve created; this is what William Catton -- who wrote the wonderful book, *Overshoot*, back in the 1980s -- called phantom carrying capacity. It´s carrying capacity that may vanish as fossil fuels disappear from our lives.
What´s the size of that phantom carrying capacity? Nobody knows for sure, but if we look back to how many people planet Earth supported before we started using oil, we find it was fewer than two billion. We now have over six billion. So, even granting that we´ve discovered ways of keeping people alive through better sanitation and so on, ways that might be sustainable using relatively little energy, the fact is that we´ve probably overshot our carrying capacity, and we may need to find ways to reduce the human load on the environment if we´re all going to survive.
Can you talk about the different options for our future as we pass the peak of the Hubbert curve?
Plan A, or what I call Plan War is what we´re pursuing right now in Iraq. Whoever has the most guns and bombs will compete with everyone else for the remaining resources, and use them till they´re gone.
Of course, the situation is a bit more complicated than that. Obviously, the U.S. didn´t conquer Iraq so that we could just literally build a pipeline directly from Basra to Houston. It´s more complicated than that. I think the U.S. has economic and geopolitical reasons for wanting to control the price of global oil, and have its hands on the spigot, if you will. Iraq is a pivotal country in terms of the future of oil production. It has the second largest reserves, and it´s sitting right there between Saudi Arabia and Iran.
Saudi Arabia has the largest reserves, but it´s politically unstable, and it´s unclear what would happen in Saudi Arabia if the government there were to fall, whether supplies would be cut off at least temporarily. So, having a large military presence next door to Saudi Arabia must make a lot of sense in the minds of the geostrategists.
U.S. geopolitics in the Middle East is complex and multi-layered, but it´s not really an oversimplification to say that it´s fundamentally all about oil. The U.S. would not be interested in the Middle East if there weren´t a lot of oil there, and the main reason the U.S. is interested in places like Africa and South America, again, is for the resources.
So that´s Plan A, and it doesn´t look like it´s going to have a very happy ending because one can foresee more and more armed conflicts between heavily militarized consuming nations and poorer resource-rich producer nations. And eventually, there will be conflicts between competing consuming nations. China, for example, wants to industrialize. China is using more and more oil every year. If the Chinese are going to raise their standard of living and industrialize, they´re going to need lots of oil. But if global oil production peaks, that means the Chinese will be in direct competition for every barrel of oil with the already developed countries like the U.S. So, how are we going to work that out? Using nuclear bombs? I hope not, but right now I don´t see any other thinking going on.
Plan B, or what I call Plan Powerdown, would entail some kind of national and global process for deliberately reducing our dependence on fossil fuels. It would require changing our economy so it´s no longer a growth economy. It would require dealing with population issues, so that we´re putting less of a load on existing resources. It would require dealing with the problem of economic inequality within and among nations, because the more economic inequality we have, the higher the likelihood of conflict.
Powerdown would require changing our whole way of life, going from a consuming society to an efficient society, going from a growth society to a society that ´s steady-state and even reducing its scale year after year. That´s politically very difficult. The last person to attempt something like that, in this country anyway, was Jimmy Carter -- and look what happened to him, when a political opponent came along promising a return to times of plenty. Still, if the American people realized what´s at stake and what the long-term consequences of their path will be, I think many if not most would be interested in following Plan B.
Plan C is what I call Plan Snooze. This is the real path of least resistance. It entails doing little or nothing while the problem is temporarily denied or wished away. There are all sorts of people assuring us that the market can take care of any resource shortages. Or that all of the intelligent people working on the problem will surely come up with an easy solution. Or that we will see an effortless transition to a hydrogen economy.
If you watch television and read the newspapers, you will see that this is a popular message. It´s what the corporations are telling us, and it´s what we all want to hear: Somebody is going to take care of the problem, so don´t worry about it. Unfortunately, the problem with Plan C, as far as I can tell, is it´s probably wishful thinking. It merely locks us into the path we´re already on, which leads us back to Plan A, back to competition for the remaining resources. Plan Powerdown requires hard choices, political will, and effort; if we avoid those because we´re convinced that there´s an easy way out, we will squander the little time we have left for maneuvering. Then the only option we will likely have left is military confrontation over the remaining resources.
The Hubbert oil peak is predicted to occur in 5-10 years. You´ve written that natural gas will go through the same peak in supply even sooner.
In North America, it´s happening right now. We´re in the middle of a natural gas crisis, but you have to read the business pages of the newspaper to find the evidence for that. Alan Greenspan has gone before Congress twice now to say that we have a big problem here, and that he doesn´t have the solution to it. This summer, Energy Secretary, Spencer Abraham convened a blue ribbon panel in Washington to address this. Abraham essentially said: Look folks, I need some short-term solutions. And the rest of the day, people from industry offered long-term partial solutions, but nothing that could make much difference in the next couple of years.
Currently, the market is dealing with the gas shortage through what´s called demand destruction.’ That means that prices rise sufficiently -- and natural gas prices are about twice what they were a year and a half ago -- to drive whole industries out of the market, so that the folks can heat their houses in the winter. Currently, 20 percent of the fertilizer industry in the U.S. --which uses natural gas to make ammonia-based fertilizers -- is gone permanently. Another 30 percent is closed down temporarily until gas prices go down, which they probably won´t. So probably half the fertilizer industry is gone. The chemical industries and a lot of manufacturers are teetering on the brink right now because they can´t afford natural gas at current prices.
So what´s going to happen? All those industries are going to go overseas. Fertilizer will be made for us in the Middle East, Trinidad, and other places that have natural gas, and then it will be shipped here. But even so, the natural gas situation is going to get worse because we´re generating a lot of our electricity with gas-fired power plants, and it´s entirely possible that, even as soon as later this summer may start to experience brown-outs or rolling black-outs.
Next summer is likely to be a lot worse, because, as I said, there´s no short-term solution to this. The U.S. has already peaked in natural gas production, and Canada -- we´ve been importing 16 percent of our natural gas from Canada -- has peaked this year too. They´re forecasting that their natural gas production this year will be down 3 percent from last year.
So we´re looking at a big problem, and it´s not going to be solved by importing liquefied natural gas in tankers. That will help, but it´s expensive, and years are required to build all the new tankers, the new special off-loading terminals, etc. The natural gas industry´s solution is to get more permits from the government to drill in Colorado, offshore, etc., but it´s unlikely that enough natural gas will be found in those places to really make that much of a difference. In Colorado, there´s coal-bed methane, which causes huge environmental problems to extract. Offshore of California and Florida, the estimates of what´s actually there are not all that encouraging.
Where can readers go for more information?
If they want more information on natural gas, I would recommend information from Julian Darley of http://www.globalpublicmedia.org. There you´ll find audio and video interviews with a lot of very knowledgeable experts on energy resource depletion. If you want more information on the social, economic, and political implications of all of this, go to my website, which is http://www.museletter.com.
--David Ross is a starving grass-root activist. To help him continue his work, send donations to: David Ross, P.O. Box 591, Arcata, CA 95518 or email him at email@example.com.
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INTRO: ANALYSIS: 'The final resource war will likely be for the planet's survival'
[This overview of the problem of resource wars in the contemporary era was published in the January 2007 number of *Monthly Review*. -- William K. Tabb quotes studies that demonstrate that "High levels of oil dependence correlate especially strongly" with "large-scale civil wars," and that "countries with one or two primary export resources have more than a one-in-five chance of civil war in any given year," compared to a one in a hundred chance in countries without such dependency. -- The bulk of the victims in such wars in recent decades have been civilians. -- Tabb focuses on Africa, oil, and U.S. hegemonic policies as a strategy for controlling resources. -- He concludes with these reflections: "[T]here is growing awareness that the final resource war will likely be for the planet´s survival. . . . The resource war against the environment will be better avoided when we stop counting consumption of nature as income, as a free good, while we deplete our natural capital, as Herman Daly and others have long suggested. The past rates of accumulation of capital which are now blithely projected forward were possible because of the unsustainable usage of natural resources. Mainstream economists have a great deal of responsibility for ignoring the distinction between natural capital and human-made capital. Fortunately many world citizens take conservation and recycling seriously, and consider a very different set of policies essential. . . . The dramatic changes which will be required raise central issues regarding the logic of capitalism. . . . Rosa Luxemburg . . . famously argued that humanity faced the choice between socialism or barbarism. . . . The ecological crisis we face and the prospect of future resource wars make her warning all the more salient." -- William K. Tabb teaches economics at Queens College (CUNY); he earned a Ph.D. from the Univ. of Wisconsin in 1968. -- Thanks to Jack Freeman for sending this and to Renée Morel for forwarding it. --Mark]
The close relation between war and natural resources is of long standing. What else was colonial conquest about? Vast estates held by the Dutch East India Company came under direct control of the Crown as did the lands conquered by the British East India Company. What was in demand in Europe dictated the commodities produced and the natural resources that were ripped from the earth. European violence set the terms on which resource extraction occurred. There was no free trade for mutual benefit based on comparative advantage. There were few constraints on the violence employed in the extraction of resources starting with the shock and awe’ of bombardments and fire storms of wars of conquest and followed by the pitiless subjugation of people of color. Having defeated the locals in battle, the invaders suborned local elites and customs to extract resources from those they had conquered.
The form of the exploitative relationships with particular colonial and neocolonial overlords depended in large measure on the local traditions and social structures the invaders found. The Spanish used the Inca mita system of requisitioned labor for the mines where the subjugated died by the thousands from brutality and, as in the case of the vast silver mines of Potosi, by mercury poisoning. The crushed ore was mixed with mercury and trodden by the workers with their bare feet and then heated producing poisonous vapors. King Leopold murdered millions in the Congo employing slavery, terror, maiming, and mass killings because it was his view that the colonies should be exploited, not by the operation of a market economy, but by state intervention and compulsory cultivation of cash crops to be sold to and distributed by the state at controlled prices." [Note 1: Peter Duignan & Lewis H. Gann, *The Rulers of Belgian Africa* (Princeton, N.J.: Princeton University Press, 1979), 30; also see Adam Hochschild, *King Leopold´s Ghost* (New York: Houghton Mifflin Company, 1998).]
The Belgians ruled through Tutsi chiefs, promoting them to a superior status over the Hutus, and imposed compulsory cash crop demands through their Tutsi intermediaries. After independence, Tutsi military dictators were left to rule. The animosities created provided the fear and hatred which led to genocide decades after independence. In the post-independence states without indigenous capitalism, but with only a comprador class, control of state revenues and natural resources were the major sources of wealth. After independence, control of the army and the power to coerce, following the colonial model, became the norm in many new nation-states. In the struggles which broke out after independence, and frequently under Cold War pressures, it was often the most violent and ruthless elements willing to do whatever was necessary to gain control who came out on top -- especially where there were easily exploitable resources to be appropriated and make those commanding them rich beyond imagining. The new nation´s economy remained entwined with that of the former colonial power. More democratically inclined indigenous leaders could be coerced and assassinated. Sponsored civil war and military coups could be employed to maintain access on favorable terms to resources.
Resource extraction in the contemporary era continues to spur extremes of violence and war. In a 1997 study, Jeffrey Sachs and Andrew Warner examined the economic performance of ninety-five countries between 1970 and 1990. [Note 2: Jeffrey D. Sachs & Andrew Warner, Fundamental Sources of Long-Run Growth,’ *American Economics Review*, May 1997.] They found the higher a country´s dependence on natural resource exports the slower their economic growth rate. Paul Collier and co-authors analyzed fifty-four large-scale civil wars that occurred between 1965 and 1999 and found that a higher ratio of primary commodity exports to GDP significantly and substantially’ increases the risk of conflict. [Note 3: See Paul Collier, Natural Resources, Development and Conflict: Channels of causation and Policy Interventions,’ World Bank, April 28, 2003.] High levels of oil dependence correlate especially strongly. Timber, it turns out, is also technologically suited to rebel predation,’ as with the Khmer Rouge. Researchers find the phenomenon of war booty futures,’ where outsiders back rebel groups in exchange for a future share of the takings -- a prospect which features heavily in Richard K. Morgan´s powerful dystopic novel *Market Forces*.
It should be pointed out that when we speak of wars in the last third of the twentieth century, we are talking about civil wars. Between 1965 and 1999, if we look at those wars in which more than a thousand people were killed a year, there were seventy-three civil wars, almost all driven by greed to control resources -- oil, diamonds, copper, cacao, coca, and even bananas. Collier and Anke Hoeffler find countries with one or two primary export resources have more than a one-in-five chance of civil war in any given year. [Note 4: Paul Collier & Anke Hoeffler, Greed and Grievance in Civil War,’ *Oxford Economic Papers*, October 2004.] In countries with no such dominant products, there is a one in a hundred chance. In these civil wars more than 90 percent of casualties are civilians. At the start of the twentieth century war casualties were 90 percent soldiers. Such traditional’ wars are rare today. Resource wars with their devastating impacts on civilians have become the norm.
Indeed, the oil rich countries of Africa -- Nigeria, Gabon, the Sudan, the Congo, Equatorial Africa, and Chad -- have long histories of coups, military rule, and strongmen. Millions have died of hunger and disease as a result of wars over oil, diamonds, copper, and other resources, as armed rebels steal, rape, and murder, making life-generating economic activity difficult if not impossible. In the Congo, one of the resource-richest countries on the planet, a half dozen countries have armies deployed and countless rebel groups have fought to control rich deposits of gold, diamonds, timber, copper, and valuable cobalt and coltan in what is often referred to as Africa´s First World War.’ Global Witness reports that despite being the fourth largest oil producer in Africa, Congo Brazzaville has overseas debt of $6.4 billion as a consequence of Elf Aquitaine, the former French state oil company´s strategy of influence peddling and bribery.
In Angola, Joseph Savimbi, backed by foreign powers from the Cold War, amassed a reported $4 billion from diamonds, ivory, and other resources sold abroad in his decades of looting and brutality before he was killed. In Angola, a million people died in the civil war, one child in five does not live to its fifth birthday, and 40 percent of Angola´s population has been displaced. Almost none of the income from the state-owned oil company found its way to Angola, but was instead diverted to overseas banks. It was the wholesale looting of Angola´s oil revenues that fueled that country´s vicious civil war.
Africa bleeds because of its abundant wealth. Charles Taylor privatized the resources of Liberia by selling rights to resources to foreign companies and pocketing the money. There is the case of Dafur in the oil-rich Sudan. There is Nigeria, exceedingly rich in oil and corruption, where foreign aid is badly needed. The environment of the Niger Delta is being destroyed, and people are killed by army thugs protecting Shell Oil. Equatorial Guinea is a criminalized state which receives half a billion in oil revenues. Because of this, it ranks sixth in the world in per capita income but third from the bottom in the U.N.´s human development index table. A third of the population has been killed or driven into exile. The revenues of the Cameroon-Chad pipeline operated by ExxonMobil, with additional investment from ChevronTexaco, do not help the people of the area who remain among the poorest of the poor as the natural wealth of their land is looted.
Wherever there are resources to be plundered, we find foreign companies ready to cooperate; often there is the World Bank to put a smiley face on these atrocities, claiming things would be worse if they did not supervise the corruption. The reality of the bank´s role, however, is quite different. Emil Salim, a former Indonesian environment minister who led the *World Bank Extractions Industries Review*, has written: The bank is a publicly supported institution whose mandate is poverty alleviation. Not only have the oil, gas, and mining industries not helped the poorest developing countries, they have often made them worse off." Note 5: *Extractive Industries Review* Secretariat, http://www.eireview.org/eir/eirhome.nsf. That is from the man the World Bank chose to review its past practices. He points out that scores of academic assessments as well as the bank´s own reports correlate corruption, civil war, and growing poverty with reliance on extractive industries, comparing unfavorably with the performance of more diversified economies.
While the cases I have mentioned focus on the relationship between resources and war in Africa, Salim´s own country is also an example of this relationship. Indonesia can be seen as analogous to a nineteenth-century empire. The central government exploits the territories, especially those rich in resources, along lines similar to what was done by the Europeans. Jakarta conducts a dirty war in Aceh, its northern province rich in natural gas and rife with civilian killings and disappearances. The Indonesian state has waged a campaign of terror and near genocide in oil- and natural gas-rich East Timor. ExxonMobil is the largest long-term investor in Indonesia. The foreign owned gold and copper mines of Irian Jaya, where miners die while working or are killed by security forces and the environment is devastated making life difficult for the province´s people, are an international scandal. In West Papua logging companies with close ties to the military have terrible reputations as well for using force against locals as they displace tribal people from their land and destroy the local ecosystem. The atrocities carried out by the military and the government in pursuit of revenues from their resources frequently require the cooperation of foreign transnationals and are supported by World Bank project aid.
Ted Koppel, writing in the *New York Times* (February 24, 2006), responded to what he described as the Bush administration´s touchiness’ about the charge that we are in Iraq because of oil by stating the obvious, though often unsaid, truth: Now that´s curious. Keeping oil flowing out of the Persian Gulf and through the Strait of Hormuz has been bedrock American foreign policy for more than half a century.’ Today control over the world´s oil supply is at the forefront of Washington policy makers´ thinking, even if the president and his team deny any such intent and talk publically of reducing dependence on Middle East oil by three-quarters of present levels, an absurdly impossible goal. Two-thirds of the oil in the world is in the Middle East, much of it under Iraq and Iran, the axis of oil, the current targets of the U.S. war on terrorism. Control of oil is integral to Washington´s official goal of world domination, a goal stated this baldly in national security documents.
During the administration of the first President Bush, the Pentagon under then Defense Secretary Dick Cheney produced a strategy paper stating the mission of convincing potential competitors that they need not aspire to a greater role or pursue a more aggressive posture to protect their legitimate interests.’ The United States would defend their interests for them and so the policy was to discourage them from challenging our leadership or seeking to overturn the established political and economic order." [Note 6: Patrick E. Tyler, U.S. Strategy Plan Calls for Insuring No Rivals Develop; A One-Superpower World; Pentagon´s Document Outlines Ways to Thwart Challenges to Primacy of America,’ *New York Times*, March 8, 1992.] Control of the world is facilitated through control of essential resources. By controlling the world´s energy, and in the presence of its overwhelming military superiority, the United States is potentially able to deny the lifeblood of any society and intimidate and coerce the world more effectively, a design going back easily to Henry Kissinger, and earlier to the emergence of U.S. global power at the end of the Second World War, but now carried to new heights by the neoconservatives.
Hegemony has always been a bipartisan consensus. With regard specifically to the Middle East we have the Carter Doctrine: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.’ Since Carter created the Rapid Deployment Force with this intervention in mind the United States has moved to forward positioning, the establishment of a huge permanent military presence in the region, including a number of multibillion-dollar bases in Iraq, huge fortified cities with all the comforts of home, fast-food places, video stores, and car rental agencies for the soldiers who garrison the empire along the arc of instability.’ All of this takes place in territories which coincide with the parts of the Global South where oil is found. That the official rationale is now the war on terrorism in place of anticommunism is secondary to the continuation of the basic policy of world domination.
Michael Klare, author of *Resource Wars* and *Blood for Oil*, cites British defense secretary John Reid´s warning that climate change will make scarce resources, clean water, viable agricultural land even scarcer’ and so make the emergence of violent conflict more likely." Note 7: Michael T. Klare, The Coming Resource Wars’ March 7, 2006, http://TomPaine.com. In the United States, too, military planners and the CIA spin out scenarios of wars for desperately needed natural resources and the need to deal with the mass migrations of desperate people as entire societies disintegrate. Climate change, these forecasts suggest, will bring on new and even greater resource wars. The United States with its overwhelming advantage in all things military is likely to see saber rattling and "shock and awe" as the best responses. When you are a hammer, everything looks like a nail,’ seems the appropriate metaphor for the petro-political situation. Some Americans, afraid of not being able to heat their homes and fill the tanks of their gas-guzzling cars, may unthinkingly offer support for new foreign adventures -- but Iraq has shown such oil comes at a high cost in blood and treasure.
It seems it is not all that easy to shock, awe, invade, and occupy countries. In the spring of 2006, 60 percent of Americans told the Gallup Poll that they did not think it worth going to war in Iraq and 74 percent disapproved of Bush´s handling of gasoline prices. They saw neither victory nor an easy exit and they had become suspicious that higher energy prices seemed to accompany such adventurism. Some worried about the U.S. balance of payments and some even knew that energy costs equaled a third of the trade deficit. Before the war, Lawrence Lindsey, then Bush´s senior economic adviser, suggested the war would cost $200 billion. He was sacked soon thereafter by an administration that insisted the war would cost $5060 billion. Current estimates by Linda Bilmes and Joseph Stiglitz are in terms of trillions of dollars.
The relationship of demand and supply of oil is complicated. It takes up to ten years and billions of dollars to get a new field into production. Refineries also take time to build and are hugely expensive. The present shortage of gasoline, often seen as a conspiracy by the oil giants, is in the main the result of rising demand especially from China and India, and supply shocks due to political events such as the U.S. invasion of Iraq, and uncertainty over the Bush administration´s intentions toward Iran and perhaps other producer states. When oil prices spiked in the 1970s the supply response was so great that the price of crude collapsed by 1986. In the 1990s demand growth was slow, no new fields were developed to increase production levels, and even so the price collapsed again in 1998-1999. This is not to say that huge profits were not made by the Western oil companies, as well as OPEC and the banks which recycled petrodollars. Since then there has been little excess capacity -- in 2005 the world´s excess capacity was 2-3 percent. It had been 15 percent in 1986.
Those who would deny even the possibility of any conspiracy point out that the international oil companies have complete control over only 7-8 percent of global crude oil and access to perhaps 20 percent of reserves. They are therefore unlikely to have conspired to produce today´s high energy prices. This is a cyclical industry and conjunctural events are responsible for most oil spikes. Events such as Vice President Cheney´s remarks during a visit to Lithuania in the spring of 2006 when he criticized Russia for using oil and natural gas as tools of intimidation and blackmail,’ and the intense negotiations to build pipelines for oil and natural gas from Kazakhstan, Azerbaijan, or Uzbekistan without going through Iran or Russia, serve to illustrate that global market shares for particular companies are not the most crucial factors in understanding oil as a weapon.
It is analysis rather than an apology for Big Oil that tells us that the situation has changed since the end of the Second World War when the so-called Seven Sisters dominated the world oil market. Today, ExxonMobil produces less than 3 percent of world output and the seven largest oil companies control less than 5 percent of world reserves. This does not mean that Exxon-Mobil is not the world´s most valuable and most profitable company, nor that the oil giants do not benefit from high oil prices. They do, however, face more sophisticated national oil companies from China, India, Brazil, and elsewhere, who compete for supply which is increasingly under the control of state-controlled producers. The seven largest national oil companies, like Kuwait Petroleum, Abu Dhabi National Oil, Algeria´s Sonatrach, and the more familiar Saudi Aramco, hold at least half the world´s proven resources, and account for a quarter of current production. [Note 8: Valerie Marcel & John V. Mitchell, *Oil Titans: National Oil Companies in the Middle East* (London: Chatham House/Brookings, 2006).] Like Venezuela´s national oil company, which fuels Chavez´s Bolivarian revolution, they have changed the distributional equation nationally as well as globally.
The days of unalloyed Anglo-American petroleum dominance are gone, and that is why the hegemonic state and its coalition partner, no longer so Great Britain, are using force to reassert dominance not through corporate control so much as state terror and coercion. While there can be no question that the national oil companies have changed the distribution of revenues from the grossly exploitative terms of pre-Second World War Anglo-American total dominance, the governments of the Middle East retain limited room to maneuver where the national interests of the United States and its thirst for oil are concerned. The long shadow of Washington darkens and dominates the politics of the region. Price-supply conditions have been set in the past by Saudi Arabia, which has acted to prevent problems for the advanced capitalist economies. It is less certain that they can continue to do so. It is surely in the interest of the hegemonic state and its British ally to gain greater purchase over supply conditions through regime change and closer working relations with new producers in the Caspian Basin and in Africa.
As to peak oil, predictions of the end of oil have been made often in the past, and it is not clear that frightening scenarios will play out in the short run that some suggest. There are complex issues of geology, technology, and prospective efficiency considerations. The accepted definition of proven reserves includes what is known and can be exploited economically with existing technology. Both price and potential supply are conservatively estimated for this purpose, although some experts suggest that producers have a strong interest in overestimating their reserve position. Because OPEC quotas are based on proven reserves, it is in the interest of members to greatly exaggerate their reserves so they can pump more. Such political barrels’ are estimated to be 44 percent of the total reserves OPEC claims. Russia´s reserves are also uncertain, but probably 3040 percent lower than officially claimed. [Note 9: Nicolas Sarkis, Addicted to Crude,’ *Le Monde Diplomatique*, May 2006, 4.] Some countries have been extracting large amounts of crude but maintaining the same proven reserves figures. Companies too have incentive to exaggerate their reserves. In 2006 Shell had to admit it had overestimated its reserves by nearly a third and its stock price promptly fell. Finally it is also the case that for the past two decades the oil taken out of the ground has exceeded new discoveries.
However, since only a little over a third of oil in known fields can be recovered today, technological innovation can be expected to increase the proven reserve figure. Among the optimists, Leonardo Maugeri wrote in *Foreign Affairs*, Put simply, the world will continue to have plenty of oil." [Note 10: Leonardo Maugeri, Two Cheers for Expensive Oil,’ *Foreign Affairs* (March/April 2006), 155.] In his view, oil experts generally underestimate supply and overestimate demand. Like other optimists, he believes China´s demand for oil is due to extraordinary circumstances that may not last, and that demand in much of the industrialized world appears to have reached its peak and faces long-term decline. That is one view. Others point out that between 1992 and 2002 world oil demand grew by 1.5 percent, by 1.9 percent in 2003, and by 3.7 percent in 2004, with China´s demand increasing by 7.6 percent in 2003 and 15.8 percent in 2004. To say that it may not keep growing at this rate may be sensible, but it will surely keep growing and it will not be alone.
Even for those as optimistic as Maugeri, the question of who controls the oil cannot be irrelevant. The U.S. state, through threat, intimidation, and violence, wants its ham fist on the spigot, allowing it to blackmail other countries. U.S. imperialism has exerted control over the Global South through the World Bank, the IMF, and the WTO. During the Cold War it used the threat of Communist Russia and China to keep Europe and Japan under its leadership.’ It is now attempting to use terrorism in the same way -- not altogether successfully, as it is turning out since its invasions and occupations of Afghanistan and Iraq have failed to produce stable governments. Its actions have produced more terrorists and alienated most of the world. Seeking control over oil for leverage does not seem a far-fetched stratagem for the oil-soaked Bush-Cheney administration.
The most effective resistance to this imperialist pattern now is coming from Latin America, where Hugo Chávez has been repeatedly elected and won referenda because he has stood up to the United States and used his country´s oil revenues to raise living standards of the poor of his nation. In April 2006, Petroleos de Venezuela increased its stake in major projects to 60 percent from 40 percent, as well as increasing its royalty cut. In Bolivia, Evo Morales nationalized the energy industry, causing the United States to express disapproval regarding Morales´s weak commitment to democracy’ (echoing its charge against Chávez). However, Bolivia´s first elected indigenous president, according to the leading polling organization in the country, enjoyed an 80 percent approval rating in the spring of 2006 while George W. Bush´s approval rating was at 33 percent among his country´s citizens. Like Chávez who had suffered at least one coup attempt, Morales has to confront a military whose officers, trained at the School of the Americas, are not, as the press delicately put it, a natural ally of Mr. Morales.’ Such developments in Latin America and similar manifestations of petro-nationalism elsewhere, along with the general decline in U.S. prestige and authority in the world, have led Thomas Friedman to suggest we are now in the post-post-Cold War era in which, U.S. power is being checked from every corner." [Note 11: Thomas L. Friedman, The Post-Post-Cold War,’ *New York Times*, May 10, 2006.] The major enemies of the United States somehow seemed to be oil producers, a group of countries that given the current high energy prices cannot be easily intimidated through economic sanctions or political pressure.
To cheerleaders for U.S. imperialism, it is the ineptitude of the Bush-Cheney policies, not their goals, that receive criticism. The critique of anti-imperialists now includes a maturing ecological consciousness. Struggles over energy are being conceptualized more usefully in terms of the economic system as well as energy alternatives. Indeed there is growing awareness that the final resource war will likely be for the planet´s survival. Currently, only 1.25 percent of China´s population possesses a car. If car ownership in that country were to reach the U.S. level, and the forecasts are that in 2031 China will have a per capita income close to that of the United States in 2004, China would have a billion vehicles. If they all needed to run on gasoline there is simply not enough oil and of course the greenhouse gases produced would heat things up distressingly. One hopes for technological breakthroughs, but the precautionary principle suggests some major changes are in order as global energy consumption presses on available supply. A system that privileges accumulation over sustainability, individualism over solidarity, cannot be accepted.
The scarcity of other resources may prove serious as well. For example, today one in four people on the planet do not have access to safe drinking water; 12 percent of the world´s population consumes 86 percent of available fresh water. With global consumption of fresh water doubling in the next twenty years, there are all sorts of water-war scenarios. Already five million people die a year from diseases related to contaminated water. China´s rapid industrialization has been accompanied by water contamination affecting 300 million people, that is nearly a third of the population. Kofi Annan´s *Millennium Report* tells us that if present trends continue, two out of three people on the planet will live in countries considered to be water-stressed.’ The World Bank projects that 40 percent of the people living in the world of 2050 will face some form of water shortage. In Palestine, Israel´s commandeering of scarce water is a major issue and on many other borders water conflicts are major occurrences.
The resource war against the environment will be better avoided when we stop counting consumption of nature as income, as a free good, while we deplete our natural capital, as Herman Daly and others have long suggested. The past rates of accumulation of capital which are now blithely projected forward were possible because of the unsustainable usage of natural resources. Mainstream economists have a great deal of responsibility for ignoring the distinction between natural capital and human-made capital. Fortunately many world citizens take conservation and recycling seriously, and consider a very different set of policies essential. They are ready to challenge the presumptions of a consumer society which has ignored the limits of the biosphere and resource base of our planet. How we respond to these resource pressures will determine what kind of society we shall have and what sort of planet ours will be.
The dramatic changes which will be required raise central issues regarding the logic of capitalism. Writing from prison in 1915 and facing the likely prospect of the First World War, Rosa Luxemburg in her *Junius Pamphlet* famously argued that humanity faced the choice between socialism or barbarism. We stand today,’ she wrote, between the awful proposition: either the triumph of imperialism and the destruction of all culture, and as in ancient Rome, depopulation, desolation, degeneration, a vast cemetery; or, the victory of socialism.’ The ecological crisis we face and the prospect of future resource wars make her warning all the more salient.
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ESSAY: The 'Laura Ingalls Wilder effect' and the future of humanity (Bill McKibben)
INTRO: [*Peripeteia* is what the ancient Greeks called it: "A sudden change of fortune or reversal of circumstances, as in a drama." -- Or as in life. -- After two and a half centuries in which Westerners have assumed that, as author Bill McKibben puts it, "the two birds More and Better roosted on the same branch," the story line is changing, and people in the West are being forced to choose. -- "[T]he distinguishing feature of our moment is this: Better has flown a few trees over to make her nest. And that changes everything. Now . . . you have to choose. It's More *or* Better." -- McKibben's consoling message, though, is that More wasn't really Better anyway. -- "Researchers from a wide variety of disciplines have started to figure out how to assess satisfaction, and economists have begun to explore the implications." -- It's now demonstrable that More isn't so wonderful after all. -- This long piece appears in the March/April 2007 number of *Mother Jones*. --Mark]
REVERSAL OF FORTUNE
** News: The formula for human well-being used to be simple: Make money,
For most of human history, the two birds More and Better roosted on the same branch. You could toss one stone and hope to hit them both. That's why the centuries since Adam Smith launched modern economics with his book *The Wealth of Nations* have been so single-mindedly devoted to the dogged pursuit of maximum economic production. Smith's core ideas -- that individuals pursuing their own interests in a market society end up making each other richer; and that increasing efficiency, usually by increasing scale, is the key to increasing wealth -- have indisputably worked. They've produced more More than he could ever have imagined. They've built the unprecedented prosperity and ease that distinguish the lives of most of the people reading these words. It is no wonder and no accident that Smith's ideas still dominate our politics, our outlook, even our personalities.
But the distinguishing feature of our moment is this: Better has flown a few trees over to make her nest. And that changes everything. Now, with the stone of your life or your society gripped in your hand, you have to choose. It's More *or* Better.
Which means, according to new research emerging from many quarters, that our continued devotion to growth above all is, on balance, making our lives worse, both collectively and individually. Growth no longer makes most people wealthier, but instead generates inequality and insecurity. Growth is bumping up against physical limits so profound -- like climate change and peak oil -- that trying to keep expanding the economy may be not just impossible but also dangerous. And perhaps most surprisingly, *growth no longer makes us happier*. Given our current dogma, that's as bizarre an idea as proposing that gravity pushes apples skyward. But then, even Newtonian physics eventually shifted to acknowledge Einstein's more complicated universe.
1. "WE CAN DO IT IF WE BELIEVE IT": FDR, LBJ, AND THE INVENTION OF GROWTH
It was the great economist John Maynard Keynes who pointed out that until very recently, "there was no very great change in the standard of life of the average man living in the civilized centers of the earth." At the utmost, Keynes calculated, the standard of living roughly doubled between 2000 B.C. and the dawn of the 18th century -- four millennia during which we basically didn't learn to do much of anything new. Before history began, we had already figured out fire, language, cattle, the wheel, the plow, the sail, the pot. We had banks and governments and mathematics and religion.
And then, something new finally did happen. In 1712, a British inventor named Thomas Newcomen created the first practical steam engine. Over the centuries that followed, fossil fuels helped create everything we consider normal and obvious about the modern world, from electricity to steel to fertilizer; now, a 100 percent jump in the standard of living could suddenly be accomplished in a few decades, not a few millennia.
In some ways, the invention of the idea of economic growth was almost as significant as the invention of fossil-fuel power. But it took a little longer to take hold. During the Depression, even FDR routinely spoke of America's economy as mature, with no further expansion anticipated. Then came World War II and the postwar boom -- by the time Lyndon Johnson moved into the White House in 1963, he said things like: "I'm sick of all the people who talk about the things we can't do. Hell, we're the richest country in the world, the most powerful. We can do it all. . . . We can do it if we believe it." He wasn't alone in thinking this way. From Moscow, Nikita Khrushchev thundered, "Growth of industrial and agricultural production is the battering ram with which we shall smash the capitalist system."
Yet the bad news was already apparent, if you cared to look. Burning rivers and smoggy cities demonstrated the dark side of industrial expansion. In 1972, a trio of MIT researchers released a series of computer forecasts they called "limits to growth," which showed that unbridled expansion would eventually deplete our resource base. A year later the British economist E.F. Schumacher wrote the best-selling *Small Is Beautiful*. (Soon after, when Schumacher came to the United States on a speaking tour, Jimmy Carter actually received him at the White House --imagine the current president making time for *any* economist.) By 1979, the sociologist Amitai Etzioni reported to President Carter that only 30 percent of Americans were "pro-growth," 31 percent were "anti-growth," and 39 percent were "highly uncertain."
Such ambivalence, Etzioni predicted, "is too stressful for societies to endure," and Ronald Reagan proved his point. He convinced us it was "Morning in America" -- out with limits, in with Trump. Today, mainstream liberals and conservatives compete mainly on the question of who can flog the economy harder. Larry Summers, who served as Bill Clinton's secretary of the treasury, at one point declared that the Clinton administration "cannot and will not accept any 'speed limit' on American economic growth. It is the task of economic policy to grow the economy as rapidly, sustainably, and inclusively as possible." It's the economy, stupid.
2. OIL BINGEING, CHINESE CARS, AND THE END OF THE EASY FIX
Except there are three small things. The first I'll mention mostly in passing: Even though the economy continues to grow, most of us are no longer getting wealthier. The average wage in the United States is less now, in real dollars, than it was 30 years ago. Even for those with college degrees, and though productivity was growing faster than it had for decades, between 2000 and 2004 earnings fell 5.2 percent when adjusted for inflation, according to the most recent data from White House economists. Much the same thing has happened across most of the globe. More than 60 countries around the world, in fact, have seen incomes per capita fall in the past decade.
For the second point, it's useful to remember what Thomas Newcomen was up to when he helped launch the Industrial Revolution -- burning coal to pump water out of a coal mine. This revolution both depended on, and revolved around, fossil fuels. "Before coal," writes the economist Jeffrey Sachs, "economic production was limited by energy inputs, almost all of which depended on the production of biomass: food for humans and farm animals, and fuel wood for heating and certain industrial processes." That is, energy depended on how much you could grow. But fossil energy depended on how much had grown eons before -- all those billions of tons of ancient biology squashed by the weight of time till they'd turned into strata and pools and seams of hydrocarbons, waiting for us to discover them.
To understand how valuable, and irreplaceable, that lake of fuel was, consider a few other forms of creating usable energy. Ethanol can perfectly well replace gasoline in a tank; like petroleum, it's a way of using biology to create energy, and right now it's a hot commodity, backed with billions of dollars of government subsidies. But ethanol relies on plants that grow anew each year, most often corn; by the time you've driven your tractor to tend the fields, and your truck to carry the crop to the refinery, and powered your refinery, the best-case "energy output-to-input ratio" is something like 1.34-to-1. You've spent 100 Btu of fossil energy to get 134 Btu. Perhaps that's worth doing, but as Kamyar Enshayan of the University of Northern Iowa points out, "it's not impressive" compared to the ratio for oil, which ranges from 30-to-1 to 200-to-1, depending on where you drill it. To go from our fossil-fuel world to a biomass world would be a little like leaving the Garden of Eden for the land where bread must be earned by "the sweat of your brow."
And east of Eden is precisely where we may be headed. As everyone knows, the past three years have seen a spate of reports and books and documentaries suggesting that humanity may have neared or passed its oil peak -- that is, the point at which those pools of primeval plankton are half used up, where each new year brings us closer to the bottom of the barrel. The major oil companies report that they can't find enough new wells most years to offset the depletion in the old ones; rumors circulate that the giant Saudi fields are dwindling faster than expected; and, of course, all this is reflected in the cost of oil.
The doctrinaire economist's answer is that no particular commodity matters all that much, because if we run short of something, it will pay for someone to develop a substitute. In general this has proved true in the past: Run short of nice big sawlogs and someone invents plywood. But it's far from clear that the same precept applies to coal, oil, and natural gas. This time, there is no easy substitute: I like the solar panels on my roof, but they're collecting diffuse daily energy, not using up eons of accumulated power. Fossil fuel was an exception to the rule, a one-time gift that underwrote a one-time binge of growth.
This brings us to the third point: If we do try to keep going, with the entire world aiming for an economy structured like America's, it won't be just oil that we'll run short of. Here are the numbers we have to contend with: Given current rates of growth in the Chinese economy, the 1.3 billion residents of that nation alone will, by 2031, be about as rich as we are. If they then eat meat, milk, and eggs at the rate that we do, calculates ecostatistician Lester Brown, they will consume 1,352 million tons of grain each year -- equal to two-thirds of the world's entire 2004 grain harvest. NOTE: This is unlikely, since 93% of Chinese are lactose intolerant. (http://en.wikipedia.org/wiki/Lactose_intolerance) --M.J. They will use 99 million barrels of oil a day, 15 million more than the entire world consumes at present. They will use more steel than all the West combined, double the world's production of paper, and drive 1.1 billion cars -- 1.5 times as many as the current world total. And that's just China; by then, India will have a bigger population, and its economy is growing almost as fast. And then there's the rest of the world.
Trying to meet that kind of demand will stress the earth past its breaking point in an almost endless number of ways, but let's take just one. When Thomas Newcomen fired up his pump on that morning in 1712, the atmosphere contained 275 parts per million of carbon dioxide. We're now up to 380 parts per million, a level higher than the earth has seen for many millions of years, and climate change has only just begun. The median predictions of the world's climatologists -- by no means the worst-case scenario -- show that unless we take truly enormous steps to rein in our use of fossil fuels, we can expect average temperatures to rise another four or five degrees before the century is out, making the globe warmer than it's been since long before primates appeared. We might as well stop calling it earth and have a contest to pick some new name, because it will be a different planet. Humans have never done anything more profound, not even when we invented nuclear weapons.
How does this tie in with economic growth? Clearly, getting rich means getting dirty -- that's why, when I was in Beijing recently, I could stare straight at the sun (once I actually figured out where in the smoggy sky it was). But eventually, getting rich also means wanting the "luxury" of clean air and finding the technological means to achieve it. Which is why you can once again see the mountains around Los Angeles; why more of our rivers are swimmable every year. And economists have figured out clever ways to speed this renewal: Creating markets for trading pollution credits, for instance, helped cut those sulfur and nitrogen clouds more rapidly and cheaply than almost anyone had imagined.
But getting richer doesn't lead to producing less carbon dioxide in the same way that it does to less smog -- in fact, so far it's mostly the reverse. Environmental destruction of the old-fashioned kind -- dirty air, dirty water -- results from something going wrong. You haven't bothered to stick the necessary filter on your pipes, and so the crud washes into the stream; a little regulation, and a little money, and the problem disappears. But the second, deeper form of environmental degradation comes from things operating exactly as they're supposed to, just too much so. Carbon dioxide is an inevitable byproduct of burning coal or gas or oil -- not something going wrong. Researchers are struggling to figure out costly and complicated methods to trap some CO2 and inject it into underground mines -- but for all practical purposes, the vast majority of the world's cars and factories and furnaces will keep belching more and more of it into the atmosphere as long as we burn more and more fossil fuels.
True, as companies and countries get richer, they can afford more efficient machinery that makes better use of fossil fuel, like the hybrid Honda Civic I drive. But if your appliances have gotten more efficient, there are also far more of them: The furnace is better than it used to be, but the average size of the house it heats has doubled since 1950. The 60-inch TV? The always-on cable modem? No need for you to do the math -- the electric company does it for you, every month. Between 1990 and 2003, precisely the years in which we learned about the peril presented by global warming, the United States' annual carbon dioxide emissions increased by 16 percent. And the momentum to keep going in that direction is enormous. For most of us, growth has become synonymous with the economy's "health," which in turn seems far more palpable than the health of the planet. Think of the terms we use -- the economy, whose temperature we take at every newscast via the Dow Jones average, is "ailing" or it's "on the mend." It's "slumping" or it's "in recovery." We cosset and succor its every sniffle with enormous devotion, even as we more or less ignore the increasingly urgent fever that the globe is now running. The ecological economists have an enormous task ahead of them --a nearly insurmountable task, if it were "merely" the environment that is in peril. But here is where things get really interesting. It turns out that the economics of environmental destruction are closely linked to another set of leading indicators -- ones that most humans happen to care a great deal about.
3. "IT SEEMS THAT WELL-BEING IS A REAL PHENOMENON": ECONOMISTS DISCOVER HEDONICS
Traditionally, happiness and satisfaction are the sort of notions that economists wave aside as poetic irrelevance, the kind of questions that occupy people with no head for numbers who had to major in liberal arts. An orthodox economist has a simple happiness formula: If you buy a Ford Expedition, then ipso facto a Ford Expedition is what makes you happy. That's all we need to know. The economist would call this idea "utility maximization," and in the words of the economic historian Gordon Bigelow, "the theory holds that every time a person buys something, sells something, quits a job, or invests, he is making a rational decision about what will . . . provide him 'maximum utility.' If you bought a Ginsu knife at 3 a.m. a neoclassical economist will tell you that, at that time, you calculated that this purchase would optimize your resources." The beauty of this principle lies in its simplicity. It is perhaps the central assumption of the world we live in: You can tell who I really am by what I buy.
Yet economists have long known that people's brains don't work quite the way the model suggests. When Bob Costanza, one of the fathers of ecological economics and now head of the Gund Institute at the University of Vermont, was first edging into economics in the early 1980s, he had a fellowship to study "social traps" -- the nuclear arms race, say -- in which "short-term behavior can get out of kilter with longer broad-term goals."
It didn't take long for Costanza to demonstrate, as others had before him, that, if you set up an auction in a certain way, people will end up bidding $1.50 to take home a dollar. Other economists have shown that people give too much weight to "sunk costs" -- that they're too willing to throw good money after bad, or that they value items more highly if they already own them than if they are considering acquiring them. Building on such insights, a school of "behavioral economics" has emerged in recent years and begun plumbing how we *really* behave.
The wonder is that it took so long. We all know in our own lives how irrationally we are capable of acting, and how unconnected those actions are to any real sense of joy. (I mean, there you are at 3 a.m. thinking about the Ginsu knife.) But until fairly recently, we had no alternatives to relying on Ginsu knife and Ford Expedition purchases as the sole measures of our satisfaction. How else would we know what made people happy?
That's where things are now changing dramatically: Researchers from a wide variety of disciplines have started to figure out how to assess satisfaction, and economists have begun to explore the implications. In 2002 Princeton's Daniel Kahneman won the Nobel Prize in economics even though he is trained as a psychologist. In the book *Well-Being*, he and a pair of coauthors announce a new field called "hedonics," defined as "the study of what makes experiences and life pleasant or unpleasant. . .. It is also concerned with the whole range of circumstances, from the biological to the societal, that ocassion suffering and enjoyment." If you are worried that there might be something altogether too airy about this, be reassured -- Kahneman thinks like an economist. In the book's very first chapter, "Objective Happiness," he describes an experiment that compares "records of the pain reported by two patients undergoing colonoscopy," wherein every 60 seconds he insists they rate their pain on a scale of 1 to 10 and eventually forces them to make "a hypothetical choice between a repeat colonoscopy and a barium enema." Dismal science indeed.
As more scientists have turned their attention to the field, researchers have studied everything from "biases in recall of menstrual symptoms" to "fearlessness and courage in novice paratroopers." Subjects have had to choose between getting an "attractive candy bar" and learning the answers to geography questions; they've been made to wear devices that measured their blood pressure at regular intervals; their brains have been scanned. And by now that's been enough to convince most observers that saying "I'm happy" is more than just a subjective statement. In the words of the economist Richard Layard, "We now know that what people say about how they feel corresponds closely to the actual levels of activity in different parts of the brain, which can be measured in standard scientific ways." Indeed, people who call themselves happy, or who have relatively high levels of electrical activity in the left prefrontal region of the brain, are also "more likely to be rated as happy by friends," "more likely to respond to requests for help," "less likely to be involved in disputes at work," and even "less likely to die prematurely." In other words, conceded one economist, "it seems that what the psychologists call subjective well-being is a real phenomenon. The various empirical measures of it have high consistency, reliability, and validity."
The idea that there is a state called happiness, and that we can dependably figure out what it feels like and how to measure it, is extremely subversive. It allows economists to start thinking about life in richer (indeed) terms, to stop asking "What did you buy?" and to start asking "Is your life good?" And if you can ask someone "Is your life good?" and count on the answer to mean something, then you'll be able to move to the real heart of the matter, the question haunting our moment on the earth: Is more better?
4. IF WE'RE SO RICH, HOW COME WE'RE SO DAMN MISERABLE?
In some sense, you could say that the years since World War II in America have been a loosely controlled experiment designed to answer this very question. The environmentalist Alan Durning found that in 1991 the average American family owned twice as many cars as it did in 1950, drove 2.5 times as far, used 21 times as much plastic, and traveled 25 times farther by air. Gross national product per capita tripled during that period. Our houses are bigger than ever and stuffed to the rafters with belongings (which is why the storage-locker industry has doubled in size in the past decade). We have all sorts of other new delights and powers -- we can send email from our cars, watch 200 channels, consume food from every corner of the world. Some people have taken much more than their share, but on average, all of us in the West are living lives materially more abundant than most people a generation ago.
What's odd is, none of it appears to have made us happier. Throughout the postwar years, even as the gnp curve has steadily climbed, the "life satisfaction" index has stayed exactly the same. Since 1972, the National Opinion Research Center has surveyed Americans on the question: "Taking all things together, how would you say things are these days -- would you say that you are very happy, pretty happy, or not too happy?" (This must be a somewhat unsettling interview.) The "very happy" number peaked at 38 percent in the 1974 poll, amid oil shock and economic malaise; it now hovers right around 33 percent.
And it's not that we're simply recalibrating our sense of what happiness means -- we are actively experiencing life as grimmer. In the winter of 2006 the National Opinion Research Center published data about "negative life events" comparing 1991 and 2004, two data points bracketing an economic boom. "The anticipation would have been that problems would have been down," the study's author said. Instead it showed a rise in problems -- for instance, the percentage who reported breaking up with a steady partner almost doubled. As one reporter summarized the findings, "There's more misery in people's lives today."
This decline in the happiness index is not confined to the United States; as other nations have followed us into mass affluence, their experiences have begun to yield similar results. In the United Kingdom, real gross domestic product per capita grew two-thirds between 1973 and 2001, but people's satisfaction with their lives changed not one whit. Japan saw a fourfold increase in real income per capita between 1958 and 1986 without any reported increase in satisfaction. In one place after another, rates of alcoholism, suicide, and depression have gone up dramatically, even as we keep accumulating more stuff. Indeed, one report in 2000 found that the average American child reported higher levels of anxiety than the average child under psychiatric care in the 1950s -- our new normal is the old disturbed.
If happiness was our goal, then the unbelievable amount of effort and resources expended in its pursuit since 1950 has been largely a waste. One study of life satisfaction and mental health by Emory University professor Corey Keyes found just 17 percent of Americans "flourishing," in mental health terms, and 26 percent either "languishing" or out-and-out depressed.
5. DANES (AND MEXICANS, THE AMISH, AND THE MASAI) JUST WANT TO HAVE FUN
How is it, then, that we became so totally, and apparently wrongly, fixated on the idea that our main goal, as individuals and as nations, should be the accumulation of more wealth? The answer is interesting for what it says about human nature. Up to a certain point, more really does equal better. Imagine briefly your life as a poor person in a poor society -- say, a peasant farmer in China. (China has one-fourth of the world's farmers, but one-fourteenth of its arable land; the average farm in the southern part of the country is about half an acre, or barely more than the standard lot for a new American home.) You likely have the benefits of a close and connected family, and a village environment where your place is clear. But you lack any modicum of security for when you get sick or old or your back simply gives out. Your diet is unvaried and nutritionally lacking; you're almost always cold in winter.
In a world like that, a boost in income delivers tangible benefits. In general, researchers report that money consistently buys happiness right up to about $10,000 income per capita. That's a useful number to keep in the back of your head -- it's like the freezing point of water, one of those random figures that just happens to define a crucial phenomenon on our planet. "As poor countries like India, Mexico, the Philippines, Brazil, and South Korea have experienced economic growth, there is some evidence that their average happiness has risen," the economist Layard reports. Past $10,000 (per capita, mind you -- that is, the average for each man, woman, and child), there's a complete scattering: When the Irish were making two-thirds as much as Americans they were reporting higher levels of satisfaction, as were the Swedes, the Danes, the Dutch. Mexicans score higher than the Japanese; the French are about as satisfied with their lives as the Venezuelans. In fact, once basic needs are met, the "satisfaction" data scrambles in mindlnding ways. A sampling of *Forbes* magazine's "richest Americans" have identical happiness scores with Pennsylvania Amish, and are only a whisker above Swedes taken as a whole, not to mention the Masai. The "life satisfaction" of pavement dwellers -- homeless people -- in Calcutta is among the lowest recorded, but it almost doubles when they move into a slum, at which point they are basically as satisfied with their lives as a sample of college students drawn from 47 nations. And so on.
On the list of major mistakes we've made as a species, this one seems pretty high up. Our single-minded focus on increasing wealth has succeeded in driving the planet's ecological systems to the brink of failure, even as it's failed to make us happier. How did we screw up?
The answer is pretty obvious -- we kept doing something past the point that it worked. Since happiness had increased with income in the past, we assumed it would inevitably do so in the future. We make these kinds of mistakes regularly: Two beers made me feel good, so ten will make me feel five times better. But this case was particularly extreme -- in part because as a species, we've spent so much time simply trying to survive. As the researchers Ed Diener and Martin Seligman -- both psychologists --observe, "At the time of Adam Smith, a concern with economic issues was understandably primary. Meeting simple human needs for food, shelter and clothing was not assured, and satisfying these needs moved in lockstep with better economics." Freeing people to build a more dynamic economy was radical and altruistic.
Consider Americans in 1820, two generations after Adam Smith. The average citizen earned, in current dollars, less than $1,500 a year, which is somewhere near the current average for all of Africa. As the economist Deirdre McCloskey explains in a 2004 article in the magazine *Christian Century*, "Your great-great-great-grandmother had one dress for church and one for the week, if she were not in rags. Her children did not attend school, and probably could not read. She and her husband worked eighty hours a week for a diet of bread and milk -- they were four inches shorter than you." Even in 1900, the average American lived in a house the size of today's typical garage. Is it any wonder that we built up considerable velocity trying to escape the gravitational pull of that kind of poverty? An object in motion stays in motion, and our economy -- with the built-up individual expectations that drive it -- is a mighty object indeed.
You could call it, I think, the Laura Ingalls Wilder effect. I grew up reading her books -- *Little House on the Prairie*, *Little House in the Big Woods* -- and my daughter grew up listening to me read them to her, and no doubt she will read them to her children. They are the ur-American story. And what do they tell? Of a life rich in family, rich in connection to the natural world, rich in adventure -- but materially deprived. That one dress, that same bland dinner. At Christmastime, a penny -- a penny! And a stick of candy, and the awful deliberation about whether to stretch it out with tiny licks or devour it in an orgy of happy greed. A rag doll was the zenith of aspiration. My daughter likes dolls too, but her bedroom boasts a density of Beanie Babies that mimiks the manic biodiversity of the deep rainforest. Another one? Really, so what? Its marginal utility, as an economist might say, is low. And so it is with all of us. We just haven't figured that out because the momentum of the past is still with us -- we still imagine we're in that little house on the big prairie.
6. THIS YEAR'S MODEL HOME: "GOOD FOR THE DYSFUNCTIONAL FAMILY"
That great momentum has carried us away from something valuable, something priceless: It has allowed us to become (very nearly forced us to become) more thoroughly individualistic than we really wanted to be. We left behind hundreds of thousands of years of human community for the excitement, and the isolation, of "making something of ourselves," an idea that would not have made sense for 99.9 percent of human history. Adam Smith's insight was that the interests of each of our individual selves could add up, almost in spite of themselves, to social good -- to longer lives, fuller tables, warmer houses. Suddenly the community was no longer necessary to provide these things; they would happen as if by magic. And they did happen. And in many ways it was good.
But this process of liberation seems to have come close to running its course. Study after study shows Americans spending less time with friends and family, either working longer hours, or hunched over their computers at night. And each year, as our population grows by 1 percent we manage to spread ourselves out over 6 to 8 percent more land. Simple mathematics says that we're less and less likely to bump into the other inhabitants of our neighborhood, or indeed of our own homes. As the *Wall Street Journal* reported recently, "Major builders and top architects are walling people off. They're touting one-person 'Internet alcoves,' locked-door 'away rooms,' and his-and-her offices on opposite ends of the house. The new floor plans offer so much seclusion, they're 'good for the dysfunctional family,' says Gopal Ahluwahlia, director of research for the National Association of Home Builders." At the building industry's annual Las Vegas trade show, the "showcase 'Ultimate Family Home' hardly had a family room," noted the *Journal*. Instead, the boy's personal playroom had its own 42-inch plasma TV, and the girl's bedroom had a secret mirrored door leading to a "hideaway karaoke room." "We call this the ultimate home for families who don't want anything to do with one another," said Mike McGee, chief executive of Pardee Homes of Los Angeles, builder of the model.
This transition from individualism to hyper-individualism also made its presence felt in politics. In the 1980s, British prime minister Margaret Thatcher asked, "Who is society? There is no such thing. There are individual men and women, and there are families." Talk about everything solid melting into air -- Thatcher's maxim would have spooked Adam Smith himself. The "public realm" -- things like parks and schools and Social Security, the last reminders of the communities from which we came -- is under steady and increasing attack. Instead of contributing to the shared risk of health insurance, Americans are encouraged to go it alone with "health savings accounts." Hell, even the nation's most collectivist institution, the U.S. military, until recently recruited under the slogan an "Army of One." No wonder the show that changed television more than any other in the past decade was "Survivor," where the goal is to end up alone on the island, to manipulate and scheme until everyone is banished and leaves you by yourself with your money.
It's not so hard, then, to figure out why happiness has declined here even as wealth has grown. During the same decades when our lives grew busier and more isolated, we've gone from having three confidants on average to only two, and the number of people saying they have no one to discuss important matters with has nearly tripled. Between 1974 and 1994, the percentage of Americans who said they visited with their neighbors at least once a month fell from almost two-thirds to less than half, a number that has continued to fall in the past decade. We simply worked too many hours earning, we commuted too far to our too-isolated homes, and there was always the blue glow of the tube shining through the curtains.
7. NEW FRIEND OR NEW COFFEEMAKER? PICK ONE
Because traditional economists think of human beings primarily as individuals and not as members of a community, they miss out on a major part of the satisfaction index. Economists lay it out almost as a mathematical equation: Overall, "evidence shows that companionship . . . contributes more to well-being than does income," writes Robert E. Lane, a Yale political science professor who is the author of *The Loss of Happiness in Market Democracies*. But there is a notable difference between poor and wealthy countries: When people have lots of companionship but not much money, income "makes more of a contribution to subjective well-being." By contrast, "where money is relatively plentiful and companionship relatively scarce, companionship will add more to subjective well-being." If you are a poor person in China, you have plenty of friends and family around all the time -- perhaps there are four other people living in your room. Adding a sixth doesn't make you happier. But adding enough money so that all five of you can eat some meat from time to time pleases you greatly. By contrast, if you live in a suburban American home, buying another coffeemaker adds very little to your quantity of happiness -- trying to figure out where to store it, or wondering if you picked the perfect model, may in fact decrease your total pleasure. But a new friend, a new connection, is a big deal. We have a surplus of individualism and a deficit of companionship, and so the second becomes more valuable.
Indeed, we seem to be genetically wired for community. As biologist Edward O. Wilson found, most primates live in groups and get sad when they're separated -- "an isolated individual will repeatedly pull a lever with no reward other than the glimpse of another monkey." Why do people so often look back on their college days as the best years of their lives? Because their classes were so fascinating? Or because in college, we live more closely and intensely with a community than most of us ever do before or after? Every measure of psychological health points to the same conclusion: People who "are married, who have good friends, and who are close to their families are happier than those who do not," says Swarthmore psychologist Barry Schwartz. "People who participate in religious communities are happier than those who are not." Which is striking, Schwartz adds, because social ties "actually decrease freedom of choice" -- being a good friend involves sacrifice.
Do we just *think* we're happier in communities? Is it merely some sentimental good-night-John-Boy affectation? No -- our bodies react in measurable ways. According to research cited by Harvard professor Robert Putnam in his classic book *Bowling Alone*, if you do not belong to any group at present, joining a club or a society of some kind cuts in half the risk that you will die in the next year. Check this out: When researchers at Carnegie Mellon (somewhat disgustingly) dropped samples of cold virus directly into subjects' nostrils, those with rich social networks were four times less likely to get sick. An economy that produces only individualism undermines us in the most basic ways.
Here's another statistic worth keeping in mind: Consumers have 10 times as many conversations at farmers' markets as they do at supermarkets -- an order of magnitude difference. By itself, that's hardly life-changing, but it points at something that could be: living in an economy where you are participant as well as consumer, where you have a sense of who's in your universe and how it fits together. At the same time, some studies show local agriculture using less energy (also by an order of magnitude) than the "it's always summer somewhere" system we operate on now. Those are big numbers, and it's worth thinking about what they suggest --especially since, between peak oil and climate change, there's no longer really a question that we'll have to wean ourselves of the current model.
So as a mental experiment, imagine how we might shift to a more sustainable kind of economy. You could use government policy to nudge the change -- remove subsidies from agribusiness and use them instead to promote farmer-entrepreneurs; underwrite the cost of windmills with even a fraction of the money that's now going to protect oil flows. You could put tariffs on goods that travel long distances, shift highway spending to projects that make it easier to live near where you work (and, by cutting down on commutes, leave some time to see the kids). And, of course, you can exploit the Net to connect a lot of this highly localized stuff into something larger. By way of example, a few of us are coordinating the first nationwide global warming demonstration -- but instead of marching on Washington, we're rallying in our local areas, and then fusing our efforts, via the website stepitup07.org, into a national message.
It's easy to dismiss such ideas as sentimental or nostalgic. In fact, economies can be localized as easily in cities and suburbs as rural villages (maybe more easily), and in ways that look as much to the future as the past, that rely more on the solar panel and the Internet than the white picket fence. In fact, given the trendlines for phenomena such as global warming and oil supply, what's nostalgic and sentimental is to keep doing what we're doing simply because it's familiar.
8. THE OIL-FOR-PEOPLE PARADOX: WHY SMALL FARMS PRODUCE MORE FOOD
To understand the importance of this last point, consider the book *American Mania* by the neuroscientist Peter Whybrow. Whybrow argues that many of us in this country are predisposed to a kind of dynamic individualism -- our gene pool includes an inordinate number of people who risked everything to start over. This served us well in settling a continent and building our prosperity. But it never got completely out of control, says Whybrow, because "the marketplace has always had its natural constraints. For the first two centuries of the nation's existence, even the most insatiable American citizen was significantly leashed by the checks and balances inherent in a closely knit community, by geography, by the elements of weather, or, in some cases, by religious practice." You lived in a society -- a habitat -- that kept your impulses in some kind of check. But that changed in the past few decades as the economy nationalized and then globalized. As we met fewer actual neighbors in the course of a day, those checks and balances fell away. "Operating in a world of instant communication with minimal social tethers," Whybrow observes, "America's engines of commerce and desire became turbocharged."
Adam Smith himself had worried that too much envy and avarice would destroy "the empathic feeling and neighborly concerns that are essential to his economic model," says Whybrow, but he "took comfort in the fellowship and social constraint that he considered inherent in the tightly knit communities characteristic of the 18th century." Businesses were built on local capital investment, and "to be solicitous of one's neighbor was prudent insurance against future personal need." For the most part, people felt a little constrained about showing off wealth; indeed, until fairly recently in American history, someone who was making tons of money was often viewed with mixed emotions, at least if he wasn't giving back to the community. "For the rich," Whybrow notes, "the reward system would be balanced between the pleasure of self-gain and the civic pride of serving others. By these mechanisms the most powerful citizens would be limited in their greed."
Once economies grow past a certain point, however, "the behavioral contingencies essential to promoting social stability in a market-regulated society -- close personal relationships, tightly knit communities, local capital investment, and so on -- are quickly eroded." So re-localizing economies offers one possible way around the gross inequalities that have come to mark our societies. Instead of aiming for growth at all costs and hoping it will trickle down, we may be better off living in enough contact with each other for the affluent to once again feel some sense of responsibility for their neighbors. This doesn't mean relying on noblesse oblige; it means taking seriously the idea that people, and their politics, can be changed by their experiences. It's a hopeful sign that more and more local and state governments across the country have enacted "living wage" laws. It's harder to pretend that the people you see around you every day should live and die by the dictates of the market.
Right around this time, an obvious question is doubtless occurring to you. Is it foolish to propose that a modern global economy of 6 (soon to be 9) billion people should rely on more localized economies? To put it more bluntly, since for most people "the economy" is just a fancy way of saying "What's for dinner?" and "Am I having any?," doesn't our survival depend on economies that function on a massive scale -- such as highly industrialized agriculture? Turns out the answer is no -- and the reasons why offer a template for rethinking the rest of the economy as well.
We assume, because it makes a certain kind of intuitive sense, that industrialized farming is the most productive farming. A vast Midwestern field filled with high-tech equipment ought to produce more food than someone with a hoe in a small garden. Yet the opposite is true. If you are after getting the greatest yield from the land, then smaller farms in fact produce more food.
If you are one guy on a tractor responsible for thousands of acres, you grow your corn and that's all you can do -- make pass after pass with the gargantuan machine across a sea of crop. But if you're working 10 acres, then you have time to really know the land, and to make it work harder. You can intercrop all kinds of plants -- their roots will go to different depths, or they'll thrive in each other's shade, or they'll make use of different nutrients in the soil. You can also walk your fields, over and over, *noticing*. According to the government's most recent agricultural census, smaller farms produce far more food per acre, whether you measure in tons, calories, or dollars. In the process, they use land, water, and oil much more efficiently; if they have animals, the manure is a gift, not a threat to public health. To feed the world, we may actually need lots more small farms.
But if this is true, then why do we have large farms? Why the relentless consolidation? There are many reasons, including the way farm subsidies have been structured, the easier access to bank loans (and politicians) for the big guys, and the convenience for food-processing companies of dealing with a few big suppliers. But the basic reason is this: We substituted oil for people. Tractors and synthetic fertilizer instead of farmers and animals. Could we take away the fossil fuel, put people back on the land in larger numbers, and have enough to eat?
The best data to answer that question comes from an English agronomist named Jules Pretty, who has studied nearly 300 sustainable agriculture projects in 57 countries around the world. They might not pass the U.S. standards for organic certification, but they're all what he calls "low-input." Pretty found that over the past decade, almost 12 million farmers had begun using sustainable practices on about 90 million acres. Even more remarkably, sustainable agriculture increased food production by 79 percent per acre. These were not tiny isolated demonstration farms --Pretty studied 14 projects where 146,000 farmers across a broad swath of the developing world were raising potatoes, sweet potatoes, and cassava, and he found that practices such as cover-cropping and fighting pests with natural adversaries had increased production 150 percent -- 17 tons per household. With 4.5 million small Asian grain farmers, average yields rose 73 percent. When Indonesian rice farmers got rid of pesticides, their yields stayed the same but their costs fell sharply.
"I acknowledge," says Pretty, "that all this may sound too good to be true for those who would disbelieve these advances. Many still believe that food production and nature must be separated, that 'agroecological' approaches offer only marginal opportunities to increase food production, and that industrialized approaches represent the best, and perhaps only, way forward. However, prevailing views have changed substantially in just the last decade."
And they will change just as profoundly in the decades to come across a wide range of other commodities. Already I've seen dozens of people and communities working on regional-scale sustainable timber projects, on building energy networks that work like the Internet by connecting solar rooftops and backyard windmills in robust mini-grids. That such things can begin to emerge even in the face of the political power of our reigning economic model is remarkable; as we confront significant change in the climate, they could speed along the same kind of learning curve as Pretty's rice farmers and wheat growers. And they would not only use less energy; they'd create more community. They'd start to reverse the very trends I've been describing, and in so doing rebuild the kind of scale at which Adam Smith's economics would help instead of hurt.
In the 20th century, two completely different models of how to run an economy battled for supremacy. Ours won, and not only because it produced more goods than socialized state economies. It also produced far more freedom, far less horror. But now that victory is starting to look Pyrrhic; in our overheated and underhappy state, we need some new ideas.
We've gone too far down the road we're traveling. The time has come to search the map, to strike off in new directions. Inertia is a powerful force; marriages and corporations and nations continue in motion until something big diverts them. But in our new world we have much to fear, and also much to desire, and together they can set us on a new, more promising course.
--Want to see how the "satisfaction index" has changed over your lifetime? Find some of the data mentioned in this article -- and a few other numbers that will surprise you -- at: motherjones.com/happiness.
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Subj: The Cavernous Divide
The Cavernous Divide
Monday 21 March 2005
Two magazine covers stood out in poignant contrast on newsstands last week. Forbes magazine released its 29th annual listing of the world's billionaires. Time magazine's cover story wondered "How to End Poverty."
It was a good year for the global billionaires' club. Their ranks grew to 691, up 17 percent from the previous year. Collectively, the wealth of the world's billionaires reached $2.2 trillion, up more than 57 percent over the last two years.
Poverty is growing as well. Time reports that nearly half of the world's 6 billion residents are poor. Over one billion of them subsist on less than $1 a day. In the United States, according to the U.S. Census Bureau, the number of impoverished Americans rose 3.7 percent in 2003. The number of children living in poverty rose 6.6 percent.
Forbes seeks to explain the billionaires' success by noting that a majority of those on the list are "self-made." Forbes' web site features an interactive quiz that asks, "Do you have what it takes to become a billionaire?" and proceeds to explore things like marital status and hobbies. The idea is that many billionaires made it on their own.
But to suggest that membership in the growing billionaires' club requires only a combination of hard work and character traits ignores some dramatic shifts in global economic rules that explain the cavernous divide that has developed between the very rich and the very poor.
Tax rates have fallen on upper-income citizens and corporations worldwide. Fifty years ago in the United States, the highest marginal income tax rate was 91 percent; today it is 34 percent. As recently as 1979, taxes on capital gains from the sale of stock, real estate and businesses were 35 percent; today they are 15 percent. Corporate taxes as a percentage of the U.S. economy have shrunk from 4.1 percent of Gross Domestic Product in 1965 to just 1.5 percent in 2002. While corporate taxes have declined throughout the world, they have plummeted in the United States, leaving only Iceland among industrialized countries with a lower corporate tax burden.
Several of the wealthiest billionaires capitalized on public assets and made their fortunes by buying formerly public assets. This was the case with Mexican Carlos Slim Helu, the world's fourth richest man, who used inherited wealth to buy a substantial share of Mexico's privatized national telephone company. U.S. billionaires Bill Gates, Paul Allen and Steve Ballmer of Microsoft, and Larry Ellison of Oracle would not be in Forbes' top 20 billionaires had the U.S. government not invested tens of billions of public dollars developing computers and the internet.
Some billionaires' fortunes rest upon paying their employees poverty wages. Such is the case for the Walton family (numbers 10 through 14 on the Forbes list.) Wal-Mart is the largest private employer in the world. Many of its U.S. workers are so poorly paid that they must rely on food stamps and other forms of public assistance to get by. Such forms of government aid represent an indirect government subsidy to corporations whose business model does not include paying employees enough to live on. Worldwide, billions are gained by outsourcing service, production and manufacturing functions to workers who labor in sweatshop conditions in countries like China.
The role of government policy in determining who has wealth and who does not continues to expand. During the recent debate on the bankruptcy bill, federal lawmakers refused to close the "asset protection trust" loophole increasingly used by millionaires and billionaires to shelter mansions and other assets from creditors in bankruptcy. Those same lawmakers weakened protections that protect the family homes of ordinary people from creditors during bankruptcy.
Forbes is wrong; none of the billionaires did it alone. The chasm between rich and poor is not a divide between who has intelligence and drive and who does not. Rather it results from a society whose rules allow some to amass wealth greater than could be enjoyed in a thousand lifetimes, while they deny others enough money to scrape through just one lifetime.
Scott Klinger is the co-director of the Responsible Wealth project at United for a Fair Economy and co-author of Executive Excess 2004: Campaign Contributions, Outsourcing, Unexpensed Stock Options and Rising CEO Pay.
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As Jobs Leave America's Shores...
By PAUL CRAIG ROBERTS
Te attacks on middle-class jobs are lending new meaning to the phrase "class war". The ladders of upward mobility are being dismantled. America, the land of opportunity, is giving way to ever deepening polarization between rich and poor.
The assault on jobs predates the Bush regime. However, the loss of middle-class jobs has become particularly intense in the 21st century, and, like other pressing problems, has been ignored by President Bush, who is focused on waging war in the Middle East and building a police state at home.
The lives and careers that are being lost to the carnage of a gratuitous war in Iraq are paralleled by the economic destruction of careers, families, and communities in the U.S.A. Since the days of President Franklin D. Roosevelt in the 1930s, the U.S. government has sought to protect employment of its citizens. Bush has turned his back on this responsibility.
He has given his support to the offshoring of American jobs that is eroding the living standards of Americans. It is another example of his betrayal of the public trust."Free trade" and "globalization" are the guises behind which class war is being conducted against the middle class by both political parties.
Patrick J. Buchanan, a three-time contender for the presidential nomination, put it well when he wrote1 that NAFTA and the various so-called trade agreements were never trade deals. The agreements were enabling acts that enabled U.S. corporations to dump their American workers, avoid Social Security taxes, health care and pensions, and move their factories offshore to locations where labor is cheap.
The offshore outsourcing of American jobs has nothing to do with free trade based on comparative advantage. Offshoring is labor arbitrage. First world capital and technology are not seeking comparative advantage at home in order to compete abroad. They are seeking absolute advantage abroad in cheap labor.
Two recent developments made possible the supremacy of absolute over comparative advantage: the high speed Internet and the collapse of world socialism, which opened China's and India's vast under-utilized labor resources to first world capital.
In times past, first world workers had nothing to fear from cheap labor abroad. Americans worked with superior capital, technology and business organization. This made Americans far more productive than Indians and Chinese, and, as it was not possible for U.S. firms to substitute cheaper foreign labor for U.S. labor, American jobs and living standards were not threatened by low wages abroad or by the products that these low wages produced.
The advent of offshoring has made it possible for U.S. firms using first world capital and technology to produce goods and services for the U.S. market with foreign labor. The result is to separate Americans' incomes from the production of the goods and services that they consume. This new development, often called "globalization," allows cheap foreign labor to work with the same capital, technology and business know-how as U.S. workers.
The foreign workers are now as productive as Americans, with the difference being that the large excess supply of labor that overhangs labor markets in China and India keeps wages in these countries low. Labor that is equally productive but paid a fraction of the wage is a magnet for Western capital and technology.
Although a new development, offshoring is destroying entire industries, occupations and communities in the United States. The devastation of U.S. manufacturing employment was waved away with promises that a "new economy" based on high-tech knowledge jobs would take its place. Education and retraining were touted as the answer.
In testimony before the U.S.-China Commission, 2 I explained that offshoring is the replacement of U.S. labor with foreign labor in U.S. production functions over a wide range of tradable goods and services. (Tradable goods and services are those that can be exported or that are competitive with imports. Nontradable goods and services are those that only have domestic markets and no import competition. For example, barbers and dentists offer nontradable services.
Examples of nontradable goods are perishable, locally produced fruits and vegetables and specially fabricated parts of local machine shops.) As the production of most tradable goods and services can be moved offshore, there are no replacement occupations for which to train except in domestic "hands on" services such as barbers, manicurists, and hospital orderlies. No country benefits from trading its professional jobs, such as engineering, for domestic service jobs.
At a Brookings Institution conference in Washington, D.C., in January 2004, I predicted that if the pace of jobs outsourcing and occupational destruction continued, the U.S. would be a third world country in 20 years. Despite my regular updates on the poor performance of U.S. job growth in the 21st century, economists have insisted that offshoring is a manifestation of free trade and can only have positive benefits overall for Americans.
Reality has contradicted the glib economists. The new high-tech knowledge jobs are being outsourced abroad even faster than the old manufacturing jobs. Establishment economists are beginning to see the light. Writing in Foreign Affairs (March/April 2006), Princeton economist and former Federal Reserve vice chairman Alan Blinder concludes that economists who insist that offshore outsourcing is merely a routine extension of international trade are overlooking a major transformation with significant consequences. Blinder estimates that 42-56 million American service sector jobs are susceptible to offshore outsourcing.3 Whether all these jobs leave, U.S. salaries will be forced down by the willingness of foreigners to do the work for less.
Software engineers and information technology workers have been especially hard hit. Jobs offshoring, which began with call centers and back-office operations, is rapidly moving up the value chain. Business Week's Michael Mandel4 compared starting salaries in 2005 with those in 2001. He found a 12.7 per cent decline in computer science pay, a 12 per cent decline in computer engineering pay, and a 10.2 per cent decline in electrical engineering pay. Marketing salaries experienced a 6.5 per cent decline, and business administration salaries fell 5.7 per cent.
Despite a make-work law for accountants known by the names of its congressional sponsors, Sarbanes-Oxley, even accounting majors, were offered 2.3 per cent less. Using the same sources as the Business Week article (salary data from the National Association of Colleges and Employers and Bureau of Labor Statistics data for inflation adjustment), professor Norm Matloff at the University of California, Davis, made the same comparison for master's degree graduates. He found that between 2001 and 2005 starting pay for master's degrees in computer science, computer engineering, and electrical engineering fell 6.6 per cent, 13.7 per cent, and 9.4 per cent respectively.
On February 22, 2006, CNNMoney.com staff writer Shaheen Pasha5 reported that America's large financial institutions are moving "large portions of their investment banking operations abroad." Offshoring is now killing American jobs in research and analytic operations, foreign exchange trades, and highly complicated credit derivatives contracts. Deal-making responsibility itself may eventually move abroad.
Deloitte Touche says that the financial services industry will move 20 per cent of its total costs base offshore by the end of 2010. As the costs are lower in India, the move will represent more than 20 per cent of the business. A job on Wall Street is a declining option for bright young persons with high stress tolerance as America's last remaining advantage is outsourced.
According to Norm Augustine, former CEO of Lockheed Martin, even McDonald jobs are on the way offshore. Augustine reports that McDonald is experimenting with replacing error-prone order takers with a system that transmits orders via satellite to a central location and from there to the person preparing the order. The technology lets the orders be taken in India or China at costs below the U.S. minimum wage and without the liabilities of U.S. employees.
American economists, some from incompetence and some from being bought and paid for, described globalization as a "win-win" development. It was supposed to work like this:
The U.S. would lose market share in tradable manufactured goods and make up the job and economic loss with highly educated knowledge workers. The win for America would be lower-priced manufactured goods and a white-collar work force. The win for China would be manufacturing jobs that would bring economic development to that country.
It did not work out this way, as Morgan Stanley's Stephen Roach, formerly a cheerleader for globalization, recently admitted. It has become apparent that job creation and real wages in the developed economies are seriously lagging behind their historical norms as offshore outsourcing displaces the "new economy" jobs in "software programming, engineering, design, and the medical profession, as well as a broad array of professionals in the legal, accounting, actuarial, consulting, and financial services industries".6
The real state of the U.S. job market is revealed by a Chicago Sun-Times report on January 26, 2006, that 25,000 people applied for 325 jobs at a new Chicago Wal-Mart. According to the BLS payroll jobs data,7 over the past half-decade (January 2001 - January 2006, the data series available at time of writing) the U.S. economy created 1,050,000 net new private sector jobs and 1,009,000 net new government jobs for a total five-year figure of 2,059,000.
That is seven million jobs short of keeping up with population growth, definitely a serious job shortfall.The BLS payroll jobs data contradict the hype from business organizations, such as the U.S. Chamber of Commerce, that offshore outsourcing is good for America.
Large corporations, which have individually dismissed thousands of their U.S. employees and replaced them with foreigners, claim that jobs outsourcing allows them to save money that can be used to hire more Americans. The corporations and the business organizations are very successful in placing this disinformation in the media.
The lie is repeated everywhere and has become a mantra among no-think economists and politicians. However, no sign of these jobs can be found in the payroll jobs data. But there is abundant evidence of the lost American jobs. During the past five years (January 01 - January 06), the information sector of the U.S. economy lost 644,000 jobs, or 17.4 per cent of its work force. Computer systems design and related work lost 105,000 jobs, or 8.5 per cent of its work force.
Clearly, jobs offshoring is not creating jobs in computers and information technology. Indeed, jobs offshoring is not even creating jobs in related fields. U.S. manufacturing lost 2.9 million jobs, almost 17 per cent of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job.
The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a "supereconomy" that is "the envy of the world." In five years, communications equipment lost 42% of its work force. Semiconductors and electronic components lost 37% of its work force .
The work force in computers and electronic products declined 30%. Electrical equipment and appliances lost 25 per cent of its employees. The work force in motor vehicles and parts declined 12 per cent. Furniture and related products lost 17 per cent of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43 per cent. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15 per cent.
For the five-year period, U.S. job growth was limited to four areas: education and health services, state and local government, leisure and hospitality, and financial services. There was no U.S. job growth outside these four areas of domestic nontradable services.
Oracle, for example, which has been handing out thousands of pink slips, has recently announced two thousand more jobs being moved to India.8 How is Oracle's move of U.S. jobs to India creating American jobs in nontradable services such as waitresses and bartenders, hospital orderlies, state and local government, and credit agencies?
Engineering jobs in general are in decline, because the manufacturing sectors that employ engineers are in decline. During the last five years, the U.S. work force lost 1.2 million jobs in the manufacture of machinery, computers, electronics, semiconductors, communication equipment, electrical equipment, motor vehicles, and transportation equipment.
The BLS payroll jobs numbers show a total of 69,000 jobs created in all fields of architecture and engineering, including clerical personnel, over the past five years. That comes to a mere 14,000 jobs per year (including clerical workers). What is the annual graduating class in engineering and architecture?
How is there a shortage of engineers when more graduate than can be employed? Of course, many new graduates take jobs opened by retirements. We would have to know the retirement rates to get a solid handle on the fate of new graduates. But this fate cannot be very pleasant , with declining employment in the manufacturing sectors that employ engineers and a minimum of 65,000 H-1B work visas annually for foreigners plus an indeterminate number of L-1 work visas.
It is not only the Bush regime that bases its policies on lies. Not content with moving Americans' jobs abroad, corporations want to fill the jobs remaining in America with foreigners on work visas. Business organizations allege shortages of engineers, scientists and even nurses. Business organizations have successfully used pubic relations firms and bought-and-paid-for "economic studies" to convince policymakers that American business cannot function without H-1B visas that permit the importation of indentured employees from abroad who are paid less than the going U.S. salaries.
The so-called shortage is, in fact, a replacement of American employees with foreign employees, with the soon-to-be-discharged American employee first required to train his replacement. It is amazing to see free-market economists rush to the defense of H-1B visas. The visas are nothing but a subsidy to U.S. companies at the expense of U.S. citizens. Keep in mind this H-1B subsidy to U.S. corporations for employing foreign workers in place of Americans as we examine the Labor Department's job projections over the 2004-2014 decade.
All of the occupations with the largest projected employment growth (in terms of the number of jobs) over ! the next decade are in nontradable domestic services. The top ten sources of the most jobs in "superpower" America are: retail salespersons, registered nurses, postsecondary teachers, customer service representatives, janitors and cleaners, waiters and waitresses, food preparation (includes fast food), home health aides, nursing aides, orderlies and attendants, general and operations managers.9
Note than none of this projected employment growth will contribute one nickel toward producing goods and services that could be exported to help close the huge U.S. trade deficit. Note, also, that few of these job classifications require a college education. Among the fastest growing occupations (in terms of rate of growth), seven of the ten are in health care and social assistance. The three remaining fields are: network systems and data analysis with 126,000 jobs projected, or 12,600 per year; computer software engineering applications with 222,000 jobs projected, or 22,200 per year; and computer software engineering systems software with 146,000 jobs projected, or 14,600 per year.10
Assuming these projections are realized, how many of the computer engineering and network systems jobs will go to Americans? Not many, considering the 65,000 H-1B visas each year (bills have been introduced in Congress to raise the number) and the loss during the past five years of 761,000 jobs in the information sector and computer systems design and related sectors.
Judging from its ten-year jobs projections, the U.S. Department of Labor does not expect to see any significant high-tech job growth in the U.S. The knowledge jobs are being outsourced even more rapidly than the manufacturing jobs. The so-called "new economy" was just another hoax perpetrated on the American people.
If outsourcing jobs offshore is good for U.S. employment, why won't the U.S. Department of Commerce release the 200-page, $335,000 study of the impact of the offshoring of U.S. high-tech jobs?
Republican political appointees reduced the 200-page report to 12 pages of public relations hype and refuse to allow the Technology Administration experts who wrote the report to testify before Congress. Democrats on the House Science Committee are unable to pry the study out of the hands of Commerce Secretary Carlos Gutierrez.
On March 29, 2006, Republicans on the House Science Committee voted down a resolution (H.Res. designed to force the Commerce Department to release the study to Congress. Obviously, the facts don't fit the Bush regime's globalization hype.
The BLS payroll data that we have been examining tracks employment by industry classification. This is not the same thing as occupational classification. For example, companies in almost every industry and area of business employ people in computer-related occupations. A recent study from the Association for Computing Machinery claims,
"Despite all the publicity in the United States about jobs being lost to India and China, the size of the IT employment market in the United States today is higher than it was at the height of the dot.com boom. Information technology appears as though it will be a growth area at least for the coming decade."
We can check this claim by turning to the BLS Occupational Employment Statistics.11 We will look at "computer and mathematical employment"12 and "architecture and engineering employment".13 Computer and mathematical employment includes such fields as "software engineers applications," "software engineers systems software," "computer programmers," "network systems and data communications," and "mathematicians." Has this occupation been a source of job growth?
In November of 2000 this occupation employed 2,932,810 people.14 In November of 2004 (the latest data available), this occupation employed 2,932,790, or 20 people fewer. Employment in this field has been stagnant for four years. During these four years, ! there have been employment shifts within the various fields of this occupation. For example, employment of computer programmers declined by 134,630, while employment of software engineers applications rose by 65,080, and employment of software engineers systems software rose by 59,600. (These shifts probably merely reflect change in job title from programmer to software engineer.)
These figures do not tell us whether any gain in software engineering jobs went to Americans. According to professor Norm Matloff, in 2002 there were 463,000 computer-related H-1B visa holders in the U.S. Similarly, the 134,630 lost computer programming jobs (if not merely a job title change) may have been outsourced offshore to foreign affiliates.
Architecture and engineering employment includes all the architecture and engineering fields except software engineering. The total employment of architects and engineers in the U.S. declined by 120,700 between November 1999 and November 2004. Employment declined by 189,940 between November 2000 and Nov.2004, and by 103,390 between November 2001 and November 2004. There are variations among fields. Between November 2000 and Nov. 2004, for example, U.S. employment of electrical engineers fell by 15,280.
Employment of computer hardware engineers rose by 15,990 (possibly these are job title reclassifications). Overall, however, over 100,000 engineering jobs were lost. We do not know how many of the lost jobs were outsourced offshore to foreign affiliates or how many American engineers were dismissed and replaced by foreign holders of H-1B or L-1 visas.
Clearly, engineering and computer-related employment in the U.S.A. has not been growing, whether measured by industry or by occupation. Moreover, with a half million or more foreigners in the U.S. on work visas, the overall employment numbers do not represent employment of Americans. American employees have been abandoned by American corporations and by their representatives in Congress. America remains a land of opportunity ?but for foreigners ?not for the native born.
A country whose work force is concentrated in domestic nontradable services has no need for scientists and engineers and no need for universities. Even the projected jobs in nursing and school teaching can be filled by foreigners on H-1B visas. The myth has been firmly established here that the jobs the U.S. is outsourcing offshore are being replaced with better jobs.
There is no sign of these jobs in the payroll jobs data or in the occupational employment statistics.
When a country loses entry-level jobs, it has no one to promote to senior level jobs. When manufacturing leaves, so does engineering, design, research and development, and innovation itself.
On February 16, 2006, the New York Times reported on a new study presented to the National Academies that concludes that outsourcing is climbing the skills ladder.15 A survey of 200 multinational corporations representing 15 industries in the U.S.and Europe found that 38 per cent planned to change substantially the worldwide distribution of their research and development work, sending it to India and China. According to the New York Times, "More companies in the survey said they planned to decrease research and development employment in the United States and Europe than planned to increase employment."
The study and the discussion it provoked came to untenable remedies. Many believe that a primary reason for the shift of R&D to India and China is the erosion of scientific prowess in the U.S. due to lack of math and science proficiency of American students and their reluctance to pursue careers in science and engineering.
This belief begs the question why students would chase after careers that are being outsourced abroad. The main author of the study, Georgia Tech professor Marie Thursby, believes that American science and engineering depend on having "an environment that fosters the development of a high-quality work force and productive collaboration between corporations and universities."
The dean of Engineering at the University of California, Berkeley, thinks the answer is to recruit the top people in China and India and bring them to Berkeley. No one seems to understand that research, development, design, and innovation take place in countries where things are made. The loss of manufacturing means ultimately the loss of engineering and science.
The newest plants embody the latest technology. If these plants are abroad, that is where the cutting edge resides. The denial of jobs reality has become an art form for economists, libertarians, the Bush regime, and journalists. Except for CNN's Lou Dobbs, no accurate reporting is available in the "mainstream media."
Economists have failed to examine the incompatibility of offshoring with free trade. Economists are so accustomed to shouting down protectionists that they dismiss any complaint about globalization's impact on domestic jobs as the ignorant voice of a protectionist seeking to preserve the buggy whip industry.
Matthew J. Slaughter, a Dartmouth economics professor rewarded for his service to offshoring with appointment to President Bush's Council of Economic Advisers, suffered no harm to his reputation when he wrote, "For every one job that U.S. multinationals created abroad in their foreign affiliates, they created nearly two U.S. jobs in their parent operations."
In other words, Slaughter claims that offshoring is creating more American jobs than foreign ones. How did Slaughter arrive at this conclusion? Not by consulting the BLS payroll jobs data or the BLS Occupational Employment Statistics. Instead, Slaughter measured the growth of U.S. multinational employment and failed to take into account the two reasons for the increase in multinational employment: (1)
Multinationals acquired many existing smaller firms, thus raising multinational employment but not overall employment, and (2) many U.S. firms established foreign operations for the first time and thereby became multinationals, thus adding their existing employment to Slaughter's number for multinational employment.
ABC News' John Stossel, a libertarian hero, recently made a similar error. In debunking Lou Dobbs' concern with U.S. jobs lost to offshore outsourcing, Stossel invoked the California-based company, Collabnet. He quotes the CEO's claim that outsourcing saves his company money and lets him hire more Americans. Turning to Collabnet's webpage, it is very instructive to see the employment opportunities that the company posts for the United States and for India.
In India, Collabnet has openings (at time of writing) for eight engineers, a sales engineer, a technical writer, and a telemarketing representative. In the U.S. Collabnet has openings for one engineer, a receptionist/office assistant, and positions in marketing, sales, services and operations.
Collabnet is a perfect example of what Lou Dobbs and I report: the engineering and design jobs move abroad, and Americans are employed to ! sell and market the foreign-made products. Other forms of deception are widely practiced. For example, Matthew Spiegleman, a Conference Board economist, claims that manufacturing jobs are only slightly higher paid than domestic service jobs, so there is no meaningful loss in income to Americans from offshoring.
He reaches this conclusion by comparing only hourly pay and leaving out the longer manufacturing workweek and the associated benefits, such as health care and pensions.
Occasionally, however, real information escapes the spin machine. In February 2006 the National Association of Manufacturers, one of offshoring's greatest boosters, released a report, "U.S. Manufacturing Innovation at Risk," by economists Joel Popkin and Kathryn Kobe.16 The economists find that U.S. industry's investment in research and development is not languishing after all. It just appears to be languishing, because it is rapidly being shifted overseas:
"Funds provided for foreign-performed R&D have grown by almost 73 per cent between 1999 and 2003, with a 36 per cent increase in the number of firms funding foreign R&D." U.S. industry is still investing in R&D after all; it is just not hiring Americans to do the research and development.
U.S. manufacturers still make things, only less and less in America with American labor. U.S. manufacturers still hire engineers, only they are foreign ones, not American ones.
In other words, everything is fine for U.S. manufacturers. It is just their former American work force that is in the doldrums. As these Americans happen to be customers for U.S. manufacturers, U.S. brand names will gradually lose their U.S. market.
U.S. household median income has fallen for the past five years. Consumer demand has been kept alive by consumers' spending their savings and home equity and going deeper into debt. It is not possible for debt to forever rise faster than income.
The United States is the first country in history to destroy the prospects and living standards of its labor force. It is amazing to watch freedom-loving libertarians and free-market economists serve as apologists for the dismantling of the ladders of upward mobility that made the America of old an opportunity society.
*America is seeing a widening polarization into rich and poor. * *The resulting political instability and social strife will be terrible.*
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by Krassimir Petrov
"Economically, the American Empire was born in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world's gold."
"An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the I960's was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax - the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that the U.S. imposed on the rest of the world."
"When in 1970-1971 foreigners demanded payment for their dollars in gold. The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of severing the link between the dollar and gold, in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government.. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond - the world was taxed and it could not do anything about it."
"From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and the reason was OIL."
"In 1971, as it became clearer and clearer that the U.S. Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saudi in exchange for accepting "only" U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had a reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil."
"The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world."
If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren't strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind."
"The man that actually did demand EURO for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably EURO and Yen, the danger to the dollar was clear and present, and a punitive action was to order Bush's Shock and Awe in Iraq. The war was not about Saddam's nuclear capabilities, about defending human rights, about spreading democracy, or even seizing oil fields: it was about defending the dollar, the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. dollars would likewise be punished."
"Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can't explain why Bush would want to seize those fields - he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq. Bush must have went into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the oil for food program was terminated, the Iraq EURO accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with EUROs. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished - he had successfully defended the U.S. dollar, and thus the American Empire."
"Now we have the Iranian Oil Bourse. The Iranian government has finally developed the ultimate 'nuclear' weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a EURO-oil-trading mechanism that naturally implies payment for oil in EURO. In economics terms, this represents a much greater threat to the hegemony of the dollar than Saddam's because it will allow anyone willing either to buy or sell oil for EURO to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this EURO oil system."
"The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. This will benefit the European at the expense of the Americans."
"The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with EUROs, thus protecting themselves against the depreciation of the dollar."
"The Russians have inherent economic interest in adopting the EURO - the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. The Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the EURO will stab the Americans, they will gladly do it and smugly watch the Americans bleed."
"The Arab oil-exporting countries will eagerly adopt the EURO as a means of diversifying against rising mountains of depreciating dollar. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy."
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US mortgage crisis goes into meltdown
Panic has begun to sweep the sub-prime mortgage sector in the United States after the bankruptcy of 22 lenders over the past two months, setting off mass liquidation of housing loans packaged as securities.
Analysts say the housing bust is pulling America into recession, citing a 14.4pc drop in housing starts
The rapid deterioration could not come at a worse time for British bank HSBC, which has set aside $10.5bn (?5.4bn) to cover bad loans in the US.
The cost of insuring against default on these loans has rocketed in recent weeks, from 50 basis points over Libor to 1,200, raising fears that a credit crunch could spread to the rest of the property market.
Low-grade BBB-rated securities - measured by the ABX index - have crashed from near par of 100 in early November to 72.5 this week.
Peter Schiff, head of Euro Pacific Capital, said the sector was in an unstoppable meltdown. "It's a self-perpetuating spiral: as sub-prime companies tighten lending they create even more defaults," he said.
advertisementCalifornia's ResMae Mortgage filed for bankruptcy last week as it struggled to cope with defaults on a $7.7bn book of sub-prime loans issued last year, while Accredited Home Lenders in San Diego warned that bad debts had reached 7.18pc of its portfolio.
HSBC chief executive Michael Geoghegan, who stepped in to take control of the US division earlier this month claiming "The buck stops at my door", has ousted top executives. But the worst may not be over for Household International, the property arm it acquired for $14.4bn in 2003 to capitalise on the housing boom.
Rating agency Standard & Poor's is shifting its focus to the tier of debt above sub-prime, eyeing loans covering people viewed as better credit risks but who lack the steady income needed for prime status.
S&P has placed 11 loan packages worth $146m on watch for a possible downgrade this week, saying it was most worried about "piggyback" second mortgages. "There is a potential danger of default on these deals," said credit strategist Robert Pollson.
For now, the US Federal Reserve believes the damage can be contained. "I don't think there'll be a large impact on prime mortgages from the sub-prime market," said governor Susan Schmidt Bies.
However, she warned of a "hidden" problem caused by sellers pulling property off the market. " The percentage of homes where nobody is living in them is at a record level. So the potential for inventory correction is still very high," she said.
Nouriel Roubini, economics professor at New York University, says the housing bust is slowly pulling America into recession. He cites a 14.4pc drop in housing starts last month; an expected loss of 600,000 real estate jobs in 2007; a sharp fall in home equity withdrawals - down from 6pc of GDP at the top of the boom; and a squeeze as $1,000bn of mortgages are adjusted upwards this year to higher interest rates.
Mr Roubini said: "America faces a 'reverse cycle' where a credit crunch has hit before the slowdown, a rare pattern. Normally, recession comes first, setting off credit troubles in its wake. We have a housing recession, an auto recession, a manufacturing recession, and a real investment recession already present. If all this happening in what the consensus terms as a 'Goldilocks economy', what would happen if the economy slows down?"
--There are 2 kinds of people, those who think there are 2 kinds of people, and those who know there is only One.
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Commentary: With no war dividend, workers ask: What the hell are we doing in Iraq?
CRISIS ABOUNDS, head for the Roosevelt Room! In anxious times nothing seems quite so appealing as the consolation of going back. Fashion houses took the lead on this in 2000-01, draping models in couture interpretations of World War II Army drab. Liberals followed a few years later, envisioning in the wake of Hurricane Katrina a "national conversation" toward vast public works: "George Bush, meet Dr. New Deal," wrote William Greider. This summer, against a backdrop of Iranian defiance, Hezbollah's humiliation of U.S./Israeli firepower, and more horror in Iraq, came Newt Gingrich, indulging an opportunist's appreciation for fear and an if-only sense of nostalgia by proposing that Americans rally themselves for World War III.
"A trial balloon for 2008?" pundits inquired as to the intentions of the "de facto leader of the GOP." The balloon deflated before it had liftoff, notwithstanding the efforts of right-wing radio, Joe Lieberman, and the Bush team bellowing "Islamofascism!" and "appeasement!" to blow air into it. Americans, it turns out, aren't keening for Victory Gardens and the draft any more than they are for Eisenhower jackets. They are too acquainted with rationing of a sort already, and with the dead, wounded, and disturbed. Even the lucky ones who haven't lost income or a job or a child and aren't at risk of doing so are cynical. This election cycle, the so-called security moms were telling pollsters they are sick of war. Iraq looks lost, the Taliban is regrouping, nothing feels safer, it's a sweat to keep up, damn the SUV, those soccer runs cost dearly, and God only knows what it will take to heat the house this winter. Something interesting has happened at the intersection of economic decline and the road to Baghdad. After more than a generation of organizing economic relations for lower expectations, worker insecurity, and super-enrichment of the moneyed at the expense of everyone else, capitalism is failing to accomplish one of its historical tasks: organizing support for war. That's the good news in a gloomy time, and not only Republicans and Democrats but also the left might want to revise their strategies.
It used to be an article of faith that war abroad brought benefits at home, not just in the warmth of perceived national unity but in hard cashjobs and rising living standards. It was mass production in mills and on assembly lines for World War II that finally brought the country out of the Depression, after all. The New Deal simply saved capitalism from itself and, through redistribution, rural electrification, and wage and hour laws, created a sense of common purpose, of faith in government that made the call to war that much easier. All the cant about "the greatest generation" obscures the fact that most Americans were poor then; they had nowhere to go but up. War helped them get there. From 1929 to 1947 real wages for production workers rose 67 percent. The path was hardly even or equal, the claim of "one nation" always wishful. The war's end brought grave dislocations for the newest members of the industrial workforceblacks and women. But the reconstruction of Europe and Japan helped, Korea helped, the GI Bill helped, the Cold War buildup and the postwar consumer frenzy helped a lot. Blacks had bases from which to mount the modern civil rights movement, and after Rosie the Riveter was sent packing from the factory to the family room, at least she got a dishwasher and a gin and tonic until time and women's liberation presented more options. That résumé glosses over worlds of pain, implicit in placards for the 1963 March on Washington: "For Jobs and Freedom." The war in Vietnam didn't answer either demand, and Lyndon Johnson's halfway measure, the War on Poverty, would be the era's other lost war. But even that forgotten campaign brought benefits. Women especially found a place in the vast enlargement of the public social-service sector, the growth of which, combined with racism, alarm over unrest, and higher wages from wartime expansion, provided enough of a distraction to keep a large portion of the older white middle class and the most privileged, mostly white sectors of the working class in the war column through most of the Vietnam years. The New Deal's unfinished business remained just that and its mirage of common purpose vanished, but with real wages rising 68 percent from 1947 to 1973, it was easy to say: War is the engine, its payoff destined to thwart a sustained antiwar politics.
We don't have such a politics now, but almost no one's talking payoff either, as insecurity at home and abroad feed off each other. Republican mothers in suburban Columbus tell the Washington Post they're frustrated with a war that has made Ohio No. 5 in deaths and diverts attention from the precarious economy. The Bureau of Labor Statistics (BLS) projects there will be 93,000 steelworkers in 2014; there were 720,000 in 1970. An Amtrak conductor out of Springfield, Massachusetts, tells a passenger he's never seen things so bad and wonders "why there isn't a revolution." In Detroit, Ford reels from overreliance on heavy trucks and SUVs, cutting production by 21 percent and anticipating 30,000 permanent layoffs. On a neighborhood corner in Columbia, South Carolina, a group of men rail against the war, their wages, the white man, and how hard it is out there, especially for young brothers, as 72 percent of black men in their 20s without a high school diploma are jobless.
On the rural fringe of Utica, New York, a graduate student keeps his thermostat at 55 and waits out the coldest days in a heated bar with retirees and sidelined hard hats. An Iraq veteran's wife in Fresno, California, flaunts a bumper sticker on her Chevy Suburban: "Mission Accomplished, My Ass!" Her husband, having quit the Army on her ultimatum, says, "The fact is I'm a trained killer," and agonizes over how else he'll support their little girls. The BLS forecasts that the greatest employment opportunities will be in low-wage retail work. A retired executive in West Virginia fumes that a credit card company hit him with more than 30 percent interest. A jobless woman near Sarasota, Florida, can't support another child and doesn't have $400 in cash or credit for an abortion, but at six weeks she can't yet get emergency help from a strapped abortion fund for low-income women; nearing the second trimester she'll be an emergency, the fund will kick in, and the price will drop, to $200 she also doesn't have. An editor for a financial securities firm despises her job and the caution she must exercise daily so as not to jeopardize it while her daughter's in college. A New Orleans florist joins the throng of local shop owners trying to reopen but rejected for loans by the Small Business Administration. Threatened with gutted wages and pensions, 83 percent of unionized Delphi workers take a deal to quit. The BLS records 251,341 "separations" due to mass layoffs in the private, nonfarm sector for the second quarter of 2006, from manufacturing to food service, professional and technical services to retail trade, emergency health care to support services; not even finance, insurance, and real estate are exempt.
For each snapshot there are myriad amplifying statistics, charting the effects of nearly 30 years of policy, under Republicans and Democrats, in boom times and in slumps, affirming militarism as a given but employment as a crapshoot, inequality inevitable, and life on the edge of ruin a fact for all but the richest or the already ruined. Since the early 1980s an estimated 30 million people, from line workers to professionals, have been permanently chucked from full-time jobs as part of a business strategy, while average real wages have tumbled, so that by 2004 more than 55 percent of available jobs paid no more than $13.25 an hour and nearly 40 percent of the workforce earned no more than $10 an hour. It's not that business and its political patrons previously were not cutthroat and now they are, only that the extent of exclusion has been so grotesque. From 1929 to 1947 the real income of the richest 1 percent fell 17 percent; from 1947 to 1973it rose 38 percent; from 1980 to 2004 it rose 132 percent. It's hard to throw a party, shut out almost everyone, and then hope to generate whoops of solidarity from the uninvited. No doubt the Global War on Terror has boosted the ranks of low-wage security guards and high-wage security system designers, just as it has kept some aircraft engine builders and Hummer makers who might otherwise have been furloughed on the job. But because neither the war nor the economy depends deeply on heavy industry, because government policy is not geared for redistribution and the private economy no longer turns on the concept that excess profits will be spread around in the form of higher wages and benefits, the co-opted worker has given way to the anxious worker.
The midterm elections can have no bearing on this reality, as Republicans "stay the course" and Democratic opposition amounts to arguing for a stingy minimum wage hike, not a renewed social contract; for a more competently fought war, not an end to war and threats of war as policy. Yet there is opportunity here. The majorities registering opposition to the war are an inchoate bunch. Antiwar forces would like to take credit for that opposition, but they are playing catch-up, reflecting mass opinion but without a mass movement capable of doing something about it or a message that compellingly unites the twin poles of insecurity. It never is wise, or moral, to oppose war on cost-benefit terms. What if it were "worth it"? But neither is there sense, or inspiration, in addressing war as if it were some walled phenomenon, over there, without implication here except as grist for playroom slogans like "Books Not Bombs." As old fighters from an earlier antiwar movement said, the aim is to stop not just this war but "the seventh war from now"; that means challenging the setup that rewards violence and casual destruction at home and abroad. That is no longer too exotic a message for most people to hear.
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