Golden Rice and the downsides of globalization for the USA (UPDATED 3X)

If your first reaction to the title of this post is to think, 'Whatever it is to do with rice, I don't have time for this,' I understand perfectly. Yesterday I knew I was suffering from bad news overload when I sat for a full four minutes and stared at ever-changing pictures of the planet Titan. Anywhere but Earth.

I don't have time for rice problems, either, but I'm squeezing a discussion of Golden Rice onto my overfull plate and yours because it's a window on a problem that is only geting worse with time.

The problem is that issues arising from the USA's involvement with globalization are now so numerous and complex that they've overleaped our ability to keep up, much less resolve them. And in that darkness of inattention many unfortunate projects have zipped around the globe, and which too often are stamped "USA" -- even though the vast majority of Americans never heard of them.

That's what we're dealing with in Golden Rice. In one saffron-colored grain we find a veritable universe of entities and issues ranging from malnutrition, to infant mortality, water and land management, transnational U.S. foundations and corporations, agribusiness, genetic engineering, the alphabet soup of international organizations, World Trade Organization, foreign policy, government corruption, biotechnology, patents issues -- I've run out of breath, but that's by no means the entire list.

If you say, 'There must be people whose job it is to deal with this stuff' -- put on your flak jacket and tiptoe to the cockpit. Hear those shouts and thuds on the other side of the door? Listen to the screams of "Babykiller!" "Luddite!" "Corporate fiend!"

Those are the sounds of Greenpeace activists, scientists, governments, biotechnologists, corporate boards and UNESCO trying to bash each other to dust during their disagreements about Golden Rice.

No, nobody's in charge.

If you try to tiptoe away, saying, 'Then this is none of my business,' your escape will be cut off by Pundita intoning, "Ogallala Aquifer."

To spare you a trip to Wikipedia, the Ogallala Aquifer, also known as the Great Plains Aquifer, is the lifeblood of America's Breadbasket farming region, and thus America's agricultural might and our ability to feed ourselves and export mountains of food.

As to what the aquifer has to do with Golden Rice, thereby lies a tangled tale of monoculture and high-yield grains, and their threat to irreplaceable water supplies here and around the globe. The key point is that the aquifer, which took millions of years to form, is drying up. According to Wikipedia:

The Ogallala Aquifer is essential to a huge portion of central and southwest plain states, but has been at annual overdrafts of 130-160 percent in excess of replacement. This irrigation source for America's bread basket will become entirely unproductive in another 30 years or so.

I think that years before it runs dry, we're going to see conflicts in this country that will make the old wars between the sheep herders and cattle ranchers seem like a company picnic.

In short, not long from now we may have trouble growing enough food to feed ourselves, let alone export food.

There's more than one reason for the aquifer's lowering levels but monoculture -- the growing of a single water-intensive crop on vast tracts of land -- is a big factor. The same is true for many regions in the world, including those which saw the Green Revolution.

Proponents of Golden Rice have framed it as a new or continuing phase of the agricultural Green Revolution, which is misleading. Golden Rice is a genetically modified type of rice.

The Green Revolution was a package of technologies that had been used with great success by the U.S. in the post-World War 2 era, then applied to alleviate famine conditions in other countries.

The technologies included chemical pesticides and fertilizers, irrigation projects, and improved crop varieties developed through the conventional, science-based methods available at the time.

I agree with the spirit of the reply that Norman Borlaug, the father of the Green Revolution, gave to the revolution's critics:

"They've never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for fifty years, they'd be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things."

Understood. However comma the Green Revolution was the flagship project of modern globalization and thus, the world and the issues involved were far less complicated than today.

There are serious downsides to the Green Revolution; these emerged in the past quarter century. Top of the list is the water intensive aspect of the revolution's grain crops, which is now being felt in India. From a 2006 BBC report:

[It] is becoming increasingly hard to make a living out of wheat, a problem particularly acute in Haryana and Punjab, two states which alone account for 60% of India's wheat output.

"We don't get anything out of wheat or rice, but we get good prices for mushroom," said Anil, one farmer who has switched from growing wheat.

"When we were growing wheat, the situation was really bad - we didn't get anything. But with the mushroom crop, we get some profit - one acre of mushroom gets the same money as ten acres of wheat."

[...] In Haryana, traditionally India's bread basket, another family of farmers has a similar story.

"The water level has gone down - we don't get enough water to irrigate the fields," said Tejpal Chohan, one of a family of farmers who have changed their crops recently.

"It's becoming a desert here. The paddy crop is not good quality either."

Haryana state was the pride of the Green Revolution and its water-intensive monoculture. Now farmers there are increasingly turning to 'cash crops' that are not so water intensive, and that can be sold in the global marketplace.

However, these are not food staples; they're crops such as coffee, cotton and mushrooms, which can't even be consumed by the farmers for their sustenance or sold locally to alleviate hunger when the prices dive in the global marketplace.

The Green Revolution was a drastic emergency effort to halt famines that took millions of lives. But emergency measures that drift into unrevised traditions can end up causing more damage than the crises they originally addressed.

So for U.S. foundations and corporations to continue to address hunger in the same old way would be akin to deciding that after Apollo 13, all space capsules would be outfitted with the jerryrigged duct-tape affair that served as the ship's emergency air cleaner.

The way is forward, not back. But Golden Rice, despite its fancy modern bioengineering, is a flash from the past. From my reading, it is not a good means for curing Vitamin A deficiency arising from malnutrition, and it's been argued that it's not even a workable means. Yet many millions of dollars have been poured into the project, and great pressure has been put on various governments to implement it.

So I have pitted myself against Dr Henry Miller, for years one of my favorite regular contributors to John Batchelor's show, and who brought up the topic of Golden Rice on John's show last night.

(The podcast will be available sometime today or tomorrow. See Hour 3 of the show.)

Henry folded the issue into a critique of what he considers to be anti-science obstructionists doing their damndest to block the sale and growing of all genetically modified foods.

This loops back to the complexities of the present era, which cannot be stuffed into sweeping generalizations. Not everyone who is against Golden Rice and genetically modified foods is anti-science; indeed, there have been many scientists who have come forward with criticisms of Golden Rice.

And, in an aside to Norman Borlaug, not all the criticisms have come from the elitists in the West. One of the most reasoned and cutting critiques of Golden Rice comes from an Indian, Dr. Vandana Shiva.

I don't want to see eye-rolling from Dr. Miller at the mention of Dr Shiva's name because two can play that game:

[Falling on her knees and lifting her arms to heaven]

"How long, O Lord, must we continue live in the Fourteenth Century? How much longer, Lord, must we read tea leaves and fiddle with Ouija boards when we have these things called supercomputers, which means we no longer have to apply the same solution to highly diverse problems?"

In truth, the reasons for endemic Vitamin A deficiency (and malnutrition in general) vary from country to country and even region to region within the country. With regard to India, see this report from the International Herald Tribune, which focuses on problems with food distribution for the needy, and the BBC one I quoted above.

The causes of malnutrition in India are myriad, and perhaps best summed by Palagummi Sainath, one of India's leading authorities on rural affairs. From the BBC report:

"India today is in what I would call the greatest agrarian crisis since the eve of the Green Revolution.

"Its effect is manifest in many ways. You have the lowest levels of growth in agricultural production in decades - it is the first time that the population growth rate has outstripped the agricultural production growth rate.

"You also have the lowest levels of employment ever seen in rural India since we started keeping data on the subject.

"You have millions of people migrating to towns and cities in search of jobs that don't exist, because the mills are closed, the factories are shut, and hundreds of thousands of units have wound up.

"You have a tremendous recipe for chaos which is entirely driven by policy. It has very little to do with drought and natural calamity."

You want to throw Golden Rice at those problems?

(Before Americans laugh up their sleeve at Indian agribusiness exporting itself into starvation: have you checked out the price of beef recently? We are paying a small fortune for beef because U.S. cattle ranchers can fetch a higher price for their beef in other countries. And the beef we can buy here -- "organic" beef excepted -- is injected with water to beef up the price per pound even more.)

As for malnutrition in Burma -- oh right; give Golden Rice seeds to the junta for distribution to their country's needy farmers. They'll sell those seeds in a New York minute to the Chinese government, and from there half the seeds will end up in the black markets, where terrorist organizations will take their cut.

I have not looked at the issues in every country that has widespread Vitamin A deficiency but money says that if you go down the list, you'll find a broad range of problems that cannot be solved by a one-size fits all approach. The same holds true for other food deficiencies.

None of this speaks to the questionable science behind Golden Rice, if it can be called science. Looks to me as if it's the dartboard method of technology research. But to be fair, here's the argument from the Golden Rice folks, although they ignore mention of the water-intensive requirements of Golden Rice growing.

The first article gets technical in parts, but they do well enough at explaining in plain English what they consider the worst problems with Golden Rice. However, the arguments stay within a very narrow frame. If you widen the frame it brings home that we're not in Kansas anymore, Toto.

The era in which Norman Borlaug propagated the Green Revolution had black markets but not black globalization. It was a different world back then.

Bottom line is that today high crime follows the same principles and practices that legal globalized business does. That means that when you distribute anything for free in a poorer country, take 40-80% straight off the top for corrupt officials and assume that most of the giveaway will end up on a black market somewhere in the world.

Then you go to the Ford Foundation, the Golden Rice distributors and UNESCO and ask, 'Just how are going to police all this?' They look at you as if you're from another planet and reply, 'That's not our job.'

Okay, we from another planet want to know: whose job is it?

Cut to the sound of chirping crickets.

And it's not just the questionable science of Golden Rice, and the downsides of growing and distributing it that are the problems. It's that the thinking behind the Golden Rice approach to dealing with malnutrition is lodged in an earlier century. Not the Fourteenth, but I will stay with sarcasm by pegging the era as sometime before Turing was born.

Having framed a discussion of Golden Rice within the context of the USA's part in globalization, having presented it as an example of U.S.-led aid projects flying under the radar of U.S. pubic attention, is there any way we can gain control of these types of situations without opting out of globalization?

We couldn't opt out even if we wanted but yes, there are a combination of ways to gain more control. The bonus is that because we'd be starting from zero, the control while by no means total would seem considerable to us. I'll look at a few of the ways later this week. They are simpler than you might imagine.
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March 24
This entry is crossposted, with a series of evocative illustrations chosen by Procrustes, at RBO. Thank you Procrustes, for all your work to make this post beautiful to look at!
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Dear Pundita:
Food preferences are incredibly conservative. There are any number of cases of people who starved because they didn't like the food that was in the relief rations they'd received. In some cases people don't even recognize food as food--in China chicken feet are a delicacy; here they're a waste product (if that isn't a basis for trade I don't know what is).

It's not enough that a food source be efficient and nutritious. It's got to look and taste like the Old Stuff, too.
Dave Schuler
The Glittering Eye

Dear Dave:
Yes, thanks; that is a problem. But then once they do accept the New Stuff, it's pulling teeth to coax them to return to the Old Stuff when food science discovers that the Old Stuff was better for them.

Breaking News: President Obama's filming for cameo role in 24 will not interfere with his appearance on American Idol

A White House spokesperson announced that President Barack Obama will appear in the final episode of this season's 24 as Maj. "Chuck" Harrison, who reads the eulogy at the memorial service for Bill Buchanan.

The spokesman noted that the President had just wrapped up successful appearances on the Jay Leno Show, 60 Minutes and town hall meetings in California, and that he was preparing for his guest appearance on American Idol on Monday.

'It will a brief appearance, to wish the remaining contestants well and explain to the Idol audience that he had no ill will for Simon Cowell by likening him to the U.S. Congress.'

When a Reuters reporter asked for comment on the rumor that President Obama will be a contestant on next season's Dancing With the Stars, the spokesperson replied, "No comment at this time," but added that the President's agent was currently in negotiation with an as-yet unnamed production company for a minor part for the President in a remake of Hawaii Five-0.

As to the President's media engagements for April, the spokesperson said that aside from the weekly radio broadcasts, 50 town hall meetings, an appearance Dr. Phil, Live with Regis and Kelly, 60 Minutes, The View, two appearances on Meet the Press and a talk show in Tehran, the President's schedule is open.

How right they were

Read every word of the following excerpts from Stephen Metcalf's June 5, 2005 report for The New York Times Magazine titled Believing (and Believing and Believing) in Bullion.

This economic crisis was no 'Black Swan' event. Many saw clearly what was coming, years in advance, and knew it had to happen sure as rain.

[...] The Daily Reckoning is a freewheeling Web site for libertarians, gold bugs and doom enthusiasts of every stripe. Its editorial director is Addison Wiggin [...]

The narrative Wiggin spun out for me over lunch is repeated, nearly verbatim, by almost everyone in the gold community.

"This is the blow-off phase for the Great Dollar Era. We're in an unsustainable trend right now," Wiggin told me, ticking off the miscalculations that have brought us to the brink of an economic apocalypse.

To begin with, the U.S. has become the world's biggest debtor, with three outstanding obligations at alarming highs: consumer debt, or our mortgages and credit cards; the federal deficit; and our current account deficit with foreign countries.

Federal Reserve Chairman Alan Greenspan, Wiggin continued, has simply shifted one bubble -- the 90's bubble in stocks and bonds -- into another, in real estate and "overconsumption," or the American propensity to pay for an ever-more-lavish lifestyle on credit.

But the real nightmare involves the U.S. dollar. If Asian central banks weary of buying Treasury bonds -- an asset denominated in the weakening dollar -- then look out below.

"What is that Dylan Thomas quote?" Wiggin wondered over his fusilli. "The dollar will not go gently into that great night."

Wiggin offered up his analysis with a confident and steady aplomb. And for good reason. While no one in the mainstream financial elite seriously advocates a return to the gold standard -- the modern global economy is too fluid and dynamic for such austere discipline -- at this moment, the gold bugs' grim prognosis for the dollar happens to align with a more mainstream view.

A low-level panic about the debt crisis, and its possible effect on the American economy, is gathering strength.

"Our little post-bubble workout is not over, not by any stretch of the imagination," Stephen Roach, the chief economist at Morgan Stanley and himself a noted pessimist, told me recently by phone.

Roach says he firmly believes that an adjustment is necessary and inevitable, and that when it comes, it will be very, very painful. From appearances, Warren Buffett, the savviest investor who ever lived, agrees. His company, Berkshire Hathaway, has placed a $21 billion bet against the U.S. dollar.

Meanwhile, the general tone is darkening. In February, Paul Volcker, the former Federal Reserve chairman, publicly stated in a speech that "there are disturbing trends" undergirding the U.S. economy, including "huge imbalances, disequilibria, risks."

These demand "a strong sense of monetary and fiscal discipline," he said, gently chiding both the U.S. government and its citizens to live within their means.

Volcker, a man known for his prudence and a cautious tone, let his words ring ominously.

"Altogether, the circumstances seem to me as dangerous and intractable as any I can remember," Volcker continued, referring to the very same warning signs as Addison Wiggin, "and I can remember quite a lot." [...]

Story of the week (H/T James Sinclair's Mineset). Emphasis mine:

China Inc. On Huge Foreign Buying Spree
March 19, 2009
By Dan Weil for MoneyNews

China’s companies are fast finding ways to spend, snapping up raw materials across the globe while those assets are cheap.

Chinese companies have been have been gulping down tens of billions of dollars worth of key assets in countries as varied as Iran, Brazil, Russia, Venezuela, Australia and France, the Washington Post reports.

Chinese companies poured $16.3 billion into foreign assets during January and February. If that pace continues, total overseas acquisitions could almost double last year’s total of $52 billion.

The assets are available at bargain-basement prices thanks to the financial crisis. As a result, China has garnered oil, minerals, metals, and other strategic natural resources necessary to sustain its economic expansion.

“That China started investing or acquiring some overseas mineral resources companies with relatively low prices during the global economic crisis is quite a normal practice,” Xu Xiangchun, consulting director for research firm Mysteel.com, tells The Post.

“Japan did the same thing in its prime development period too.”

It’s an early sign that China Inc. is gearing up for the next big surge of growth. Chinese demand for iron ore, food, and oil drove up the costs of those commodities at the tail end of the last boom.

As the U.S. and Europe continue to slide commodities should fall, but Chinese buying is buoying commodities instead, creating global stagflation. Western consumers have less money, but prices rise anyway.

The massive size of China’s purchases has swayed energy markets. It also has sparked concern that China will hoard commodities, lifting their prices and making them unavailable to other countries, including the United States. [...]

I don't think China's government would be so stupid as to actually corner markets in precious metals and minerals or even attempt to do so. But I think it's true that their hedge strategy is leading to stagflation. One can hardly blame them, of course. They need to diversify investments and aside from the US dollar, commodities are the only refuge.

How will all this shake out at the G20 summit next month? I think "SDR" might be the operative term. If they do toss around that idea I cannot recommend strongly enough that they add some gold to the current basket of SDR currencies.

I would also very much appreciate it, and I think the entire world would appreciate it, if Paul Volcker attended the meeting. I don't know how that could be arranged; perhaps he could be appointed a temporary assistant to Mr Geithner.

But by any which way I think he should be present to represent U.S. interests. His presence would be an assurance that someone who has widespread respect in the international financial community, and who is a veteran of highly complex monetary crises, will be in attendance at such a crucial meeting.

I think just the announcement that he would attend would have a calming effect, to the extent calm can be found at this juncture.
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This entry is crossposted at RBO.

More on "The all-important question of egress" and the Gurkhas (UPDATED March 17)

I can't resist giving this comment from reader Shaunak its own post. See my earlier post, The all-important question of egress, for background:

"The tale about the Gurkhas is true. It's mentioned in fair detail in a book chronicling the history of India's Parachute Brigade.

A battalion of Gurkhas was told about parachuting into the battlefield. Volunteers were called for. A little less than half the battalion volunteered.

The officer was not impressed and clearly told them so, berating them for their lack of bravery.

One of the NCOs stood up and told the officer that he would have got more volunteers but for the fact that they (the Gurkhas) didn't understand how they would be useful as soldiers after jumping out of an airplane and splattering on the ground.

When the concept of the parachute was adequately explained, the entire battalion volunteered in the blink of an eye.

Brave people!

Will post a link if I come across it."

Yes, the Gurkhas are very brave. Imagine: several Gurkhas volunteered even when they thought they'd have to splatter on the ground.

That was a great story to start off the week, in which Americans must endure yet more news items about the courage and sense of duty of our leaders in government, finance, and business.

From Wikipedia's article about the Gurkhas, which the British colonial government categorized as martial:

"Martial Race" was a designation created by officials of British India to describe "races" (peoples) that were thought to be naturally warlike and aggressive in battle, and to possess qualities like courage, loyalty, self sufficiency, physical strength, resilience, orderliness, the ability to work hard for long periods of time, fighting tenacity and military strategy.

Looking through that list of qualities I'm reminded of Glenn Beck's comment last week that the only U.S. group he trusted was the military. I suspect that many Americans have come to think the same way. That's probably why certain segments in Washington now fear that the military is becoming too much of a role model.

I guess they'd prefer that Americans took bureaucrats and politicians as role models.

Speaking of character issues: the British government, for all the use they found for the Gurkhas, did not treat them all that well when they retired. From the Wikipedia article:

The treatment of Gurkhas and their families has been the subject of controversy in the United Kingdom following revelations that Gurkhas received smaller pensions than their British equivalents.

On 8 March 2007, it was announced by the British Government that all Gurkhas who signed up after July 1, 1997 would receive a pension equivalent to that of their British counterparts. In addition, Gurkhas would, for the first time, be able to transfer to another army unit after five years service to broaden their experience. It was also stated that, for the first time in the history of the Gurkhas, women would be allowed to join - although not in infantry units, in line with general British Army policy.

Despite this, many Gurkhas who had not served long enough to entitle them to a pension faced hardship on their return to Nepal, and some critics have derided the Government's decision to only award the new pension to those joining after 1 July 1997, claiming that this left many ex-Gurkhas still facing a financially uncertain retirement.

A charity, the Gurkha Welfare Trust, provides aid to alleviate hardship and distress among Gurkha ex-servicemen.

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UPDATE
It was a long time ago, so I'm not 100% sure, but I think I read the anecdote in this book - The Story of the Indian Airborne Troops by Maj Gen Afsir Karim. -- Shaunak

She'll be comin round the mountain when she comes, Yeehaw! She'll be comin round the mountain when she comes, Yeehaw! She'll be comin round the --

"Geithner says the details are on the way."

Anytime this century is fine, Mr Geithner. Just let me set my bones down in my rockin chair and pick away at my banjo. Just a happy and a rockin and a strummin with all the time in the world to wait.

She'll be comin round the mountain....

John Batchelor's Plain Speaking 1933, Babble 2009 has more on the G20 pre-summit meeting this weekend in England. John reports that the meeting highlights are "Blame-shifting, Selfishness, Anti-Americanism and Defeat."

They're piling on the U.S.; even Canada joined in.

The old TIME magazine cover featuring a painting of Stalin, which John dug up for one of the accompanying illustrations to his post, made the hairs on the back of my neck stand up.

As John noted, today's crop of devils are sensing disarray in the leading nations' responses to the global econonimic crisis.

Here's the schedule for both parts of John's show tomorrow night. The economic/financial crises, including G20 issues, will take up much of the night, but I note his 9:55 PM ET interview with Gordon Chang about North Korea.

Dymphna asked me the other day about the podcasts and online streaming relating to John's show. I answered her questions in my comment section but here is the handy tab that RBO created, which has links to the online versions of the Batchelor radio show, the times of the (two-part) show, and the podcasts for the first portion of the show. The latter is available at John's website within a few hours of the broadcast.

Check out the KFI website for the podcast to the second portion of the show, which broadcasts out of Los Angeles; it's available the day after the show.

AFPAK: "Obama is making the muddle worse."

I seem to recall that Franklin Roosevelt liked a team of rival advisors around him, but clearly President Obama is going overboard with a tactic favored by emperors for keeping advisors off balance. The following, by three AEI guys, is from an almost maniacally funny analysis of how Obama is holding up his end of the Afghanistan muddle:

[T]he president needs to better control his "Team of Rivals." It is a military truism that strategic clarity depends upon a well-defined decision-making process, on a "unity of command." This principle is absent in the present Afghanistan policy.

To a certain extent, this is inherent to coalition warfare: General McKiernan as International Security Assistance Force commander reports to both NATO and to U.S. Central Command. Likewise, his subordinate commanders--be they British, German, Canadian--report to at least two bosses.

But Obama is making the muddle worse. Afghanistan policy is the product of a horse-by-committee termed "the Interagency." The president, members of his cabinet, the national security adviser and his staff, generals and viceroys, and a burgeoning number of bureaucrats all take part and bring divergent personal or institutional biases with them.

Interagency policy reflects the State Department's desires to do traditional diplomacy, the Pentagon's concerns about force structure and "balancing risk," the intelligence and special operations operatives charged with prosecuting the global war on terrorism, the charter of development agencies to alleviate poverty, and so on. No one in Washington is, as yet, responsible for winning the war.

And these structural problems are hugely exacerbated by the herd of elephantine egos and personalities engaged. There are at least three four-star officers with different agendas: McKiernan, CENTCOM chief General David Petraeus, and Admiral Mike Mullen, chairman of the Joint Chiefs of Staff.

The civilian side is even worse. Aside from the president himself, who has occasionally quipped that he's smarter than any of his advisers, there are the two poles of the new secretary of state and the old the secretary of defense. There's the national security adviser, Jim Jones, a former four-star general himself, who recently sounded like another four-star NSA, Alexander Haig, when he boasted to the Washington Post that he was in charge at the White House (even though Jones was in Munich at the time).

The Obama administration is also keen on ministers plenipotentiary and special envoys, with the new U.S. Special Envoy for Pakistan and Afghanistan, Richard Holbrooke, being the most special of all. He stands outside the traditional bureaucratic structures, and the great danger is that he will have lots of power but not so much responsibility.

Foreign governments -- Germany and Britain among them -- remember the way in which Holbrooke dominated policymaking during the Balkans wars of the 1990s and want their own Holbrooke-equivalents in Afghanistan, if only to keep tabs on what the American is up to.

This multipolar decision-making world is a recipe for competition and confusion. There are at least three Afghanistan reviews underway: at the NSC by Bush-holdover "war czar" General Douglas Lute, at CENTCOM by Petraeus and many of the counterinsurgency experts who designed the Iraq surge, and by Mullen and the Joint Chiefs.

These reviews, in turn, are to be reviewed by Bruce Riedel, a scholar at the Brookings Institution now working -- at least temporarily -- for Jones and the NSC. Whether he will bring clarity instead of further confusion is unclear; Riedel has written that he believes that settling the Israeli-Palestinian dispute is a key to success in Afghanistan and the war on terror.

As to how Mr Riedel arrived at the conclusion that the most direct route between Boston and New York is via Bangkok, he summarized his reasoning this way: "Tweet twitter awk cheep tweet. Chirp!"

The AEI guys (resident fellow Thomas Donnelly, researcher Raphael Cohen and research assistant Tim Sullivan) forgot to include the input from Senators John Kerry and Richard Lugar.

Congress and President Obama are now so spooked at the thought that Pakistan is becoming a failed state that they want the Kerry-Lugar bill (the "Enhanced Partnership with Pakistan Act") to be passed yesterday.

The bill, which was originally sponsored in 2008 by Joe Biden and Richard Lugar when Biden was a senator and chairman of the US Senate Committee on Foreign Relations, would give Pakistan $1.5 billion in nonmilitary aid a year for at least the next five years.

That would be on top of the $10 billion in military aid that was launched during the Bush administration and whatever additional military aid the Congress wants to hurl at Pakistan.

Dan Riehl is also spooked; last week he urged his readers to rip their attention from the economic crisis long enough to focus on the situations in Pakistan and Afghanistan, which he fears could easily converge in a nuclear exchange.

I would be less worried at this minute about Pakistan's nuclear program than about what Messrs Kerry and Lugar know regarding Afghanistan and Pakistan. They know as much as Vice President Biden, who while senator encouraged Benazir Bhutto to return to the olde sod, where she went to her death. In other words they know nothing that can be considered useful information about either country.

And they're at a loss to explain what measures the U.S. would take to prevent Pakistani officials from outright stealing the proposed yearly $1.5 billion aid, diverting substantial amounts of it to the Taliban and other terrorist groups, and funneling a portion of it to military projects for making war on India.(1)

Pakistan has already stolen a big chunk of the $8.7 in U.S. military aid that's been disbursed to them.

After more than two decades, the U.S. General Accounting Office is probably still trying to figure how much Pakistan stole of the U.S. financial aid to Afghan's insurgency against the Soviets.

And after more than 30 years of pouring uncounted billions into the black hole of Pakistan's education system, which has a trap door opening into Pakistan's military establishment, scores of external aid agencies and international banks are afraid to tot up the amount. They're afraid because they suspect the total will roughly equal what it cost Pakistan to build a nuclear weapon program.

I'm glad to read that the AEI guys share my concern about AFPAK. From their analysis:

[T]he administration needs to better define or, better yet, drop entirely the idea of "AfPak." This is the neologism for an emerging strain of conventional wisdom suggesting that for the United States to succeed in Afghanistan, it must first address the problems in the Pakistani border regions.
While there is no denying that the flow of weapons, resources, and fighters across the border into Afghanistan has complicated the U.S. mission there, Pakistan itself presents a range of strategic challenges of which the violence and extremism in its volatile tribal regions are only a symptom.

As a nuclear-armed state with a weak civilian government, a politically powerful but malfunctioning military, and a population prone to extremism, Pakistan is strategically far more important to the United States than Afghanistan. The administration cannot afford to shape its policy toward Pakistan based simply upon the effects it hopes to achieve in Afghanistan; it must instead tackle Pakistan qua Pakistan, even as it pursues a comprehensive strategy for its neighbor. "AfPak" thinking will be wrongheaded about both countries.

I agree it's wrongheaded but I would recommend that to the greatest extent possible the U.S. focus on Afghanistan. That is actually the best way to deal with Pakistan.

1) In response to a comment from Shaunak (see comment section) I've changed "Pakistan" to "Pakistani officials." I'd intended to put in a quote from TIME magazine that clarifies what I meant by "Pakistan," but it slipped my mind. I'll save the quote for another post.

Shaunak's comments bring up another valid point that I'd not mentioned, and which is well known to Pakistan watchers:

A large chunk of [Pakistan's] economy is controlled by the Pakistan Army through front companies and stooges and the profits find their way back into the Army's coffers.

Even if the $7.5 billion were entirely used for non-military purposes in the first set of transactions (consumption of food, services and everything non-military), it would probably land up funding the Pakistan Army by the time the second, third and fourth set of transactions are through.

The rest of his comments are also worth the read.
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This entry is crossposted at RBO.

While we were napping

"How hard can we laugh at this and still find coffee money in the morning? These are the geniuses who claim they have insured our deposits up the $250,000 each. The FDIC is bust. It didn't collect for ten years. The banks that are gone never paid their fees and are now draining the pool. And the same crew that crashed the airplane is now claiming it can take off again even though it is out of fuel, and they forgot to lay in a supply."

-- John Batchelor on Sheila Bair's assessment of where the FDIC is today.

John has a gorgeous new website that features a banner with ever-changing landscapes of Earth's twin, Titan. A good way to keep things in perspective while we're tearing our hair about the human tragicomedy in our patch of the galaxy.

Here's the rest of his post on the FDIC -- and us.

The all-important question of egress

"I always liked the probably apocryphal tale of a Gurkha Battalion asked to undergo airborne training. A surprisingly small number of volunteers climbed rapidly when it was explained that parachutes would be provided."

-- From a discussion at Small Wars Journal about David Kilcullen's statements regarding AFPAK to the Senate Foreign Relations Committee

If the acronym is new to you, get used to it because you'll be hearing a lot of it. It stands for "Afghanistan-Pakistan" but more specifically it's shorthand for the emerging consensus in the defense establishment and Congress that the U.S. military and NATO need to think of the security problems in both countries as one and treat them as such.

To pinpoint AFPAK even more precisely, it's The Great Game spelled backward only this time instead of different countries vying for power in the region, it's different factions of the U.S. military and NATO establishments vying over which strategies they think best for routing terrorism from the region.

Why not simply let General Petraeus do what he was sent to Afghanistan to do?

No no that would be the rational decision.

Boiled down, it's a new U.S. President, and everyone wants to test how much they can get away with around him.

So, ladies and gentleman, we have officially arrived at the Tweet Chirp era in U.S. defense thinking. Parachute, anyone?

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This entry is crossposted at RBO, with pix, of course.

Should the U.S. negotiate with the Taliban?

Writing on his blog on Saturday John Batchelor playfully asked whether President Obama's words on Friday were the first time he'd "ever acknowledged the Petraeus surge plan in Iraq was a 'success'."

I am pretty sure that was the first time, which The New York Times reported on in a March 7 report titled Obama Ponders Outreach to Elements of the Taliban. The Times quoted Obama as saying:

“If you talk to General Petraeus, I think he would argue that part of the success in Iraq involved reaching out to people that we would consider to be Islamic fundamentalists, but who were willing to work with us because they had been completely alienated by the tactics of Al Qaeda in Iraq.”

If Obama's observations sound familiar, reference my March 4 post about Fareed Zakaria, Newsweek, and Fareed's GPS show last week on CNN.

Yes; by amazing coincidence, just days before Obama's public announcement that he was considering reaching out to the Taliban, Fareed decided to discuss the subject of whether "the international community should have the same policy for the Taliban as it does al Qaeda."

I refused to link to the Newsweek article, which rehashes points Fareed brought up in the GPS program, but I finally broke down and read the thing. Here's the link and the key quote from the article -- a quote that Fareed did not think to bring up on the GPS program:

[...] David Kilcullen, a counterinsurgency expert who has advised Petraeus, says, "I've had tribal leaders and Afghan government officials at the province and district level tell me that 90 percent of the people we call the Taliban are actually tribal fighters or Pashtun nationalists or people pursuing their own agendas. Less than 10 percent are ideologically aligned with the Quetta Shura [Mullah Omar's leadership group] or Al Qaeda."

These people are, in his view, "almost certainly reconcilable under some circumstances." Kilcullen adds, "That's very much what we did in Iraq. We negotiated with 90 percent of the people we were fighting."

Very few of that 90 percent were Islamists. They were for the most part Baathists/ex-Baathists and tribal chiefs -- a distinction that even Fareed mentions in his article.

Kilcullen is saying that we need to distinguish between the Taliban and other Afghani factions -- the same point I made in my March 4 post.

His observations are a far cry from saying that the US negotiated with the Islamists in Iraq. His words shouldn't be twisted to serve the argument that we should consider negotiating with the Taliban.

Obama straddles the fence by saying that we should think about "reaching out to people that we would consider to be Islamic fundamentalists."

Let's dispense with the word games. It would folly for the U.S. or NATO to negotiate with the Taliban or try to 'turn' them. The Taliban's unbroken record of breaking their agreements with Pakistan's government demonstrates just how much folly.

Kepler lifts off

The most fortunate people in the world were at Cape Canaveral last night, when at precisely 10:49 PM Eastern Time they watched a Delta II rocket lift humanity's hopes into the heavens. John Batchelor was not at the Cape, but he had been waiting for the moment all his life; he wrote about it here, with accompanying pictures, of course.

Pondering the launch of Kepler's historic mission against the backdrop of a gathering global economic depression, I found myself recalling something that Les Brown, the great motivational speaker, said many years ago. He observed that often, just as we're making great progress in our lives, we're hit with a host of problems. He made a gesture with his hand to emulate a plane climbing in altitude and said, "It's just normal turbulence that can occur when you're moving to a higher level."

Humanity is now officially launched on a search for planets like Earth. Will we find them? The odds are good that we will.

Countdown to disaster: Massive U.S. borrowing knocks other governments and private borrowers out of capital markets, skyrockets the cost of money

"As I got out onto the promenade deck, I saw a large gray, what looked to me like a building, floating by. But that building kept bumping along the rail and as it bumped it sliced off bits of ice that fell all over the deck. We just picked up the ice and started playing snowballs. We thought it was fun. We asked the officers if there was any danger and they said 'Oh, no, nothing at all, nothing at all, nothing at all.'"
-- From Titanic first-class passenger Edith Russell's account of the immediate aftermath of the ship's collision with the iceberg

At Davos, former Mexican president Ernesto Zedillo warned that heavy U.S. borrowing was starting to crowd developing countries out of the capital markets. On February 8 I passed along Zedillo's warning. After I snapped and growled for several paragraphs about the need to work out a plan for orderly borrowing, I had a sort of Edith Russell moment. I decided that the G7 nations would somehow keep the poorer nations above water while they borrowed themselves away from the cliff.

Last week came another shower of ice on the deck. I was walking by the TV set and lo and behold, there was Niall Ferguson on the Glenn Beck show. Just a few days before I'd read his There will be blood interview with Canada's Globe and Mail about the financial crisis. It seemed Beck had also read the interview. I plopped down to listen to the discussion.

At one point Ferguson said almost in passing that Britain couldn't borrow because it was crowded out by the massive U.S. borrowings.

I sat for a moment, trying to digest the enormous implications of Ferguson's observation. Britain wasn't a developing country, and with all its problems it was still a finance powerhouse. If they were being crowded out of the capital markets --

The rest of the thought trailed off, my mind refusing to finish it.

Yesterday, after hearing that Gordon Brown's speech in Congress had mentioned the dangers of protectionism, it struck me that the most serious issue connected with financial crisis was being dodged.

Borrowing wars, not trade wars, are the gravest danger.

Yet eerily, as I'd noted in the February 8 post, there was almost no public discussion about the impact of massive U.S. borrowing on other countries trying to borrow.

Turning to the internet I looked for mentions of the borrowing issue. That's how I found Warren Buffet's warning that government borrowing was crowding out private borrowers. From his new annual letter to Berkshire Hathaway shareholders: (H/T Gurufocus)

[...] Funders that have access to any sort of government guarantee -- banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella -- have money costs that are minimal.

Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.

This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with a favored status. Government is determining the “haves” and “have-nots.” That is why companies are rushing to convert to bank holding companies, not a course feasible for Berkshire.

Though Berkshire’s credit is pristine -- we are one of only seven AAA corporations in the country -- our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.

Wednesday also saw the news that China's government was launching their own domestic stimulus plan. The news gave a boost to the Asian financial markets and was met with relief in the USA.

There was also concern here that Beijing might cut back on their purchases of T-bills in order to fund their spending program. Yet by the evening Bloomberg had reported that China's finance ministry would be selling bonds to raise the $29 billion needed for the economic stimulus programs.

$29 billion is a drop in the bucket next to the borrowing that the United States is doing, but if you add the drops from all the governments competing to borrow --

Titanic buffs correct me if I'm wrong, but I seem to recall a theory that it was the sharp turn to avoid the iceberg that spelled doom for the ship. If they'd let the ship crash head-on into the iceberg, the ship would have been badly damaged but would have taken the hit without sinking.

Whether or not the theory is right it might be applied to the cascading mortgage/banking/credit crises. It's possible that the governments that reacted first to the crises by borrowing huge amounts didn't factor in that the sheer size of their interventions was creating secondary effects that could be worse than the original crises.

However, by now it's clear that the massive amounts of money that need to be borrowed are creating unprecedented competition between borrowers for scarce funds, driving interest rates through the roof -- and crowding out all but the wealthiest governments.

The secondary effects are already emerging:

After first striking the advanced economies and then emerging markets, a third wave of the global financial crisis has begun to hit the world’s poorest and most vulnerable countries, threatening to undermine recent economic gains and to create a humanitarian crisis, IMF Managing Director Dominique Strauss-Kahn said in Washington DC. [...] financing problems are also beginning to affect developing countries, Strauss-Kahn stated. Foreign direct investment is expected to fall by 20 percent this year. The cost of borrowing has risen significantly, and in some cases may be unavailable.[...]

If we stay with the Titanic metaphor, what is it about a financial crisis that's analogous to the submerged part of the iceberg?

I think that the submerged part is called reality. To show you what the IMF thinks of reality:

[...] Strauss-Kahn said the IMF hopes to have in place shortly the capacity to make concessional loans of $11 billion over the next five years, about twice its current ability.

But the main responsibility for meeting the financing needs of the poorest countries lies with donor countries, he said. The donor countries must find some room to help poor countries in stimulus packages they are putting in place and must live up their 2005 commitment to double annual aid to Africa to $50 billion by 2010 and raise it to $75 billion by 2015.[...]

How are donor countries going to come up with that kind of money, on top of increasing their financial commitment to the IMF, when they're having to borrow heavily just to keep their own economies afloat?

They'll have to borrow it. As he said, the money to help the poorest countries will have to be included in the donor countries' stimulus packages, which they're having to borrow to create.

Has Messr Strauss-Kahn got any idea how to manage all that borrowing without touching off global hyperinflation?

That's an off-limits question because it's a reality question, which doesn't actually exist until -- well, until the ship is sinking.

Fareed Zakaria's next cover story for Newsweek: ALIENS KIDNAPPED MY DOG AND I HAVE THE PICTURES TO PROVE IT

When I checked my email a while ago my eye was caught by one that was titled: "Cover of Newsweek says we must live with radical Islam"

I thought, 'Huh. Must be Fareed shilling for advertising dollars again. Don't you dare waste your time on that.'

I don't know how you get along with yourself but I hate it when I boss myself around. So I clicked open the email, just to see if my hunch was right about the author of the piece. I was right but now here I am, trying to figure out how to justify the time I wasted falling once again for that rag's supermarket-tabloid tactics.

Remember last year? Remember all the outrageous Newsweek covers?(1) The magazine was so in the tank for Barack Obama, and so determined to foment class warfare in the USA, that their covers had a ghoulish lure. But reading the stories that went with the covers was like giving into the temptation to read about the two-headed woman who gave birth to a healthy one-headed baby; once you get it out of your system, you're supposed to spend your time in the checkout line in more productive ways.

I'm happy to report that Newsweek, as we know it today, is going out of business this year. Their readership tanked and their owner, The Washington Post Company, can't carry the dead weight anymore --- not in the magazine's present format. Couldn't happen to a more deserving editorial board.

What will rise out the newsmagazine's ashes is planned to be -- I kid you not -- a “thought leader" aimed at an "elite" audience. I don't know what kind of elite enjoys being thrown up on:

“I think a weekly magazine is a standing dinner date, or the fourth person in your bridge game,” said Jon Meacham, editor of Newsweek. “Sometimes they’re the most delightful person in the world, sometimes they get drunk and throw up on you. But enough times in a year, when something happens, that’s the first place you want to go to hear what they have to say.”

I venture that sensible people take the view that if you throw up on them once, you'll never get the chance again.

Already aware that their rag was headed for extinction, Newsweek's editors spent 2008 petulantly throwing up on their American readers. The topper was Fareed's cover story, lifted from his book The Post-American World. Not since Clare Booth Luce announced that Harry Truman was finished politically has a prediction been so wrong, as the present economic crisis demonstrates. The reality is that when the United States gets a bad cold, the rest of the world gets double pneumonia.

Miffed, perhaps, that reality snubbed their editorial viewpoint, Newsweek's cover story this week by Fareed ("Radical Islam is a fact of life. How to live with it.") suggests that the magazine intends to spend its final days in an orgy of regurgitation.

I seem to recall that in 2005 Charlie Gasparino did great reporting on the Hurricane Katrina crisis for Newsweek. The magazine's been around a long time; it's a shame they're going out with no dignity left.

The next incarnation of the rag will attempt to compete with The Economist, which is becoming popular among American news readers. I doubt the British publication is quaking at the thought.

Beneath The Economist's heavily ironic tone is a fiercely nationalistic outlook, which editorial boards for major U.S. news publications don't have in their DNA.

No matter how much The Economist might criticize their government's policies, their writers project the certainty that the British way is best for the world. The certainty is the reason for the magazine's enduring transnational appeal. No matter whether you agree or disagree with their views, you always know from reading The Economist where the British stand.

In place of certainty, America's major news publications have the desire to be fair, with the result that America's way of doing things is read as a blank slate, on which its enemies write anything that suits them.

As for Fareed's titillating cover story this week -- I don't know what he wrote. I ain't gonna be suckered again into reading another Newsweek article. But the opening segment of Fareed's "GPS" show last week for CNN was a teaser for the article. It was the first time I'd seen the show.

Fareed brought together Christopher Hitchens, Asra Nomani, Bernard-Henri Levy and Fawaz Gerges to "argue if the international community should have the same policy for the Taliban as it does al Qaeda."

Here's the link to the video of the segment.

Fareed and Gerges took the position that the U.S. has to make a distinction between Islamic fundamentalists who are simply cruel to each other and ones who threaten transnational terrorism. Levy was having none of the hair-splitting. He said they were all a bunch of fascists and as such represented a serious threat to civilization.

Gerges kept talking over him and even grabbed his arm in the attempt to restrain him long enough to get in more of his own argument. It was hilarious. But Levy had one point, and by gum he wasn't going to let it get buried by sloppy reasoning. There's nothing like a French philosopher on a tear against fascism.

Gerges and Fareed got their facts on one point. They used the U.S. command's cooperation with Iraqi Sunnis to shore their argument that the U.S. in Afghanistan might find cooperation among the Taliban if they would stop lumping them with al Qaeda.

True, the U.S. military made great progress in Iraq when they stopped treating the Sunnis as the enemy. But those Sunnis are 'traditionalist' tribal Muslims, not fundamentalists; indeed it was their disputes with al Qaeda's brand of Islam that started the rift between the two groups of insurgents. The Sunnis became horrified by al Qaeda's atrocities against other Muslims in the name of the Islam.

In the same manner, the Taliban's brand of fundamentalism is not 'indigenous' to Afghanistan's Muslim tribes. The Taliban are a Cold War creation of Pakistan's ISI with help from the Saudis and with American encouragement.

So while none of this was brought up during the debate, Bernard-Henri Levy was correct to dismiss the argument that the Taliban's fundamentalism could be accommodated as a means to help the U.S.-Nato efforts in Afghanistan.

If Gerges and Fareed want to revise by saying it's possible to peel away from the Taliban those Afghanis who joined because they hate Karzai's faction and/or want the foreign troops out at all costs, that would be another story.

Yet the real story in that part of the world is not Islamic radicalism. In Afghanistan we're facing not so much the classic insurgency we found in Iraq as a mix of tribal rivalries, stateless actors, and a fabulously lucrative illicit drug industry that's global in reach.

In other words, in one of the world's most 'undeveloped' regions, we're up against the cutting edge of the modern 'black' or 'deviant' globalization phenomenon that Nils Gilman has talked about. As if to underscore that, the people recently caught smuggling heroin from Afghanistan, via Pakistan, via India, are not Afghani, Pakistani, or Indian. They're West African.

Black globalization is the nut that General Petraeus and his team have to crack; doing so could require an approach that differs considerably from the 'social workers with guns' one that racked up successes in Iraq.

1) RBO has dug up some of those covers for their crosspost of this entry.

Barack Obama, Gordon Brown, and the rise of Pussyfoot Totalitarians

Prime Minister Gordon Brown's planned speech to the U.S. Congress on Wednesday will extol the virtues of what he terms the "global society" and the benefits of globalization. David R. Henderson, a research fellow with the Hoover Institution and associate professor of economics at the Naval Postgraduate School, is decidedly unimpressed with Mr Brown's praises for globalization.

Writing yesterday for Forbes, Professor Henderson shrewdly speculated that during their meeting President Barack Obama and Brown might "cook up" a global tax cartel. If that sounds vaguely unsettling, wait'll you learn exactly what a global tax cartel is. Henderson explains:

[...] Various European governments want to "harmonize taxation," their euphemism for agreeing to keep tax rates high so that high-income workers and investors have less incentive to seek out countries with low tax rates.

This high-tax strategy is hampered by small countries, often former British colonies, that have the gall to keep tax rates low. In the past few years, the OECD has pushed vigorously to blacklist such countries, with the idea of imposing sanctions on them.

In their book, Global Tax Competition, Cato Institute economists Chris Edwards and Daniel J. Mitchell write that Gordon Brown "has a long track record of undermining the interests of the U.K. territories that are on the OECD blacklist."

Edwards and Mitchell also point out that in 2000, when Lawrence Summers was President Clinton's Treasury secretary, he claimed that tax competition among governments was "the dark side to international capital mobility."

Fortunately, with the Clinton administration on its way out, Summers put little effort into supporting the OECD's anti-tax-competition agenda. But now Summers is President Obama's main economic adviser. In case you think Summers has forgotten his agenda, he hasn't.

In a paper published in January, Summers and co-author James Hines recognized that the increasingly global economy makes people and capital more mobile and, therefore, will make government hesitant to increase corporate and individual tax rates. But they identified a way to avoid this problem: reduce tax competition between countries. They wrote:

"International agreements have the potential to play significant roles in these strategies. It is already the case that governments cooperate in international settings such as the World Trade Organization to promote international trade and investment, and bilateral and multilateral tax agreements and initiatives serve the function of facilitating tax enforcement and avoidance of double taxation of international income. Doubtless governments will come to rely more heavily on international agreements in the years to come, but it remains to be seen whether they will accelerate or offset the recent trend in the direction of expenditure taxation."

It does remain to be seen. Will the meeting on Tuesday be the opening round in a discussion of a tax cartel? If it is, will we find out?

As you can see 'harmonization,' of the type Henderson discusses, is actually an inversion of globalization -- yet that's not clear from Gordon Brown's calls for cooperation and international coordination in the globalized era.

But now go back and re-read Brown's column for The Times, which I posted yesterday, and which is a clue to what he'll say to the Congress. Henderson's explanation is Open Sesame; suddenly the meaning of Brown's words about the global society is revealed in a completely different light.

Of course tax competition between countries is a very good thing -- the one and perhaps only thing that can keep national governments from taxing their citizens to death.

Globalization, which simply means the free movement of people, goods and services around the globe, has made it possible for workers to relocate to countries where tax rates, wages, and living conditions are better than they find in their native country. For decades this has often worked against citizens whose countries have attractive salaries, etc. But now the shoe might be on the other foot.

Hands up how many American readers would consider working in another country and relocating their family there, if Mr Obama's Marxist revolution takes hold in the USA?

Sure, you can try to fight it, but if you have a young family to raise and you can sell your work skills in a country with a fair tax rate and decent salaries, why stay here and beat your head against a wall during your most productive years?

That's how many people think, all over the world, and they always have. Globalization in the modern era makes it easily possible for such people to cast their vote on their government's worst policies by relocating to another country and with a minimum of hassle.

This won't stand, from the viewpoint of government social engineers. You just can't allow citizens to high-tail it to another country if they don't like being engineered and heavily taxed. But the Stalinist solution is a little hard to pull off in these days of cell-phone cameras and internet communications. It's not longer easy to hide death camps. And thus, the rise of Pussyfoot Totalitarianism, cleverly concealed behind the mask of globalization:

If every nation's government can harmonize their taxation rates and methods of social engineering, the slicks who thought they could escape by going to another country will have nowhere on earth to run.

A German tourist explained it all quite wonderfully to me in 2003: "No one will have much but everyone will have the same."

Can they get away with it? They'll keep trying. For more on how they're trying read Global Tax Competition. But the MO boils down to:

> Incrementalism: Introduce regulations slowly, and make sure no one regulation reveals a big picture.

> Debasement of the language: Fiddle with definitions of words or think up terms that only the initiated can clearly understand.

> Sneakiness; e.g., bury key passages in the middle of 1,000 page documents that only an attorney can decipher.

In other words, the European Parliament way of doing things. Welcome to the globalized era in smoke-blowing.

How likely is it that during their meeting Messrs. Obama and Brown will get around to discussing a global tax cartel?

One minister [in Britain's government] sketched the skein of long-standing political contacts that Brown has in Obama's administration, including Larry Summers, Robert Reich and Timothy Geithner:

"I think Obama will feel very strongly drawn to back Brown ... you can't underestimate how much the development of the new Democrat projects and the new Labour projects of the early nineties are intertwined. Many of Obama's closest advisers are Brown's mates - they have looked up to Gordon for a long time. I think there will be a lot of pressure to help Gordon's position."

Given that Brown and Summers are committed to quashing tax-rate competition between countries -- I'd say its likely they'll bring up the topic, if not during this meeting then at the G20 Summit next month.

Gordon Brown proposes U.K. and U.S. create global New Deal. Pundita proposes U.K. and U.S. first learn to chew and walk.

Prime Minister Gordon Brown is scheduled to arrive in Washington today for a three-day visit that will include a meeting with President Barack Obama, then on Wednesday he'll address the U.S. Congress. However, Washington is in the midst of its first major snowstorm of the year. Now there's a cosmic comment.

Mr Brown decided to test drive his planned speech by writing what is surely a draft for yesterday's (London) Sunday Times Online (Posted below.)

From the first 60 comments The Times posted from around Europe, the United Kingdom, the U.S. and even Japan, the consensus is that the circular file is the best place for Mr Brown's plan for a "global new deal" in which America plays a big part. There's so much sputtering indignation from mostly sensible people that my blogging task should have been easy: just publish the comments.

However, the views of sensible people don't count for much here in Washington, DC. It's the Congress, President Obama and his administration that Mr Brown will be addressing.

There are many Members of Congress, on both sides of the aisle, who will see business and political opportunities oozing from Mr Brown's every declaration.

So while Brown's planned speech sounds a crock it's shrewdly crafted to be catnip to every business and socio-political view in the US: From the one-world government advocates to the environmentalist radicals, to those who just want to make a buck from global trade, to the commies who have been waiting a century for just this opportunity, to those who want to stamp out all poverty and everything else bad that besets humanity, to the Anglophiles who reside most of the year on another planet and so don't know that Britain's part of the Anglosphere is now run by Arab bankers.

And all this overlaid by an appeal to those who are just plain scared to death of the global recession, which economists are inching toward pronouncing a depression.

Mr Brown's thought is if we would all band together and institute some form of FDR's New Deal at the global level, we can save the world. The catch to the Kumbaya is obvious in yesterday's big news from the G20 Summit pre-summit meeting in Brussels

(AP) — German Chancellor Angela Merkel and other EU leaders flatly rejected a new multibillion euro (dollar) bailout for eastern Europe on Sunday, suggesting that additional aid be given to struggling nations only on a case-by-case basis.

Germany had been under rising pressure to take the lead in rescuing eastern EU members staggering from sinking currencies, shrinking demand for exports and rising debt, but Merkel insisted a one-size-fits-all bailout was unwise.

"Saying that the situation is the same for all central and eastern European states, I don't see that," said Merkel, adding "you cannot compare" the dire situation in Hungary with that of other countries.

That tough stance came even as Hungarian Prime Minister Ferenc Gyurcsany warned that the global credit crunch was creating a widening economic chasm in the 27-nation bloc which threatened to rend Europe. [...]

So much for a coordinated effort to bail out the world. The Europeans can't even agree on how their own should be helped. Yet Gordon Brown wants to usher in globalized government. And the EU wants the United States to hurry up and back whatever plan for saving the world they bring to the G20 summit next month.

In this case speed is disastrous. Scare up money to throw at the IMF so they can continue to bail out the basket-case governments. Then slow down and look more closely for the causes of the financial meltdown, which seem to be a perfect storm of several convergent factors.

There's no way to solve a problem before it's correctly defined. And right now we don't have the definition. We have pieces of data. Last week Dave Schuler at The Glittering Eye turned up a piece -- about computerized trading programs.

How much did that play into creating the crisis? It might have been a significant factor in the blinding speed with which the crisis became full blown. We just don't know at this point, but we need to find out.

So until we know exactly what happened, what use is it to devise a plan for saving the world from a future financial markets meltdown? All you'll get is a host of regulations that would be counterproductive if they don't address what actually happened this time around.

As for Mr Brown's desire to save the world from global warming, listen to Marc Marano's discussion last night with John Batchelor. Mr Morano sits on the U.S. Senate Committee on Environment and Public Works. From every quarter scientists are clearing their throats to explain that the models used by Al Gore and others to argue that high CO2 levels create global warming are hoodoo.

(The interview is found in hour three of the podcast.)

We also need to think hard about globalism, a point that Dan Riehl stressed last week in his essay Can the American Spirit Be Tamed?

In his guest column for The Times Gordon Brown used the term "globalization" for what he clearly intends to mean globalism: the application of nationalist principles of democratic government to the entire world.

But again the current economic crisis has underscored that the European Union is having a hard time getting its act together.

And one look at the current problems in California and several other U.S. states suggests so much mismanagement at the state levels of government that only the vastness of this nation and its mega-population have staved off disaster.

I am reminded of Ivan Illich's harsh criticism, decades ago, of the U.S. He said that Americans were not even able to deal with the problem of their big-city ghettos, yet they presumed to tell Latin America how to live.

Granted, when you're much better off than the other fellow, as the U.S. was then in relation to our southern neighbors, that gives you rights to advise. But that doesn't overturn Illich's basic point, particularly as it can be applied to globalism.

Not to be unkind but just glancing through the first 60 comments in response to Brown's column for The Times underscores that over several years he and the rest of the Labor government made one serious mistake after another.

Not the least of the mistakes was putting too many eggs in the basket of the global banking industry. The upshot was that Britain is suffering with the banking crisis in the way a Banana Republic does when the price of their one major export commodity tanks.

The British didn't think to diversify enough. And yet their prime minister wants to take the lead in telling the world how best to run its affairs. And he proposes that we Americans, who stupidly borrowed against our mortgages to fuel a consumption boom, sit at the right hand of the British throne atop the globe.

Please. First we learn to chew and walk. Then ponder how to save the world. And before that, Americans need to think on the points about globalism and the American way that Dan Riehl raised.

A cynic might observe that Brown's goal has as much to do with saving the world as the Democrats are interested in stemming the banking crisis. Yes, one could argue that both find the crisis a convenient excuse for promoting socialist government.

But the thing about going over the cliff, it really doesn't matter how you came to fall off the edge once you're on the way down. We're in a lot of trouble and to avoid making the trouble worse we need to stop and think about how we got to this point -- and where we're going.

We also need to admit to ourselves that Mr Obama's financial advisors are out of their depth. The by guess and by golly triage measures of Paulson and Bernanke last year averted a total collapse of the financial markets and the banking industry; since then things have been bumping along without a resolution to the banking crisis.

So it's time to consider the advice of Steve Forbes, who popped up Saturday night on Geraldo Rivera's show for Fox News Cable. Taken by surprise -- I'd tuned in looking for breaking news -- I grabbed pen and paper and scribbled as fast as I could. I didn't get down every word but I got the key points and the money quote:

"Banks have more money than ever before but they won't lend because regulators come in and make them take book losses. These are not money losses."

From that, clearly Steve sides with veteran Wall Street traders who have been urging a suspension of mark-to-market accounting.

More points:

> The Obama stimulus plan: it's not geared to creating wealth.

> Steve's view is to focus is on creating wealth rather than redistributing it; a better approach than printing/borrowing mountains of money to throw into the bottomless pit of the world's economic slowdown.

Additional advice:

> Cut payroll taxes to put more money in the pockets of Americans to spend as they please.
> Lower corporate tax rate to bring more US corporations back to the US.
> Bring down health care costs by making health insurance a truly free market enterprise.

What chance do we have that Mr Obama's team and the Congress will follow the advice? The ship has left the pier with the trillions of dollars committed to the Obama team's plan. But the Congress may be forced to swallow much of Steve's prescription because reality is bearing down, in the form of investors who are so mad they're sitting out every market but gold.

Who'll blink first? I venture it depends on how low the Dow goes during March. If it loses another thousand points I think that'll boost the practical solution.

The special relationship is going global
By Gordon Brown
March 1, 2009, The Times Online

Historians will look back and say this was no ordinary time but a defining moment: an unprecedented period of global change, and a time when one chapter ended and another began.

The scale and the speed of the global banking crisis has at times been almost overwhelming, and I know that in countries everywhere people who rely on their banks for savings have been feeling powerless and afraid. But it is when times become harder and challenges greater that across the world countries must show vision, leadership and courage – and, while we can do a great deal nationally, we can do even more working together internationally.

So now is the time for leaders of every country in the world to work together to agree the action that will see us through the current crisis and ensure we come out stronger. And there is no international partnership in recent history that has served the world better than the special relationship between Britain and the United States.

It is a relationship that has endured and flourished because it is based not simply on our shared history but on the enduring values that bind us together – our countries founded upon liberty, our histories forged through democracy and an unshakeable belief in the power of enterprise and opportunity.

But if it reflects our values and our histories, this special relationship is also a partnership of purpose, renewed by every generation to reflect the challenges we face. In the 1940s it found its full force defeating fascism and building the postwar international order; in the cold war era we fought the growth of nuclear weapons and when the Berlin Wall fell we saw the end of communism. In this new century, since the horrors visited on America in 2001, we have worked in partnership to defeat terrorism.

Now, in this generation, we must renew our work together once again. A new set of challenges faces the whole world, which summons forth the need for a partnership of purpose that must involve the whole world. Rebuilding global financial stability is a global challenge that needs global solutions. However, financial instability is but one of the challenges that globalisation brings. Our task in working together is to secure a high-growth, low-carbon recovery by taking seriously the global challenge of climate change. And our efforts must be to work for a more stable world where we defeat not only global terrorism but global poverty, hunger and disease.

Globalisation has brought great advances, lifting millions out of poverty as they reap the benefits of economic growth and trade. But it has also brought new insecurities, as this – the first truly global financial crisis – underlines. Globalisation is not an option, it is a fact, so the question is whether we manage it well or badly.

I believe there is no challenge so great or so difficult that it cannot be overcome by America, Britain and the world working together. That is why President Obama and I will discuss this week a global new deal, whose impact can stretch from the villages of Africa to reforming the financial institutions of London and New York– and giving security to the hard-working families in every country.

I see this global new deal as an agreement that every continent injects resources into its economy. I believe that central to this new investment is that every country backs a green recovery for the future, that every country that wishes to participate in the international financial system agrees common principles for financial regulation, coordinated internationally, and changes to their own banking system that will bring us shared prosperity once again. And that, together, we must agree to reform the mandate and governance of global institutions to recognise the changing shape of the world economy and the emergence of new players.

It is a global new deal that will lay the foundations not just fora sustainable economic recovery but for a genuinely new era of international partnership in which all countries have a part to play. This programme of internationally coordinated actions includes six elements:

First, universal action to prevent the crisis spreading, to stimulate the global economy and to help reduce the severity and length of the global recession. Second, action to kick-start lending so that families and businesses can borrow again. Third, all countries renouncing protectionism, with a transparent mechanism to monitor commitments. Fourth, reform of international regulation to close regulatory gaps so shadow banking systems have nowhere to hide. Fifth, reform of our international financial institutions and the creation of an international early warning system. And last, coordinated international action to build tomorrow today – putting the world economy on an economically, environmentally and socially sustainable path towards future growth and recovery.

I have always been an Atlanticist and a great admirer of the American spirit of enterprise and national purpose. I have visited America many times and have many friends there, and as prime minister I want to do more to strengthen even further our relationship with America.

Winston Churchill described the joint inheritance of Britain and America as not just a shared history but a shared belief in the great principles of freedom and the rights of man – what Barack Obama has described as the enduring power of our ideals – democracy, liberty, opportunity and unyielding hope. Britain and America may be separated by the thousands of miles of the Atlantic, but we are united by shared values that can never be broken. And as America stands at its own dawn of hope, I want that hope to be fulfilled through us all coming together to shape the 21st century as the first century of a truly global society.

See February 25 Pundita post for additional comments on Mr Brown's address to Congress.

This entry is crossposted at RBO.

Gasp! The Washington Post headlines an Obama mistake!

Where are my smelling salts? Not stuck back on Page A20 but on the front page, above the fold, under the headline Economy Shrinks At Staggering Rate:

By Annys Shin and Neil Irwin
Washington Post Staff Writers
Saturday, February 28, 2009; Page A01

The prospects for an economic recovery by year's end dimmed yesterday, as government data showed that the economy contracted at the end of 2008 by the fastest pace in a quarter-century. The worse-than-expected data fueled doubts about whether the Obama administration had adequately sized up the challenges it faces in trying to pull the country out of recession. [...]

Of course it was the Saturday edition -- The Washington Post's Siberia. But that the editor okayed a discussion of doubts for the front page -- I repeat, above the fold -- might indicate the shortest honeymoon period ever for a U.S. president.

They could have reported just the hard data on the front page then stuck the discussion about the bad judgment of Obama's administration somewhere else; what passes for a shrieking headline for the paper suggests that the editorial board was a tad upset to learn that President Obama leaped before he looked. Returning to The Post report:

The revised GDP figure helped stoke skepticism among economists who say the White House's projections for the nation's recovery are too rosy.

Based on those projections, Obama said he would slash the deficit in half by the end of his term. In its budget outline, the administration predicted that the economy would shrink 1.2 percent this year and grow 3.2 percent next year. By contrast, the consensus among private forecasters is that the economy will shrink 1.9 percent this year and grow 2.1 percent next year.

"It's just premature to expect the economy to be recovering," said Joshua Shapiro, chief economist at MFR, a forecasting firm. He said he expects the recession to drag into early next year.

"If you looked at the Obama administration's forecast, it's very much at the optimistic end of the spectrum. There's a whole 180 degrees between us and them," Shapiro said. "That doesn't guarantee they're wrong and the pessimists are right. But they are making pretty optimistic assumptions right now to hit even these terrible numbers for deficits."

Christina Romer, chairman of the White House Council of Economic Advisers, told reporters yesterday that the administration's growth projections were made weeks ago, before data showed an even deeper recession, and noted that it is normal for an economy to bounce back fairly sharply after a major downturn.

Speaking at a monetary policy conference in New York yesterday, she said the first quarter "is going to be bad," but the government stimulus package and other efforts would eventually bring healing. [...]

I hate to be the bearer of bad news, Ms Romer, but there is nothing normal about this recession. Economists are famously myopic about predicting recessions and their duration but the situation this time is so extraordinary that most economists are sensibly practicing caution in their predictions. Not so for Mr Obama's economic advisors, who committed him to a projection and stimulus strategy that do not fully take reality into account.

Were the advisors pushed to wear rose-tinted glasses so that Mr Obama's first speech to Congress could be 'sensitive' to complaints from the media that his earlier announcements about the economy sounded apocalyptic? I hope not, although that would be consistent with the political-campaigning style he's carried into the White House.

Worse than misapplied style, however, is blindness to the goal posts. To return to The Post report:

Whether their outlook is bleak or hopeful, analysts agree on one thing: The most serious threat to the economy is the credit crisis. Until banks are healthy enough to begin lending more, the economy is not likely to see sustainable growth, even with the massive stimulus package approved this month by Congress.

"Until you get the banking sector going, all the stimulus can do is provide a brief reprieve," said Bernard Baumohl, chief global economist at the Economic Outlook Group, a forecasting firm in Princeton, N.J. "Otherwise we could be condemned to a period of anemic growth or slip back in to recession in 2010 once the stimulus dissipates."

Yet it's beginning to look as if President Obama sees his agenda for "spreading the wealth around," as he's put it, as having equal importance with battling the credit crisis.

Er, is President Obama proposing geriatricide as a means to reduce America's budget deficit?

Yesterday New York Times columnist David Leonhardt took a stab at deciphering President Obama's proposed budget. Usually I don't mention a columnist's credentials but in this case I think it's helpful to know that Leonhardt didn't fall off the back of a potato truck. He studied applied mathematics at Yale and he's been writing about economics issues for The Times since 2000. So I think he's reasonably qualified to comment on the proposed budget. I was struck by this part of his explanation:

Mr. Obama would try to lift the incomes of the middle class and poor through two main channels, administration officials said. The first is an overhaul of health care, meant to reduce the insurance premiums now taking a large bite out of many families’ paychecks.

The details remain vague, but the budget begins paying for investments that would eventually allow Medicare officials to refuse to pay for medical treatment that does not show evidence of improving health. If successful, that change would vastly reduce the government’s long-term budget deficit. It is also likely to bring down private health costs, since insurers typically follow Medicare’s lead.

Small wonder the details are vague; many of the medical conditions that beset the elderly, including aging, do not improve with medical treatment. The best that can be hoped for is management of symptoms for a host of illnesses, such as Alzheimer's and COPD, which are typically associated with aging.

Of course the same holds true for many illnesses that not are age-specific, such as AIDS and asthma, and which can only be managed, not improved.

I have a hunch that the AARP would have something to say about a backdoor proposal to slip geriatricide policy into Medicare reform.

I hope that I've misunderstood Leonhardt's analysis or that he's misunderstood what he read of the proposal. Yet on the chance we've understood perfectly it's time to review a few basic points:

Granted, the Social Security problem is now at crisis proportions as the post-WW2 generation approaches retirement. But any solution that encourages involuntary manslaughter of the elderly is out of bounds in a civilized society.

I would remind President Obama that America's medicine fields have grown into mega-industries because of research and treatment methods aimed at helping people manage incurable illnesses and the wages of aging.

I also remind House Speaker Nancy Pelosi that allowing elderly people who cannot afford private insurance to die from medical neglect is not a humane way for a government to reduce humanity's carbon footprint.

There is a simple means to bring down Medicare costs and that's to omit Medicare fraud. For reasons I don't understand our government has made only the most cursory attempt at stopping the massive fraud.

Ah yes, the detail about interest charges

I wish I hadn't visited Reuters this morning:

Think the U.S. deficit is bad? Check out the interest payments

Posted by: Jeremy Pelofsky
February 26th, 2009
Front Row Washington Blog, Reuters

For those who are worried about the $1.75 trillion deficit that President Barack Obama projected the government would run in fiscal 2009, wait until you see what the interest on the growing U.S. debt will be.

The U.S. debt is roughly $10.6 trillion and the government spent $253 billion servicing it last year. With the mounting yearly deficits, that cost is skyrocketing.

During the debate over the $787 billion economic stimulus plan aimed at pulling the U.S. economy out of its downward spiral, Republicans argued that the cost was really over $1.1 trillion because of the cost to service the additional debt.

Lest folks think that current low borrowing costs would make the burden a little lighter, Obama’s fiscal 2010 budget projected that during his upcoming four years in office the cost will run roughly $1 trillion.

How does spending $447 billion just in interest payments on the debt in 2013 sound? And $694 billion in 2019 alone? If you want to see those shocking figures in black and white, see page 117 of Obama’s budget. [...]