I think maybe we all have little self-destructive traits. That's probably a throwback to the atavistic idea that we should inflict injury on ourselves for harboring bad thoughts. Some people pick at their scabs. Others like to see how long they can go without flossing before they end up in the dentist's chair with a lump in their gums and a fever of 102. Me, I watch the Sean Hannity Show whenever I feel like elevating my blood pressure to an unhealthy level. I stand there and snap at the TV, "You stupid idiot why don't you read RBO so you can know what you're talking about when you criticize Barack Obama?
Opposition research is not Hannity's strong suit; every time I've tuned in, I've noted he's flubbed his facts so much that he makes Obama look in the right. And despite his pugnacity he doesn't have the temperament to be an effective critic.
Sean Hannity is at his best when he's encouraging people to take a positive view of themselves and America. His TV audience has seen little of that side of him during the past year, as he's futilely battled Barack Obama's cunning and luck.
But with Republicans in disarray these many months, Sean demonstrated his true mettle on his April 9 TV show. After wasting a couple moments complaining about Democrats, he turned away from criticism and featured a roundup of proposals from several GOP politicians about how to solve six big problems that America faces.
All the ideas are worthy of consideration. Yet the best thing about the show is that it integrates a range of practical GOP proposals into a coherent platform -- one that emphasizes what Republicans should do rather than what the Democrats shouldn't do.
Sean and his team obviously spent days putting the show together and their hard work paid off. A minority political party needs more such efforts, which highlighted some impressive GOP members of Congress who are not well known to the public outside their home states.
The proposals on the April 9 show deal with the issues of Economic Recovery, Education, Housing, Energy Independence, Health Care, and Illegal Immigration.
I wasn't able to locate a transcript or video of the entire show, which is called 6 Ways to Save America. So far, the website only has up transcripts and videos for three of the six segments. They did put together a one-page PDF that more-or-less summarizes major points mentioned in each proposal. However, the document shorts the politicians who gave their time to the show because it doesn't mention the names associated with the proposals.
As to what I think of the proposals, since late last year I've been studying the USA from a viewpoint that's outside the legislative one and I'm still wrapped up in that project. For years Americans have been like the person who spends his evening on the back porch swatting at swarms of mosquitoes. When you see that many mosquitoes, it's time to put down your swatter and look around your property for their breeding grounds, which are stagnant pools of water hidden from bright light.
In the same manner, when a wealthy democracy with friendly neighbors is beset by endlessly accelerating problems from all directions, that's the time to hunt for unaddressed situations that are generating swarms of social and economic problems.
The U.S. has three stagnant situations that are perfect breeding grounds for the most intractable problems we're seeing today. In the previous post I addressed one such situation: Americans' blind acceptance and practice of Equalization economic theory. In Monday's follow-up post I'll discuss the other two situations I've noted.
Meanwhile we can't twiddle our thumbs while waiting to confront what must eventually be confronted. America has a two-party political system so when one party completely dominates, that's a troubling situation.
If he continues to act like a Republican instead of a gladiator, Sean Hannity can make his TV show into a rallying place, where the best of today's Republican politicians could put forward proposals and viewpoints and debate them with each other. They do talk about their views on different TV shows, but the task is to get them together in one place on a routine basis.
Hannity has an "All American Panel" in which he invites three people to criticize the latest outrage done by the Obama administration. The time might be better spent at this juncture in getting Republicans to criticize each other's views.
Until the GOP voters get deeply involved in their party's internal debates about direction and specific proposals, a cohesive reply to the Democrat platform would be very hard to maintain. Yet involvement is difficult, if the voters have to go to the back of beyond all the time to scrounge up information about the issues among leading Republicans.
So I think Hannity would have a great show if he consolidated discussion of the Republican issues.
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5:45 PM ET UPDATE
I'm signing off for the rest of the Easter weekend.
This entry is linked at Riehl World View and crossposted at RBO with very thought-provoking comments (as of this time) by RWV and RBO readers, which are in the manner of constructive criticism.
A RBO reader, SJ Reidhead at The Pink Flamingo blog, claims that Hannity is a registered Independent, not a Republican; she goes on to say it's types like Hannity -- who don't inform their GOP audience that they're not Republican -- who are hurting the party. See the RBO comment section for more of Reidhead's observations.
Here are a couple observations that I think can't be repeated enough, from RBO reader "EyesOpen."
"AMEN!!! I had been banging away with fervor for months on some of the conservative sites that there has to be some mention of Republicans who are doing good things. If they can’t find them at the national level, go state, if not at the state level, go local.
Any press is good press as they say, and so the constant attention on the Dems and Obama without any solutions, you’re essentially an entertainment outlet following Britney Spears. [...] If there is one thing following politics has taught me, we need a solid two party system. The imbalance of power is extremely dangerous. The Republicans appear rudderless. This may or may not be accurate, but one thing I’m certain about, no one is carrying their message.[...]"
Yes. If it's all criticism, there's no message beyond the criticism.
Saturday, April 11
Wednesday, April 8
Why the financial crash happened. Rethinking American society, Part 1 (UPDATED)
Here I talk with one of Pundita blog's earliest 'regular' readers about the true reason for the global financial crash and about America's refusal to confront issues connected with globalization.
CLAUDIA: There's been a lot of finger-pointing about who's most responsible for the financial crash, whether it was greedy bankers, Fannie Mae and Freddie Mac, and so on. Who is most responsible?
PUNDITA: All the situations you allude to are third and fourth-order effects of the actual problem, which is that there's too much money in the world. The crash was a kind of Deus ex Machina. It gave humanity a brief reprieve because almost overnight billions if not trillions of money vanished.
So, the crash was akin to taking some water pressure off a cracked dam. The dam can be considered the international monetary system, as overseen by the world's most powerful central banks.
CLAUDIA: If there's too much money why isn't everyone a billionaire? Are you saying there's too much money concentrated in the hands of a few?
PUNDITA: I'm saying there's too much money in the world, period. That's why the crash was only a respite. Amazing but true, humanity is drowning in money even though there's still a lot of poverty. Regarding the poor, think of the old saying, 'Water, water everywhere and none to spare.' And in fact, the poorest nations -- the ones where corruption runs amok -- are doing their part to contribute to the rising flood.
CLAUDIA: Pundita, I'm lost.
PUNDITA: First let's back up. We count computerization as the beginning of the modern era. But the modern era in trade began with the EFT -- electronic funds transfer -- which made possible the modern phase of globalization.
Now stop and think about what EFTs unleashed. Every time a bank makes a loan, it's creating money. Every time you swipe your credit card to buy something that you're not paying for in full at the moment, you're creating money -- or to be more precise your bank is.
At first the central banks could contain and offset the inflationary effects of mushrooming money creation by fiddling with interest rates and deploying various other mechanisms that would sop up excess money.
The mechanisms began to creak from the strain as the success of globalized trade made itself felt in countries outside the handful of successful industrialized nations. The standardization of the medium of globalized monetary exchange, which occurred with the creation of the petrodollar, further streamlined the process of money creation.
The FSU Experience
There were other significant contributing factors to the mushrooming money, which I'll skip over at this point, except to mention the fall of the Iron Curtain. Virtually overnight, vast quantities of money were created by the opening up of the FSU (former Soviet Union) countries, and the rampant corruption that proceeded. This happened because a tremendous amount of money in the form of aid and loans were pumped into the FSU.
And the privatization of the FSU's huge state-run companies that traded in key resources, such as oil and gas, created billionaires who plowed mind-boggling amounts of wealth into the global financial markets.
All this led to corruption on a vast scale and over a very short period of time. Of course there was always corruption in the Soviet Union, but the union's demise opened the floodgates to the Western financial markets. In one case alone, if I recall, $4 billion dollars in aid to Russia was stolen in one swoop -- by Westerners, but the spoils were shared with those in Russia who helped pull off the crime.
Corruption Mushrooms Money
To understand this angle with regard to the money supply, think about how corruption creates vast quantities of money. Say you're a corrupt procurement specialist for equipment that's bought with international loans made to poor countries. You're raking in $100,000 a month in dirty money. You have to hide the source of the bribes, which you do by laundering them through banks and through the creation of front companies.
As soon as a bank gets hold of your dirty deposits it can turn around and loan out based on the deposits, thereby leveraging your dirty money into -- more money.
And the companies you create as fronts can then borrow. This creates yet more money. And of course the profits from the legitimate businesses are banked, where the bank can loan out yet more money -- thereby creating even more money.
CLAUDIA: It's like Mickey Mouse and the brooms in the Sorcerer's New Apprentice.
PUNDITA: [laughing] That's a good visual. Except here the sorcerer never showed up to undo Mickey's botched spell. So humanity's had to depend on increasingly ruinous financial crashes to sop up some of the excess money.
Mega-business of Money
I haven't even gotten to the good part, which happened with the industrialization of money, or what's sometimes called financialization.
Money is supposed to be payment, but it's been transformed into a product -- and during the past two decades, into a very hot product.
There have long been a variety of financial instruments but once trading in those instruments skyrocketed, once entire markets were created to trade in them, a globalized money industry was born that took on a life of its own. Trade in exotic financial instruments mushroomed, which led to things such as junk bond markets, energy futures markets, bundled mortgages markets, and you name it.
So, the money industry quickly passed beyond the ability of any single government or even a consortium of governments to manage. Indeed, every time a national government tried to get a handle on the trade in one type of financial instrument, the trade would flow to another country -- and with the speed of a few taps on a computer keyboard.
That's how you got countries the size of a postage stamp, and countries such as Poland, transforming into world financial capitals even though they exported no goods to speak of. And those very same countries became magnets for "black money" -- profits from illicit trades.
All those exotic financial instruments, which were traded on credit, were in turn creating floods of money. That led to the creation of more exotic trading instruments, because as money piles up, it has be invested somewhere, in something.
So here is where your Sorcerer's Apprentice metaphor really comes into its own. All those buckets that the brooms are carrying can be thought of as financial trading instruments, and the water in the buckets is the money they're creating.
CLAUDIA: Was the Dotcom crash due to this excess money?
PUNDITA: Sure; there are even elements of the 1990s Asian financial crisis which stemmed from the money glut. And that crisis quickly engulfed other world regions and led to the crash of the U.S. stock market.
CLAUDIA: The market crashes work like ShamWow.
PUNDITA: [laughing] You're a good analogous thinker. Yes. But when the most effective mechanism for sopping up excess money is market crashes that cause dislocations throughout a society, that's a sign of a deep socio-economic problem.
The Dope Peddler's Plight
The heavy trading in mortgages, which followed on the heels of the Dotcom crash, arose from the need to do something with floods of money that quickly began to accumulate again in the wake of a crash. And it's been argued that even the U.S.-led housing boom was fueled by the need to find places to put excess money.
At some point what to do with accumulated money becomes a huge problem. This is illustrated by some funny stories about drug dealers who were quite literally suffocating from their ill-gotten gains. That was before the money laundering business became a sophisticated globalized industry, but around the time that globalized drug sales skyrocketed.
When they had no more room in the house to store the cash profits, some drug dealers would dig holes in their yard to store the money. Then the ground would cave in from all the holes, taking the house with it. The cops and firemen would show up and see stacks of 100-dollar bills sticking up from the dirt and rubble. There's another visual for you.
When the illegal bucks got efficiently laundered into the banking system, they began earning big money -- and in turn creating yet more of the stuff.
So, when you start having your money create lots of money you might be okay, until billions of your fellow humans do the same. When they do -- think of Mickey Mouse trying to command the brooms not to keep dumping buckets of water into the castle.
CLAUDIA: You once wrote about globalized banks like Citibank encouraging the Chinese to use credit cards. If even a relatively few people in China start to buy on credit, that would also skyrocket the creation of money.
PUNDITA: Many Chinese still favor cash even for purchases of big items such as cars because those who can afford to blow a wad have a lot of cash. But yes; you can look at the timeline and find places where events caused money creation to spike within a relatively short period. The industrialization of remittances, which occurred near the start of this decade, is another milestone on the timeline.
Remittances as a Microcosm of the Money Industry
Here I'll take a minute to explain how this created another flood of money because it can be applied to many situations. In the old days remittances were an informal family affair. When an immigrant or ex-pat worker in a foreign country scraped up enough money to send home, he'd go to a place such as a halal market or some other local business, which would courier the money back to the old country. Or he'd telegraph the money, if the home country had a Western Union. And the better-off immigrants, the ones who had bank accounts, would do bank-to-bank transfers.
But all this was ponderous, slow and risky -- the latter because home governments often frowned on the lack of control they had over remittances, and because couriers could get robbed of their cash.
So along came major governments and the World Bank and IMF, and got behind streamlining the process of remittances transfers. They encouraged governments in Emerging Markets, aka Developing Countries, to accept remittances as a key means of obtaining hard currency. And they got those governments to encourage their citizens to send remittances when they worked abroad.
With the stamp of government approval, globalized banks were able to make the remittances procedure easy and cheap -- much cheaper than the Mom-and-Pop operations that traditionally handled remittances.
And thus the remittances industry was born, with large numbers of workers all over the world paying a small fee for making the remittances -- and I think maybe in some cases paying no fee. All this came in time with the globalization of the workforce.
The upshot was that remittances skyrocketed. So even though the banks were only collecting a tiny fee, that created tons of new money. Most importantly, banks getting hold of the remittance money, if only for a few hours, could loan out against it, creating yet more tons of money.
CLAUDIA: I wonder if they've thought up making a market in trading remittances futures. It's as if anything we do today can be turned into a financial instrument.
Do central banks know about this problem of excess money?
Why Governments Hate to Talk About Excess Money
PUNDITA: I doubt that kind of market exists, but give them time. Yes, in theory you can make a financial market in anything -- even betting on which raindrop will roll down a window pane fastest, as in "Guys and Dolls." Then there could be insurance to cover your position on raindrops -- and that insurance in turn could be traded. This of course is outright gambling, but much about the trade in exotic financial instruments is just that, except that gambling doesn't create interest -- until the bookie's or casino's profits are banked.
Sure the central banks know.
CLAUDIA: Then why is the Fed printing up tons more money and creating tons more money through borrowing as the solution to the financial crisis?
PUNDITA: [laughing] I didn't think I'd have so much fun explaining the end of civilization. Well, see, they're trying to create a sort of life-jacket for people to ride out the floods of money. So in their view what does it matter if you're bobbing in 20 feet of water or 30?
They're applying outmoded monetary theories. The Keynesian model, all the money supply management models, went out the window at least a decade ago. Money in this magnitude is unprecedented in human affairs.
CLAUDIA: Pundita, why is nobody in government talking to the public about the real cause of the crash?
PUNDITA: Part of the reason is that they can't see how to talk about it without making it seem that they're attacking globalization. That is Taboo. So they talk around the edges of the problem, and they talk about its effects. The same thing happened at the G20 Summit last week. They went nowhere near talking about the real problem -- at least, not in public.
CLAUDIA: Why isn't it possible to make excess money disappear when it's in the form of debt?
PUNDITA: Oh, that sort of thing has been done! Remember the G7 meeting in 2005, when they forgave Africa's billions in debt? But that's like Mickey throwing a couple brooms out the window in an attempt to lower the flood waters. As soon as those two disappear, five new brooms and their water buckets materialize.
As soon as a country's debt is forgiven, that leaves the government free to borrow more money -- or to mooch it outright in the form of financial aid. So the whole cycle starts up again, complete with corrupt officials skimming a few million or billion and having to launder it. And with all that new aid or loan money sitting in banks, that means the banks can turn around and loan out against the deposits, thus, creating more floods of money.
In short, you get about two months of a breather when you forgive massive debt. Then the flood waters start rising again.
In theory, you could just keep forgiving debt, or allow countries to default on their debt, in an attempt to keep the flood waters at bay. But here we come to a snag. Unless you address the root cause, you're leaving unaddressed a secondary effect that will actually precipitate the crash of civilization -- and which is busily doing so right this minute.
Black Money and Secondary Effects of Financialization
Financialization is not exactly the same as capitalization. So when Marxist economists argue that financialization is capitalism run amok, they're just being cheesy.
The basic function of stock markets is to raise capital for companies that produce goods and services. The financial markets are to raise money -- money that is not necessarily tied to the production of goods and services -- beyond servicing a money market.
Now, imagine that you're an investor, plugging along with a 5% return on stock in your favorite Widget, Inc. company. Along comes a friend and says, 'Hey! I'm getting a 10% return by playing a market in financial instruments!'
Multiply that situation by billions of trades, then do not ask why so many corporations are running around the world, cutting deals with foreign governments so they can raise enough capital to compete in the cutthroat globalized markets.
On many levels this situation is disastrous. It's a blow to liberty, not to mention civilization. Walk the cat backward and you'll see why. The lobbyists for those corporations lean on their home governments not to condemn human rights violations and unfair trade practices in the foreign countries where the corporations are roosted.
And because corporations from so many different countries are competing for the government's help, the foreign government can demand whatever the traffic will bear in bribes for their help. If you want to see where this has led, watch the PBS "Frontline" show this week. It's titled "Black Money."
From the blurb about the show, it seems the documentary focuses on just one kind of black money -- the bribes paid by transnational corporations to governments -- and not the black money from illegal activities. But the bribe amounts that the corporations pay are staggering in total -- they're in the billions.
And all those bribes have to be laundered in some fashion, which often includes investments in illegal businesses such as drugs, the arms trade, and the WMD-parts and technology trade -- and in supporting terrorism. And last but not least, helping to take over entire economies.
Then militaries throw up their hands and ask, 'Where the hell is all this dirty money coming from that's supporting these insurgencies and terrorist gangs?'
Too often, the tragic answer is that it starts with legitimate firms just trying to get a wedge in a foreign country because they can't raise enough from capital markets, despite the huge pool of investors.
Financialization, or rather the huge part it plays in investment markets, is squeezing out much investment capital because its returns to the investor can be dazzling and quick, in relation to capital investments. Thus, the phenomenon of mid-level employees who can make tens of millions in yearly bonuses for pulling investment into a particular financial instrument.
Another secondary effect is the extreme inflationary aspect of too much money. That aspect has been tamped down in many countries simply because the economy is moribund due to bad government fiscal policies.
CLAUDIA: [laughing] That reminds me of the essay you wrote in defense of morons.
PUNDITA: I'd forgotten about that post. But yes, human society has been saved many a time by the actions of idiots. Humanity moves forward on many pairs of stilts including faith and reason, knowledge and ignorance, and idiocy and intelligence.
India Dodges the Inflation Monster
Rescue by idiocy happened in India starting around the 1960s. I don't know whether "Slumdog Millionaire" mentioned this little factoid -- I tend to doubt it -- but there are more millionaires in India than the entire population of the United States. And the U.S., remember, is the third largest population in the world.
That factoid does not count Indians who are simply very well off financially. In fact, if you're a reasonably bright and well-connected Indian businessman it's hard not to get rich by selling products in India.
And this wealth was created prior to the business-friendly improvements that the Indian government began in the 1990s after they wised up.
To understand how all that money could have been made in a heavily socialized economy, think of the consumer base. Think of the basic household supplies that a billion people require, and which have to be replaced on a frequent basis. Think of toothbrushes, toothpaste, detergent, plastic buckets. Everything you can think of, you have a billion consumers for it.
So, by the 1980s, in big Indian cities it should have cost $5 million in rupee equivalent for an apartment the size of a shoebox. Why didn't this inflationary event happen? Because in those days India's central government, which was a knockoff of what Michael Vlahos termed, "Creepy European socialism," strangled investments.
And thus, Indian businessmen converted rupees to dollars and pounds sterling and shipped them overseas by the boatload. Then they plowed the fortunes into investment opportunities -- and banks -- around the world. Where of course it helped mushroom the global money supply.
All that money could have done so much good at home. But that is how India was saved from galloping inflation arising from too much money chasing too few goods and prime real estate: by siphoning it off to other countries in reaction to idiotic fiscal policy on the home front.
CLAUDIA: What's going to happen when there's no place left to siphon it to? My God. The human race is drowning in its own success.
PUNDITA: There are ways to brake the problem of excess money, although it will always be a problem going forward. Some of the ways have very unpleasant side effects, such as totalitarianism or military dictatorships to enforce low goods consumption and control financial markets.
American Ostriches
Before an intelligent and humane solution can be worked out, first societies have to squarely confront the problem. The United States should be in the vanguard because we hold the key to braking the problem.
The obstacle to this, as I mentioned, is the connection between excess money and globalization. As soon as you even look as if you're going to say a word against globalization, many Americans stick their fingers in their ears and chant, 'La la la I won't listen I won't listen I won't listen you commie isolationist fruitcake.'
The anti-globalists aren't any better. They pretend to listen and take copious notes. Then they extract quotes out of context and print them on a bumper sticker: "Globalization is killing the planet." You could have saved your breath.
Then there are the corporate heads who know exactly what you're talking about, and who will go to any lengths to shut you up.
CLAUDIA: What about the Obama administration? Do you think they understand the true situation?
Equalization and How it Failed in America
PUNDITA: President Obama's heart is in the right place, if he truly wants to address astronomical health care costs, inadequate public education and job training, energy requirements and dilapidated infrastructures -- even though his plans for executing these goals are open to argument. However, his every proposal to help America is like trying to heal a festering wound by applying a clean bandage.
The wound is what I call Equalization -- or to be more precise, the blind application of Equalization in the USA. Here I'm not speaking of factor-price equalization, but in a broader sense.
I'll describe Equalization as the theory that the greatest disparity in income between the richest and poorest nations can disappear if the rich nations stop producing goods, focus on providing services, and become consumers of the poorer nation's goods. Thus, the benefits of trade for rich and poor nations are supposed to eventually equalize.(1)
How are the rich nations to fund their consumerism if they don't produce goods? By their citizens funneling a portion of their disposable income into investments, which not only makes it easier for poor countries to compete with the trading giants, but also helps finance businesses in the poorest countries.
CLAUDIA: That idea turned out to be a disaster for this country.
PUNDITA: As with so many economic theories Equalization omits many factors, which has caused its proponents to overlook galactic-sized chunks of reality.
One overlooked reality in this case is that only a relative handful of people in the rich countries are capable of being full-time investors -- and skilled ones. That means they put their investment money and trust in the hands of professional traders. That means a small number of people come to control vast wealth and capital flows.
You see where that led: to the Dotcom bubble, the Enron debacle, the bizarre credit instruments that finally crashed the financial markets, and individual employee bonuses in the tens of millions of dollars.
Meanwhile, as our consumerism helped ease the worst poverty in many countries, inside the USA Equalization was working in reverse. A smaller and smaller number of Americans holding greater and greater wealth. And a larger and larger number of Americans falling from the middle class and having to go deeper and deeper into debt just to meet basic needs, or continue to consume above their baseline needs.
That explanation isn't a pure example of Equalization -- which I don't think exists outside the theory -- because the United States didn't fully give up export trade in things. But that's the basic idea of Equalization: an investor-consumer class substitutes for a goods-producing class in a rich country, to the betterment of the world's poorest exporting nations.
CLAUDIA: I've never heard that before but it's the craziest thing I've ever heard. How did that idea gain acceptance? And isn't a large population like ours becoming involved in the financial markets swelling the global money supply -- creating the problem you've been talking about?
PUNDITA: Well, that's why I said that the USA holds the key to getting a handle on the problem. But sure you've heard that idea before; you just haven't heard it discussed separately from globalization.
CLAUDIA: You mean I've just never heard it spelled out in plain English, just like everyone else hasn't! Pundita, what's been going on?
PUNDITA: I suppose it wouldn't do to call a spade a spade because when put into practice, the concept has so many holes that any reasonable American who hears it says the same as you about it.
But it's not a conspiracy. The idea gained popularity over a succession of U.S. government administrations and to my knowledge it was never spelled out in domestic policy; all we heard about it was in references to the benefits of globalization.
And I suspect that the looming disaster with the Social Security program, which was foreseen decades ago, was a factor. I think it gave a boost to encouraging the growth of an investor class among middle-income Americans as a means to supplement Social Security.
There were several other things about Equalization to attract politicians from both sides of the US political aisle. And of course it was hugely attractive to globalized corporations, including banks and investment houses.
It was also attractive to American officials who believed that the country's economic success depended on raising billions of people out of poverty so they could become consumers of U.S. goods.
And the idea attracted radical environmentalists -- the ones who believed that the planet could only be saved if the biggest industrial nations slowed down their production.
Another group among the U.S. Equalization boosters were the journalists and media moguls who loved the idea of Americans using investments to become more 'socially responsible' toward the poorer nations.
That's only the short-list. Americans might have backed into Equalization but we took to it like a duck to water. What we didn't stop to consider is what happens when so many relatively well-off people in the 'First World' nations invest a chunk of their disposable income in the globalized money industry -- and when their investing is joined by investments from huge numbers of people in the countries that Equalization helped.
Financial markets sprouted around the globe like a desert sprouting grass in the wake of a drenching rain, as the world's money supply kept rising, and rising, and rising.
Thus, solutions are proposed that are not directed to the problem of excess money but to its second- and third-order effects. That returns us to the G20 Summit in London.
The G20 Leaders Play Ostrich
As near as I can make out, the summit leaders are inching toward outfitting everyone on earth with a life jacket to survive the flood of excess money. The jacket would be made from draconian regulations for the money industries and from money created to serve the needs of the population and to service government debt.
The reasoning is that when the flood finally bursts the dam we can all bobble around in our life jackets and hopefully many of us can hang on until the waters recede.
CLAUDIA: Creating gobs of fiat money just makes the flood of excess money rise higher. [laughing] Oh but wait, I get it! If we're bobbing in 10 or 20 feet of water where's the difference as far as our life jacket is concerned?
PUNDITA: I think you're in the swing of G20 thinking. The big catch with the G20 life jacket is that keeping it strapped to so many people will require totalitarian measures. These measures won't work very well, mind you, a point which I think the G20 leaders would rather not confront.
Draconian oversight measures would only create more rogue regimes. ('Come live in sunny downtown Anarchy, where your life won't be worth a plug nickel but at least you won't die wrapped in red tape.')
And the G20 solution would only create more layers of corruption, which will dump yet more buckets of money into the rising tide of money sloshing around the planet.
CLAUDIA: They're trying to corner all the consequences of excess money without fixing the problem.
PUNDITA: My work is done. Nicely put.
I don't know about you but I need a break. If you want to discuss more of this later, let me know.
CLAUDIA: I'd very much like to continue with this if you have the time. What you've told me is upsetting but it's better to know what we're really facing. Thank you very, very much, Pundita.
PUNDITA: You're welcome, Claudia.
[Part 2 of this discussion will be published on Monday, 6:00 AM ET]
1) "Alternatively, rational economic agents in "first world" economies may choose to invest in financial assets instead of human capital — further eroding the long term ability of the "first world" country to produce and grow. As predicted by Adam Smith, this effect would reduce the inequality between First World and Third World countries, increasing overall fairness." - From Wikipedia article on neomercantilism
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This entry is crossposted at RBO with great illustrations, of course. It's hard for me to pick a favorite but maybe the close-up of the ostrich wins by a beak. What a fitting portrait of the G20 participants. RBO also has an editorial comment: "... her version of ‘Why It’s Better For the US to Export More Products Than to Eat Bank Notes’ For Dummies.
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4/9 UPDATE
This entry is crossposted at Uppity Woman. Thank you, Comradess Uppity! Labor in potato fields always good for sharpening mind!
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4/19 UPDATE
Yesterday evening Dan Riehl at Riehl World View linked to this post and gave it high praise for the information it provided and criticism for the length of the published dialogue, and for bringing in some material he considered a distraction from the central points, thereby making the length "that much more of an issue given the format."
His comments are a repeat of advice he gave me in 2005 when I complained to him that no matter how hard I worked to break down unfamiliar concepts for the general reader I didn't think I was making headway.
His point was that I had to be more sensitive to the medium I was working in -- the blogosphere -- and that if I didn't want to stoop to providing catchy 'hooks,' I was writing for the wrong medium.
I followed his advice in catch-can fashion, but often ignored it during the melee of research, analysis, and writing, which could be exhausting.
A compromise might be to provide a summary or introduction for posts that discuss unfamiliar concepts or bring up a series of complex interlocked issues.
The thought of taking time to summarize makes me feel as I have to swallow castor oil. But Dan's criticism is very constructive, particularly at this juncture in my blogging, when I'm striking out in a new direction.
All right; I'll think on all this. Thanks, Dan.
CLAUDIA: There's been a lot of finger-pointing about who's most responsible for the financial crash, whether it was greedy bankers, Fannie Mae and Freddie Mac, and so on. Who is most responsible?
PUNDITA: All the situations you allude to are third and fourth-order effects of the actual problem, which is that there's too much money in the world. The crash was a kind of Deus ex Machina. It gave humanity a brief reprieve because almost overnight billions if not trillions of money vanished.
So, the crash was akin to taking some water pressure off a cracked dam. The dam can be considered the international monetary system, as overseen by the world's most powerful central banks.
CLAUDIA: If there's too much money why isn't everyone a billionaire? Are you saying there's too much money concentrated in the hands of a few?
PUNDITA: I'm saying there's too much money in the world, period. That's why the crash was only a respite. Amazing but true, humanity is drowning in money even though there's still a lot of poverty. Regarding the poor, think of the old saying, 'Water, water everywhere and none to spare.' And in fact, the poorest nations -- the ones where corruption runs amok -- are doing their part to contribute to the rising flood.
CLAUDIA: Pundita, I'm lost.
PUNDITA: First let's back up. We count computerization as the beginning of the modern era. But the modern era in trade began with the EFT -- electronic funds transfer -- which made possible the modern phase of globalization.
Now stop and think about what EFTs unleashed. Every time a bank makes a loan, it's creating money. Every time you swipe your credit card to buy something that you're not paying for in full at the moment, you're creating money -- or to be more precise your bank is.
At first the central banks could contain and offset the inflationary effects of mushrooming money creation by fiddling with interest rates and deploying various other mechanisms that would sop up excess money.
The mechanisms began to creak from the strain as the success of globalized trade made itself felt in countries outside the handful of successful industrialized nations. The standardization of the medium of globalized monetary exchange, which occurred with the creation of the petrodollar, further streamlined the process of money creation.
The FSU Experience
There were other significant contributing factors to the mushrooming money, which I'll skip over at this point, except to mention the fall of the Iron Curtain. Virtually overnight, vast quantities of money were created by the opening up of the FSU (former Soviet Union) countries, and the rampant corruption that proceeded. This happened because a tremendous amount of money in the form of aid and loans were pumped into the FSU.
And the privatization of the FSU's huge state-run companies that traded in key resources, such as oil and gas, created billionaires who plowed mind-boggling amounts of wealth into the global financial markets.
All this led to corruption on a vast scale and over a very short period of time. Of course there was always corruption in the Soviet Union, but the union's demise opened the floodgates to the Western financial markets. In one case alone, if I recall, $4 billion dollars in aid to Russia was stolen in one swoop -- by Westerners, but the spoils were shared with those in Russia who helped pull off the crime.
Corruption Mushrooms Money
To understand this angle with regard to the money supply, think about how corruption creates vast quantities of money. Say you're a corrupt procurement specialist for equipment that's bought with international loans made to poor countries. You're raking in $100,000 a month in dirty money. You have to hide the source of the bribes, which you do by laundering them through banks and through the creation of front companies.
As soon as a bank gets hold of your dirty deposits it can turn around and loan out based on the deposits, thereby leveraging your dirty money into -- more money.
And the companies you create as fronts can then borrow. This creates yet more money. And of course the profits from the legitimate businesses are banked, where the bank can loan out yet more money -- thereby creating even more money.
CLAUDIA: It's like Mickey Mouse and the brooms in the Sorcerer's New Apprentice.
PUNDITA: [laughing] That's a good visual. Except here the sorcerer never showed up to undo Mickey's botched spell. So humanity's had to depend on increasingly ruinous financial crashes to sop up some of the excess money.
Mega-business of Money
I haven't even gotten to the good part, which happened with the industrialization of money, or what's sometimes called financialization.
Money is supposed to be payment, but it's been transformed into a product -- and during the past two decades, into a very hot product.
There have long been a variety of financial instruments but once trading in those instruments skyrocketed, once entire markets were created to trade in them, a globalized money industry was born that took on a life of its own. Trade in exotic financial instruments mushroomed, which led to things such as junk bond markets, energy futures markets, bundled mortgages markets, and you name it.
So, the money industry quickly passed beyond the ability of any single government or even a consortium of governments to manage. Indeed, every time a national government tried to get a handle on the trade in one type of financial instrument, the trade would flow to another country -- and with the speed of a few taps on a computer keyboard.
That's how you got countries the size of a postage stamp, and countries such as Poland, transforming into world financial capitals even though they exported no goods to speak of. And those very same countries became magnets for "black money" -- profits from illicit trades.
All those exotic financial instruments, which were traded on credit, were in turn creating floods of money. That led to the creation of more exotic trading instruments, because as money piles up, it has be invested somewhere, in something.
So here is where your Sorcerer's Apprentice metaphor really comes into its own. All those buckets that the brooms are carrying can be thought of as financial trading instruments, and the water in the buckets is the money they're creating.
CLAUDIA: Was the Dotcom crash due to this excess money?
PUNDITA: Sure; there are even elements of the 1990s Asian financial crisis which stemmed from the money glut. And that crisis quickly engulfed other world regions and led to the crash of the U.S. stock market.
CLAUDIA: The market crashes work like ShamWow.
PUNDITA: [laughing] You're a good analogous thinker. Yes. But when the most effective mechanism for sopping up excess money is market crashes that cause dislocations throughout a society, that's a sign of a deep socio-economic problem.
The Dope Peddler's Plight
The heavy trading in mortgages, which followed on the heels of the Dotcom crash, arose from the need to do something with floods of money that quickly began to accumulate again in the wake of a crash. And it's been argued that even the U.S.-led housing boom was fueled by the need to find places to put excess money.
At some point what to do with accumulated money becomes a huge problem. This is illustrated by some funny stories about drug dealers who were quite literally suffocating from their ill-gotten gains. That was before the money laundering business became a sophisticated globalized industry, but around the time that globalized drug sales skyrocketed.
When they had no more room in the house to store the cash profits, some drug dealers would dig holes in their yard to store the money. Then the ground would cave in from all the holes, taking the house with it. The cops and firemen would show up and see stacks of 100-dollar bills sticking up from the dirt and rubble. There's another visual for you.
When the illegal bucks got efficiently laundered into the banking system, they began earning big money -- and in turn creating yet more of the stuff.
So, when you start having your money create lots of money you might be okay, until billions of your fellow humans do the same. When they do -- think of Mickey Mouse trying to command the brooms not to keep dumping buckets of water into the castle.
CLAUDIA: You once wrote about globalized banks like Citibank encouraging the Chinese to use credit cards. If even a relatively few people in China start to buy on credit, that would also skyrocket the creation of money.
PUNDITA: Many Chinese still favor cash even for purchases of big items such as cars because those who can afford to blow a wad have a lot of cash. But yes; you can look at the timeline and find places where events caused money creation to spike within a relatively short period. The industrialization of remittances, which occurred near the start of this decade, is another milestone on the timeline.
Remittances as a Microcosm of the Money Industry
Here I'll take a minute to explain how this created another flood of money because it can be applied to many situations. In the old days remittances were an informal family affair. When an immigrant or ex-pat worker in a foreign country scraped up enough money to send home, he'd go to a place such as a halal market or some other local business, which would courier the money back to the old country. Or he'd telegraph the money, if the home country had a Western Union. And the better-off immigrants, the ones who had bank accounts, would do bank-to-bank transfers.
But all this was ponderous, slow and risky -- the latter because home governments often frowned on the lack of control they had over remittances, and because couriers could get robbed of their cash.
So along came major governments and the World Bank and IMF, and got behind streamlining the process of remittances transfers. They encouraged governments in Emerging Markets, aka Developing Countries, to accept remittances as a key means of obtaining hard currency. And they got those governments to encourage their citizens to send remittances when they worked abroad.
With the stamp of government approval, globalized banks were able to make the remittances procedure easy and cheap -- much cheaper than the Mom-and-Pop operations that traditionally handled remittances.
And thus the remittances industry was born, with large numbers of workers all over the world paying a small fee for making the remittances -- and I think maybe in some cases paying no fee. All this came in time with the globalization of the workforce.
The upshot was that remittances skyrocketed. So even though the banks were only collecting a tiny fee, that created tons of new money. Most importantly, banks getting hold of the remittance money, if only for a few hours, could loan out against it, creating yet more tons of money.
CLAUDIA: I wonder if they've thought up making a market in trading remittances futures. It's as if anything we do today can be turned into a financial instrument.
Do central banks know about this problem of excess money?
Why Governments Hate to Talk About Excess Money
PUNDITA: I doubt that kind of market exists, but give them time. Yes, in theory you can make a financial market in anything -- even betting on which raindrop will roll down a window pane fastest, as in "Guys and Dolls." Then there could be insurance to cover your position on raindrops -- and that insurance in turn could be traded. This of course is outright gambling, but much about the trade in exotic financial instruments is just that, except that gambling doesn't create interest -- until the bookie's or casino's profits are banked.
Sure the central banks know.
CLAUDIA: Then why is the Fed printing up tons more money and creating tons more money through borrowing as the solution to the financial crisis?
PUNDITA: [laughing] I didn't think I'd have so much fun explaining the end of civilization. Well, see, they're trying to create a sort of life-jacket for people to ride out the floods of money. So in their view what does it matter if you're bobbing in 20 feet of water or 30?
They're applying outmoded monetary theories. The Keynesian model, all the money supply management models, went out the window at least a decade ago. Money in this magnitude is unprecedented in human affairs.
CLAUDIA: Pundita, why is nobody in government talking to the public about the real cause of the crash?
PUNDITA: Part of the reason is that they can't see how to talk about it without making it seem that they're attacking globalization. That is Taboo. So they talk around the edges of the problem, and they talk about its effects. The same thing happened at the G20 Summit last week. They went nowhere near talking about the real problem -- at least, not in public.
CLAUDIA: Why isn't it possible to make excess money disappear when it's in the form of debt?
PUNDITA: Oh, that sort of thing has been done! Remember the G7 meeting in 2005, when they forgave Africa's billions in debt? But that's like Mickey throwing a couple brooms out the window in an attempt to lower the flood waters. As soon as those two disappear, five new brooms and their water buckets materialize.
As soon as a country's debt is forgiven, that leaves the government free to borrow more money -- or to mooch it outright in the form of financial aid. So the whole cycle starts up again, complete with corrupt officials skimming a few million or billion and having to launder it. And with all that new aid or loan money sitting in banks, that means the banks can turn around and loan out against the deposits, thus, creating more floods of money.
In short, you get about two months of a breather when you forgive massive debt. Then the flood waters start rising again.
In theory, you could just keep forgiving debt, or allow countries to default on their debt, in an attempt to keep the flood waters at bay. But here we come to a snag. Unless you address the root cause, you're leaving unaddressed a secondary effect that will actually precipitate the crash of civilization -- and which is busily doing so right this minute.
Black Money and Secondary Effects of Financialization
Financialization is not exactly the same as capitalization. So when Marxist economists argue that financialization is capitalism run amok, they're just being cheesy.
The basic function of stock markets is to raise capital for companies that produce goods and services. The financial markets are to raise money -- money that is not necessarily tied to the production of goods and services -- beyond servicing a money market.
Now, imagine that you're an investor, plugging along with a 5% return on stock in your favorite Widget, Inc. company. Along comes a friend and says, 'Hey! I'm getting a 10% return by playing a market in financial instruments!'
Multiply that situation by billions of trades, then do not ask why so many corporations are running around the world, cutting deals with foreign governments so they can raise enough capital to compete in the cutthroat globalized markets.
On many levels this situation is disastrous. It's a blow to liberty, not to mention civilization. Walk the cat backward and you'll see why. The lobbyists for those corporations lean on their home governments not to condemn human rights violations and unfair trade practices in the foreign countries where the corporations are roosted.
And because corporations from so many different countries are competing for the government's help, the foreign government can demand whatever the traffic will bear in bribes for their help. If you want to see where this has led, watch the PBS "Frontline" show this week. It's titled "Black Money."
From the blurb about the show, it seems the documentary focuses on just one kind of black money -- the bribes paid by transnational corporations to governments -- and not the black money from illegal activities. But the bribe amounts that the corporations pay are staggering in total -- they're in the billions.
And all those bribes have to be laundered in some fashion, which often includes investments in illegal businesses such as drugs, the arms trade, and the WMD-parts and technology trade -- and in supporting terrorism. And last but not least, helping to take over entire economies.
Then militaries throw up their hands and ask, 'Where the hell is all this dirty money coming from that's supporting these insurgencies and terrorist gangs?'
Too often, the tragic answer is that it starts with legitimate firms just trying to get a wedge in a foreign country because they can't raise enough from capital markets, despite the huge pool of investors.
Financialization, or rather the huge part it plays in investment markets, is squeezing out much investment capital because its returns to the investor can be dazzling and quick, in relation to capital investments. Thus, the phenomenon of mid-level employees who can make tens of millions in yearly bonuses for pulling investment into a particular financial instrument.
Another secondary effect is the extreme inflationary aspect of too much money. That aspect has been tamped down in many countries simply because the economy is moribund due to bad government fiscal policies.
CLAUDIA: [laughing] That reminds me of the essay you wrote in defense of morons.
PUNDITA: I'd forgotten about that post. But yes, human society has been saved many a time by the actions of idiots. Humanity moves forward on many pairs of stilts including faith and reason, knowledge and ignorance, and idiocy and intelligence.
India Dodges the Inflation Monster
Rescue by idiocy happened in India starting around the 1960s. I don't know whether "Slumdog Millionaire" mentioned this little factoid -- I tend to doubt it -- but there are more millionaires in India than the entire population of the United States. And the U.S., remember, is the third largest population in the world.
That factoid does not count Indians who are simply very well off financially. In fact, if you're a reasonably bright and well-connected Indian businessman it's hard not to get rich by selling products in India.
And this wealth was created prior to the business-friendly improvements that the Indian government began in the 1990s after they wised up.
To understand how all that money could have been made in a heavily socialized economy, think of the consumer base. Think of the basic household supplies that a billion people require, and which have to be replaced on a frequent basis. Think of toothbrushes, toothpaste, detergent, plastic buckets. Everything you can think of, you have a billion consumers for it.
So, by the 1980s, in big Indian cities it should have cost $5 million in rupee equivalent for an apartment the size of a shoebox. Why didn't this inflationary event happen? Because in those days India's central government, which was a knockoff of what Michael Vlahos termed, "Creepy European socialism," strangled investments.
And thus, Indian businessmen converted rupees to dollars and pounds sterling and shipped them overseas by the boatload. Then they plowed the fortunes into investment opportunities -- and banks -- around the world. Where of course it helped mushroom the global money supply.
All that money could have done so much good at home. But that is how India was saved from galloping inflation arising from too much money chasing too few goods and prime real estate: by siphoning it off to other countries in reaction to idiotic fiscal policy on the home front.
CLAUDIA: What's going to happen when there's no place left to siphon it to? My God. The human race is drowning in its own success.
PUNDITA: There are ways to brake the problem of excess money, although it will always be a problem going forward. Some of the ways have very unpleasant side effects, such as totalitarianism or military dictatorships to enforce low goods consumption and control financial markets.
American Ostriches
Before an intelligent and humane solution can be worked out, first societies have to squarely confront the problem. The United States should be in the vanguard because we hold the key to braking the problem.
The obstacle to this, as I mentioned, is the connection between excess money and globalization. As soon as you even look as if you're going to say a word against globalization, many Americans stick their fingers in their ears and chant, 'La la la I won't listen I won't listen I won't listen you commie isolationist fruitcake.'
The anti-globalists aren't any better. They pretend to listen and take copious notes. Then they extract quotes out of context and print them on a bumper sticker: "Globalization is killing the planet." You could have saved your breath.
Then there are the corporate heads who know exactly what you're talking about, and who will go to any lengths to shut you up.
CLAUDIA: What about the Obama administration? Do you think they understand the true situation?
Equalization and How it Failed in America
PUNDITA: President Obama's heart is in the right place, if he truly wants to address astronomical health care costs, inadequate public education and job training, energy requirements and dilapidated infrastructures -- even though his plans for executing these goals are open to argument. However, his every proposal to help America is like trying to heal a festering wound by applying a clean bandage.
The wound is what I call Equalization -- or to be more precise, the blind application of Equalization in the USA. Here I'm not speaking of factor-price equalization, but in a broader sense.
I'll describe Equalization as the theory that the greatest disparity in income between the richest and poorest nations can disappear if the rich nations stop producing goods, focus on providing services, and become consumers of the poorer nation's goods. Thus, the benefits of trade for rich and poor nations are supposed to eventually equalize.(1)
How are the rich nations to fund their consumerism if they don't produce goods? By their citizens funneling a portion of their disposable income into investments, which not only makes it easier for poor countries to compete with the trading giants, but also helps finance businesses in the poorest countries.
CLAUDIA: That idea turned out to be a disaster for this country.
PUNDITA: As with so many economic theories Equalization omits many factors, which has caused its proponents to overlook galactic-sized chunks of reality.
One overlooked reality in this case is that only a relative handful of people in the rich countries are capable of being full-time investors -- and skilled ones. That means they put their investment money and trust in the hands of professional traders. That means a small number of people come to control vast wealth and capital flows.
You see where that led: to the Dotcom bubble, the Enron debacle, the bizarre credit instruments that finally crashed the financial markets, and individual employee bonuses in the tens of millions of dollars.
Meanwhile, as our consumerism helped ease the worst poverty in many countries, inside the USA Equalization was working in reverse. A smaller and smaller number of Americans holding greater and greater wealth. And a larger and larger number of Americans falling from the middle class and having to go deeper and deeper into debt just to meet basic needs, or continue to consume above their baseline needs.
That explanation isn't a pure example of Equalization -- which I don't think exists outside the theory -- because the United States didn't fully give up export trade in things. But that's the basic idea of Equalization: an investor-consumer class substitutes for a goods-producing class in a rich country, to the betterment of the world's poorest exporting nations.
CLAUDIA: I've never heard that before but it's the craziest thing I've ever heard. How did that idea gain acceptance? And isn't a large population like ours becoming involved in the financial markets swelling the global money supply -- creating the problem you've been talking about?
PUNDITA: Well, that's why I said that the USA holds the key to getting a handle on the problem. But sure you've heard that idea before; you just haven't heard it discussed separately from globalization.
CLAUDIA: You mean I've just never heard it spelled out in plain English, just like everyone else hasn't! Pundita, what's been going on?
PUNDITA: I suppose it wouldn't do to call a spade a spade because when put into practice, the concept has so many holes that any reasonable American who hears it says the same as you about it.
But it's not a conspiracy. The idea gained popularity over a succession of U.S. government administrations and to my knowledge it was never spelled out in domestic policy; all we heard about it was in references to the benefits of globalization.
And I suspect that the looming disaster with the Social Security program, which was foreseen decades ago, was a factor. I think it gave a boost to encouraging the growth of an investor class among middle-income Americans as a means to supplement Social Security.
There were several other things about Equalization to attract politicians from both sides of the US political aisle. And of course it was hugely attractive to globalized corporations, including banks and investment houses.
It was also attractive to American officials who believed that the country's economic success depended on raising billions of people out of poverty so they could become consumers of U.S. goods.
And the idea attracted radical environmentalists -- the ones who believed that the planet could only be saved if the biggest industrial nations slowed down their production.
Another group among the U.S. Equalization boosters were the journalists and media moguls who loved the idea of Americans using investments to become more 'socially responsible' toward the poorer nations.
That's only the short-list. Americans might have backed into Equalization but we took to it like a duck to water. What we didn't stop to consider is what happens when so many relatively well-off people in the 'First World' nations invest a chunk of their disposable income in the globalized money industry -- and when their investing is joined by investments from huge numbers of people in the countries that Equalization helped.
Financial markets sprouted around the globe like a desert sprouting grass in the wake of a drenching rain, as the world's money supply kept rising, and rising, and rising.
Thus, solutions are proposed that are not directed to the problem of excess money but to its second- and third-order effects. That returns us to the G20 Summit in London.
The G20 Leaders Play Ostrich
As near as I can make out, the summit leaders are inching toward outfitting everyone on earth with a life jacket to survive the flood of excess money. The jacket would be made from draconian regulations for the money industries and from money created to serve the needs of the population and to service government debt.
The reasoning is that when the flood finally bursts the dam we can all bobble around in our life jackets and hopefully many of us can hang on until the waters recede.
CLAUDIA: Creating gobs of fiat money just makes the flood of excess money rise higher. [laughing] Oh but wait, I get it! If we're bobbing in 10 or 20 feet of water where's the difference as far as our life jacket is concerned?
PUNDITA: I think you're in the swing of G20 thinking. The big catch with the G20 life jacket is that keeping it strapped to so many people will require totalitarian measures. These measures won't work very well, mind you, a point which I think the G20 leaders would rather not confront.
Draconian oversight measures would only create more rogue regimes. ('Come live in sunny downtown Anarchy, where your life won't be worth a plug nickel but at least you won't die wrapped in red tape.')
And the G20 solution would only create more layers of corruption, which will dump yet more buckets of money into the rising tide of money sloshing around the planet.
CLAUDIA: They're trying to corner all the consequences of excess money without fixing the problem.
PUNDITA: My work is done. Nicely put.
I don't know about you but I need a break. If you want to discuss more of this later, let me know.
CLAUDIA: I'd very much like to continue with this if you have the time. What you've told me is upsetting but it's better to know what we're really facing. Thank you very, very much, Pundita.
PUNDITA: You're welcome, Claudia.
[Part 2 of this discussion will be published on Monday, 6:00 AM ET]
1) "Alternatively, rational economic agents in "first world" economies may choose to invest in financial assets instead of human capital — further eroding the long term ability of the "first world" country to produce and grow. As predicted by Adam Smith, this effect would reduce the inequality between First World and Third World countries, increasing overall fairness." - From Wikipedia article on neomercantilism
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This entry is crossposted at RBO with great illustrations, of course. It's hard for me to pick a favorite but maybe the close-up of the ostrich wins by a beak. What a fitting portrait of the G20 participants. RBO also has an editorial comment: "... her version of ‘Why It’s Better For the US to Export More Products Than to Eat Bank Notes’ For Dummies.
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4/9 UPDATE
This entry is crossposted at Uppity Woman. Thank you, Comradess Uppity! Labor in potato fields always good for sharpening mind!
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4/19 UPDATE
Yesterday evening Dan Riehl at Riehl World View linked to this post and gave it high praise for the information it provided and criticism for the length of the published dialogue, and for bringing in some material he considered a distraction from the central points, thereby making the length "that much more of an issue given the format."
His comments are a repeat of advice he gave me in 2005 when I complained to him that no matter how hard I worked to break down unfamiliar concepts for the general reader I didn't think I was making headway.
His point was that I had to be more sensitive to the medium I was working in -- the blogosphere -- and that if I didn't want to stoop to providing catchy 'hooks,' I was writing for the wrong medium.
I followed his advice in catch-can fashion, but often ignored it during the melee of research, analysis, and writing, which could be exhausting.
A compromise might be to provide a summary or introduction for posts that discuss unfamiliar concepts or bring up a series of complex interlocked issues.
The thought of taking time to summarize makes me feel as I have to swallow castor oil. But Dan's criticism is very constructive, particularly at this juncture in my blogging, when I'm striking out in a new direction.
All right; I'll think on all this. Thanks, Dan.
Tuesday, March 31
Globalization Series: The Neoliberal Puzzle and Whack-a-Mole, Russian style
I received the following question from a reader named Frank in response to the Washington Continues to Play Ostrich about Mexico post:
"When you say neoliberal policies like the one Reagan and Thatcher did, what do you mean by that? I thought they were associated with conservatism?"
Because the question opens onto important foreign policy issues for the USA, I decided to expand on the dictionary definition of neoliberalism for my reply:
Dear Frank:
So many Americans are confused about the meaning of neoliberal that I should have added a Wikipedia link to the word, which generally I do just because of the widespread confusion about the term.
Liberal in this context does not mean 'progressive' or Leftist; it is an economics term that refers to liberalization of capital markets, free trade, and privatization of government-owned businesses and industries.
In other words, neoliberalism "liberally " or "greatly" embraces capitalism, and the kind of government practices that are associated with Margaret Thatcher's economics revolution, which was adopted by Ronald Reagan.
Couldn't the economists have come up with a more descriptive term, one that's less confusing? Why not simply call it capitalism? Because it's not so much about capitalism as about undoing socialist/communist and protectionist government policies through the application of capitalism and liberal ("generous" or "free") trade policies.
It's really a term that refers to implementation of an economic theory, rather than the theory itself.
A term that's closely associated with neoliberalism is the Washington Consensus. The more you know about the consensus, the more you'll understand why neoliberalism became controversial -- and why, by the turn of this century, the American government had become hated in many places around the world. From the Wikipedia article. (There are other articles about the consensus that are even more informative, and which are readily available on the internet, but the Wikipedia one is a good place to start.)
On paper, neoliberal economic policy is a prescription for bringing a sick national economy back to health. But in its application neoliberalism policy does not start with a fresh sheet of paper -- with a new society. It was imposed on countries that had often followed strongly socialist or communist policies for generations. And often the application of neoliberalism in those countries was accompanied by economic Shock Therapy.
The idea of Shock Therapy is 'all or nothing' on the argument that half-way cures for a very sick socialist economy don't work: Either privatize all the biggest state-run industries and open up the country wide to foreign investment, remove all wage and price controls, etc., or have the country continue to fall into ruin.
True. But it's the speed of the fall that Shock Therapy isn't constructed to deal with.
If you have a dirt poor country with very primitive or nonexistent entitlements programs (e.g., social security), only the most rudimentary social safety nets (e.g., big charity networks), what happens when the state-run industry closes its doors and says go find a job in a private sector that we haven't created yet? And when the World Bank doesn't write loans fast enough to stave off disaster?
What happens is that people starve, Frank, or they turn to crime so they can feed their families.
That's what happened to Russia. It happened to a lessor degree in Eastern European ex-Soviet republics. But those countries got tremendous help from the EU, the EU-backed European development bank (EBRD) and to a great extent the government of West Germany, which came rushing into the breach with an open checkbook.
And because Washington was so all-fired intent on peeling those countries away from Russia's sphere of influence, the U.S. government also threw mountains of financial aid at those countries to help them stave off the worst.
But when Shock Therapy was applied it was a disaster in cases where the country didn't have the safety nets that Margaret Thatcher's Britain and Reagan's United States had, and didn't have enough access to outside help.
Imagine: You've been living from paycheck to paycheck, and suddenly you're out of a job because the state-run industry you work for closed its doors with no warning. There are no food stamps, unemployment checks, soup kitchens run by the Red Cross, homeless shelters, or job retraining programs. No nothing. And your relatives, friends, and neighbors are in the same boat destined for starvation.
Here's a metaphor to summarize the downsides of badly-applied neoliberalism particularly when applied via Shock Therapy: Think of a man who was chained to his desk job for years. Then he develops a host of illnesses that are related to lack of exercise. When his doctor orders him to exercise, the first thing he does is run a mile, then he drops dead.
Many poor countries that followed socialist policies can be likened to the man. And neoliberalism can be likened to a doctor's orders to help him improve his health. But applied thoughtlessly, the prescription can kill a society.
One of the downsides is that bad application of neoliberal policies gave capitalism a bad name. But of course life is more than an economic model. So the general rule should be that the more radical and rapid the change, the more that social services should be expanded to cushion the shock and help smooth the transition from a state-owned economy to a privatized one.
Often that rule wasn't followed. Instead, the economic prescription was applied across the board, no matter what the circumstances. Yet implementing the policies was the price tag for bailout loans arranged by the IMF and international development banks that followed the Washington Consensus. You can look at the Wikipedia article on SALs -- Structural Adjustment Loans -- to get an idea of how the price tag worked in practice.
To make matters worse, as foreign investors rushed to snap up former state-run companies that fell to privatization, starving people saw their country being overrun by rich foreigners who were making fortunes from the country's most precious resources -- and who were not returning any of that wealth to the people who were starving.
So, the people who were suffering greatly as a result of inappropriately applied neoliberal policies came to see neoliberalism as a dirty trick by the rich countries to rob them. And so, many threw the baby out with the bath water; that happened in several Latin American countries that threw aside neoliberalism and turned sharply Left.
And because the mainstream U.S. news media had always greatly ignored reporting on IMF-World Bank policies and how they affected the poorer countries, the vast majority of Americans were unaware of the situation.
That also explains why the term neoliberalism, for all it's impact on peoples outside the United States, is either unknown to many Americans or misunderstand to mean a Liberal in the political sense of the word.
I don't wish to demonize neoliberalism or the Washington Consensus; they've done much good in the world. But when by a few strokes of a pen a handful of people can radically alter the lives of millions in a country distant from theirs, those pen pushers had better be sure they are in control at the implemental level of their economic prescription. Often they weren't, and tragedies spun out from there.
Then, confounded Americans asked, 'Why are so many people around the world angry at us?'
Has the United States government learned its lesson? If reason were the only standard by which to measure the question, I'd say, 'I think so.' I think it was the Iraq experience that began to break up the ice floes of thinking about neoliberalism among its champions. The more greatly insulated we are from the consequences of our actions, the harder it is to see our mistakes. The worst downsides of the Washington Consensus were always at great remove from the American society. But when the Green Zone became an American society in microcosm, suddenly the feedback loop for mistakes was very short.
Paul Bremer is a big fan of neoliberalism. While he was acting as the de facto viceroy of Iraq he got it into his head that a top priority was to privatize Iraq's state industries: get rid of the bloat, where thousands of Iraqis collected a paycheck from the state for the work of sitting around and drinking tea all day.
On paper Bremer was right. But getting rid of the bloat with a stroke of the pen put many Iraqis out of a paycheck -- in a country that was in chaos, where jobs in private industry couldn't be found, and where unemployment checks weren't available.
So the unemployed turned to crime or joined the insurgency. When rockets started landing inside the Green Zone, suddenly the downsides of badly applied neoliberal theories were brought home to Bremer.
A short feedback loop: it's a wonderful thing.
I can't remember whether Bremer actually cried uncle and admitted the folly of his prescription for rapid economic prosperity in Iraq. Probably not. But some American advisors went to war with him over the issue, or completely circumvented him -- I can't remember which -- and if I recall they got at least some of the state-run factories started up again.
Somewhere in my archives I have a post that quotes a Washington Post report on that episode of the Iraq operation; I'll try to find it when I have time and repost it.
However, what continues to prop up support for indiscriminate application of neoliberalism is not bad reasoning; it's the vast amount of money to be made by foreign investors who buy into privatized industries and who, because they're foreigners, don't have to live with the downsides of fast privatization.
I wish Vladimir Putin would write a book; that would explain everything wonderfully to Americans. Putin's struggles with the foreign investors who were intent on getting control of Russia's energy and mineral wealth became a game of Whack-a-Mole. Every time he whacked them, they'd pop up in a different way.
They used to go to the governors of the different provinces and bribe them to sell off various businesses. So Putin said, Okay, I'll suspend elections of the provincial governors and I'll appoint them myself and make them accountable.
Cut off from that avenue of plunder, the scoundrels went howling to their government to demand that the government lodge protests against Putin. And they ordered flunkies to blitz the financial papers and major press in Europe and the U.S. with op-eds saying that Putin was a dictator.
Then they started in with fronting NGOs (Non-governmental not-for-profit organizations) to attack Putin's policies. So he threw all the foreign NGOs out of Russia. Undaunted, the scoundrels began funneling money to Russian NGOs -- which made it really tough on the legitimate Russian NGOs when Putin went after them.
From a long distance, it was almost funny. Every time he blocked them, they'd go running to the financial papers and wail about the erosion of freedom in Russia. Then they'd find a way to fox him again. Then he'd figure out their newest ploy, and so the whole cycle of op-eds and diplomatic protests would start up again.
The game is still in play because there's a lot of money to be made if they can get control of Russia's government. And that game doesn't even speak to the more deadly one that the Russian Oligarchs played when he took their power away from them. They wanted to run Russia again, at any cost.
The deadliest game of all was the one played by the old Cold War Warrior crowd, which thought that the only safe Russia was a Russia reduced to the size of a postage stamp. Yes indeed; Vladimir Putin was the world's busiest President.
The tragedy is that all those games to capture power and vast wealth really did result in an erosion of freedoms for Russians. But many Russians have no complaints about life in a fortress. That's because they still remember the neoliberal days, when a few fabulously rich Russians ran the country along with their foreign investor buddies.
That gang's motto was, 'If the Russian people are hungry, let them eat snow in winter and grass in the summer.'
Their only interest in development was building up the chi-chi shopping - hotel - restaurant zones. There was a lot of freedom back then for ordinary Russians: freedom to starve, freedom to get shot up on the streets by gangs of thugs.
On paper there's nothing wrong with foreign investment, but the types I'm talking about are not really intent on investing. They're intent on plunder, which requires getting control of a government. When caught red-handed they mumble about the trickle-down theory, while millions go hungry waiting for the trickles. So they aren't even Carpetbaggers. The Carpetbaggers were ruthless, but they went to the American south after the Civil War and moved in, and helped reconstruct the society.
Not so for the kind of people Putin was fighting. Such characters, who are best described as pirates without a ship's deck under their feet, are not interested in the locals in the countries they target.
And they're not moved by reasoned arguments. They don't give a flying fig about how best to implement neoliberalism. They just want their government to get them access to a foreign government that can be bribed or bullied into privatizing lucrative industries, and to help them shove out local competition.
The upshot? These self-described friends of free enterprise, who back phoney democracy and human rights organizations and political parties as a means to pressure governments they've targeted, have done more to hurt democracy and capitalism than all today's socialist dictators combined.
In the globalized era of trade, how does a government protect itself against predatory foreign investors while staying democratic? And while avoiding a reversion to isolationism and the massive corruption that goes with state ownership of a nation's key industries?
In other words, how does a country reap the benefits of neoliberalism without the scoundrels among us using the very instruments of neoliberal policy to rob the citizens?
Vladimir Putin and his band of technocrats have been discussing and debating that puzzle for years and years. So if you figure out the answer, mail it to the nearest Russian embassy.
"When you say neoliberal policies like the one Reagan and Thatcher did, what do you mean by that? I thought they were associated with conservatism?"
Because the question opens onto important foreign policy issues for the USA, I decided to expand on the dictionary definition of neoliberalism for my reply:
Dear Frank:
So many Americans are confused about the meaning of neoliberal that I should have added a Wikipedia link to the word, which generally I do just because of the widespread confusion about the term.
Liberal in this context does not mean 'progressive' or Leftist; it is an economics term that refers to liberalization of capital markets, free trade, and privatization of government-owned businesses and industries.
In other words, neoliberalism "liberally " or "greatly" embraces capitalism, and the kind of government practices that are associated with Margaret Thatcher's economics revolution, which was adopted by Ronald Reagan.
Couldn't the economists have come up with a more descriptive term, one that's less confusing? Why not simply call it capitalism? Because it's not so much about capitalism as about undoing socialist/communist and protectionist government policies through the application of capitalism and liberal ("generous" or "free") trade policies.
It's really a term that refers to implementation of an economic theory, rather than the theory itself.
A term that's closely associated with neoliberalism is the Washington Consensus. The more you know about the consensus, the more you'll understand why neoliberalism became controversial -- and why, by the turn of this century, the American government had become hated in many places around the world. From the Wikipedia article. (There are other articles about the consensus that are even more informative, and which are readily available on the internet, but the Wikipedia one is a good place to start.)
The term Washington Consensus was initially coined in 1989 by John Williamson to describe a set of ten specific economic policy prescriptions that he considered to constitute a "standard" reform package promoted for crisis-wracked developing countries by Washington D.C based institutions such as the International Monetary Fund (IMF), World Bank and the U.S. Treasury Department.Mr Soros has self-serving reasons for criticizing neoliberalism and the Washington Consensus. But there are valid criticisms of both.
Subsequently, as Williamson himself has pointed out, the term has come to be used in a different and broader sense, as a synonym for market fundamentalism; in this broader sense, Williamson states, it has been criticized by writers such as George Soros and Nobel Laureate Joseph E. Stiglitz.
The Washington Consensus is also criticized by others such as some Latin American politicians and heterodox economists. The term has become associated with neoliberal policies in general and drawn into the broader debate over the expanding role of the free market, constraints upon the state, and US influence on other countries' national sovereignty.
On paper, neoliberal economic policy is a prescription for bringing a sick national economy back to health. But in its application neoliberalism policy does not start with a fresh sheet of paper -- with a new society. It was imposed on countries that had often followed strongly socialist or communist policies for generations. And often the application of neoliberalism in those countries was accompanied by economic Shock Therapy.
The idea of Shock Therapy is 'all or nothing' on the argument that half-way cures for a very sick socialist economy don't work: Either privatize all the biggest state-run industries and open up the country wide to foreign investment, remove all wage and price controls, etc., or have the country continue to fall into ruin.
True. But it's the speed of the fall that Shock Therapy isn't constructed to deal with.
If you have a dirt poor country with very primitive or nonexistent entitlements programs (e.g., social security), only the most rudimentary social safety nets (e.g., big charity networks), what happens when the state-run industry closes its doors and says go find a job in a private sector that we haven't created yet? And when the World Bank doesn't write loans fast enough to stave off disaster?
What happens is that people starve, Frank, or they turn to crime so they can feed their families.
That's what happened to Russia. It happened to a lessor degree in Eastern European ex-Soviet republics. But those countries got tremendous help from the EU, the EU-backed European development bank (EBRD) and to a great extent the government of West Germany, which came rushing into the breach with an open checkbook.
And because Washington was so all-fired intent on peeling those countries away from Russia's sphere of influence, the U.S. government also threw mountains of financial aid at those countries to help them stave off the worst.
But when Shock Therapy was applied it was a disaster in cases where the country didn't have the safety nets that Margaret Thatcher's Britain and Reagan's United States had, and didn't have enough access to outside help.
Imagine: You've been living from paycheck to paycheck, and suddenly you're out of a job because the state-run industry you work for closed its doors with no warning. There are no food stamps, unemployment checks, soup kitchens run by the Red Cross, homeless shelters, or job retraining programs. No nothing. And your relatives, friends, and neighbors are in the same boat destined for starvation.
Here's a metaphor to summarize the downsides of badly-applied neoliberalism particularly when applied via Shock Therapy: Think of a man who was chained to his desk job for years. Then he develops a host of illnesses that are related to lack of exercise. When his doctor orders him to exercise, the first thing he does is run a mile, then he drops dead.
Many poor countries that followed socialist policies can be likened to the man. And neoliberalism can be likened to a doctor's orders to help him improve his health. But applied thoughtlessly, the prescription can kill a society.
One of the downsides is that bad application of neoliberal policies gave capitalism a bad name. But of course life is more than an economic model. So the general rule should be that the more radical and rapid the change, the more that social services should be expanded to cushion the shock and help smooth the transition from a state-owned economy to a privatized one.
Often that rule wasn't followed. Instead, the economic prescription was applied across the board, no matter what the circumstances. Yet implementing the policies was the price tag for bailout loans arranged by the IMF and international development banks that followed the Washington Consensus. You can look at the Wikipedia article on SALs -- Structural Adjustment Loans -- to get an idea of how the price tag worked in practice.
To make matters worse, as foreign investors rushed to snap up former state-run companies that fell to privatization, starving people saw their country being overrun by rich foreigners who were making fortunes from the country's most precious resources -- and who were not returning any of that wealth to the people who were starving.
So, the people who were suffering greatly as a result of inappropriately applied neoliberal policies came to see neoliberalism as a dirty trick by the rich countries to rob them. And so, many threw the baby out with the bath water; that happened in several Latin American countries that threw aside neoliberalism and turned sharply Left.
And because the mainstream U.S. news media had always greatly ignored reporting on IMF-World Bank policies and how they affected the poorer countries, the vast majority of Americans were unaware of the situation.
That also explains why the term neoliberalism, for all it's impact on peoples outside the United States, is either unknown to many Americans or misunderstand to mean a Liberal in the political sense of the word.
I don't wish to demonize neoliberalism or the Washington Consensus; they've done much good in the world. But when by a few strokes of a pen a handful of people can radically alter the lives of millions in a country distant from theirs, those pen pushers had better be sure they are in control at the implemental level of their economic prescription. Often they weren't, and tragedies spun out from there.
Then, confounded Americans asked, 'Why are so many people around the world angry at us?'
Has the United States government learned its lesson? If reason were the only standard by which to measure the question, I'd say, 'I think so.' I think it was the Iraq experience that began to break up the ice floes of thinking about neoliberalism among its champions. The more greatly insulated we are from the consequences of our actions, the harder it is to see our mistakes. The worst downsides of the Washington Consensus were always at great remove from the American society. But when the Green Zone became an American society in microcosm, suddenly the feedback loop for mistakes was very short.
Paul Bremer is a big fan of neoliberalism. While he was acting as the de facto viceroy of Iraq he got it into his head that a top priority was to privatize Iraq's state industries: get rid of the bloat, where thousands of Iraqis collected a paycheck from the state for the work of sitting around and drinking tea all day.
On paper Bremer was right. But getting rid of the bloat with a stroke of the pen put many Iraqis out of a paycheck -- in a country that was in chaos, where jobs in private industry couldn't be found, and where unemployment checks weren't available.
So the unemployed turned to crime or joined the insurgency. When rockets started landing inside the Green Zone, suddenly the downsides of badly applied neoliberal theories were brought home to Bremer.
A short feedback loop: it's a wonderful thing.
I can't remember whether Bremer actually cried uncle and admitted the folly of his prescription for rapid economic prosperity in Iraq. Probably not. But some American advisors went to war with him over the issue, or completely circumvented him -- I can't remember which -- and if I recall they got at least some of the state-run factories started up again.
Somewhere in my archives I have a post that quotes a Washington Post report on that episode of the Iraq operation; I'll try to find it when I have time and repost it.
However, what continues to prop up support for indiscriminate application of neoliberalism is not bad reasoning; it's the vast amount of money to be made by foreign investors who buy into privatized industries and who, because they're foreigners, don't have to live with the downsides of fast privatization.
I wish Vladimir Putin would write a book; that would explain everything wonderfully to Americans. Putin's struggles with the foreign investors who were intent on getting control of Russia's energy and mineral wealth became a game of Whack-a-Mole. Every time he whacked them, they'd pop up in a different way.
They used to go to the governors of the different provinces and bribe them to sell off various businesses. So Putin said, Okay, I'll suspend elections of the provincial governors and I'll appoint them myself and make them accountable.
Cut off from that avenue of plunder, the scoundrels went howling to their government to demand that the government lodge protests against Putin. And they ordered flunkies to blitz the financial papers and major press in Europe and the U.S. with op-eds saying that Putin was a dictator.
Then they started in with fronting NGOs (Non-governmental not-for-profit organizations) to attack Putin's policies. So he threw all the foreign NGOs out of Russia. Undaunted, the scoundrels began funneling money to Russian NGOs -- which made it really tough on the legitimate Russian NGOs when Putin went after them.
From a long distance, it was almost funny. Every time he blocked them, they'd go running to the financial papers and wail about the erosion of freedom in Russia. Then they'd find a way to fox him again. Then he'd figure out their newest ploy, and so the whole cycle of op-eds and diplomatic protests would start up again.
The game is still in play because there's a lot of money to be made if they can get control of Russia's government. And that game doesn't even speak to the more deadly one that the Russian Oligarchs played when he took their power away from them. They wanted to run Russia again, at any cost.
The deadliest game of all was the one played by the old Cold War Warrior crowd, which thought that the only safe Russia was a Russia reduced to the size of a postage stamp. Yes indeed; Vladimir Putin was the world's busiest President.
The tragedy is that all those games to capture power and vast wealth really did result in an erosion of freedoms for Russians. But many Russians have no complaints about life in a fortress. That's because they still remember the neoliberal days, when a few fabulously rich Russians ran the country along with their foreign investor buddies.
That gang's motto was, 'If the Russian people are hungry, let them eat snow in winter and grass in the summer.'
Their only interest in development was building up the chi-chi shopping - hotel - restaurant zones. There was a lot of freedom back then for ordinary Russians: freedom to starve, freedom to get shot up on the streets by gangs of thugs.
On paper there's nothing wrong with foreign investment, but the types I'm talking about are not really intent on investing. They're intent on plunder, which requires getting control of a government. When caught red-handed they mumble about the trickle-down theory, while millions go hungry waiting for the trickles. So they aren't even Carpetbaggers. The Carpetbaggers were ruthless, but they went to the American south after the Civil War and moved in, and helped reconstruct the society.
Not so for the kind of people Putin was fighting. Such characters, who are best described as pirates without a ship's deck under their feet, are not interested in the locals in the countries they target.
And they're not moved by reasoned arguments. They don't give a flying fig about how best to implement neoliberalism. They just want their government to get them access to a foreign government that can be bribed or bullied into privatizing lucrative industries, and to help them shove out local competition.
The upshot? These self-described friends of free enterprise, who back phoney democracy and human rights organizations and political parties as a means to pressure governments they've targeted, have done more to hurt democracy and capitalism than all today's socialist dictators combined.
In the globalized era of trade, how does a government protect itself against predatory foreign investors while staying democratic? And while avoiding a reversion to isolationism and the massive corruption that goes with state ownership of a nation's key industries?
In other words, how does a country reap the benefits of neoliberalism without the scoundrels among us using the very instruments of neoliberal policy to rob the citizens?
Vladimir Putin and his band of technocrats have been discussing and debating that puzzle for years and years. So if you figure out the answer, mail it to the nearest Russian embassy.
Sunday, March 29
Washington continues to play ostrich about Mexico (UPDATED 2X)
Earlier, while still free of Mexican diplomatic and political pressure, the U.S. military accurately assessed the potential threat of Mexico devolving into a failed state in this JFCOM planning document (we won’t be seeing anything like this in public again, barring leaks): [...]The quote is from Zenpundit Mark Safranski's A Mexican Standoff with Reality. He has written a gravely important post on the Mexico situation, which dashes the notion that the country is in no danger of becoming a failed state.
As the above quote indicates, there has been enormous pressure on the U.S. government to repudiate the claim that Mexico's government is in danger of falling. I understand the etiquette of the situation: it's not very nice to go around saying that your next door neighbor is a basket case. But the bottom line is quite literally that: before Mexico "fails," the government will fall to the kind of Leftist revolution that has overtaken several Latin American states.
Make no mistake, Andrés Manuel López Obrador, who still insists that the 2006 presidential election was stolen from him, has the winds of the economic downturn at his back. And in a letter last week to Secretary of State Hillary Clinton (see below), he made it clear that he believes that U.S. assistance to help President Calderón fight the drug cartels is an interventionist move intended to prop up Mexico's elite -- or 'oligarchy,' as Mark more correctly terms them.
Mr Obrador is right. In Mexico, the United States never abandoned its Cold War policy of propping up the ruling class to stave off a Leftist takeover; Vicente Fox's selection was simply a fig leaf for the policy.
This hopelessly outmoded and destructive U.S. policy continued even after it was patently obvious that Mexico had become a tinderbox -- and that Fox was unwilling or unable to prod the oligarchs to accept substantial tax increases.
Instead of taking the hard path, he went along with the obscene policy toward the poor that Prime Minister Tony Blair, China's leaders and the World Bank-IMF pushed, and which President Bush accepted: The policy boiled down to 'Let Mexico's Poor Eat Remittances.'
To top it off, Fox continued to support neoliberal policies (read 'Thatcherite/
Reaganite' economics), even though he knew that Mexico did not have the advanced legal and social safety nets that British and U.S. citizens enjoyed.
The upshot was a populist movement that nearly swept Obrador into power. Less than two years later, a tsunami of violence fueled by widespread corruption is threatening to topple Mexico's government.
Mr Calderón has shown surprising and admirable courage in confronting drug lords and corrupt officials, but he must find even more courage and get the elite to turn out their pockets more.
What must NOT be done, and which Hillary Clinton is already offering to do, is for the U.S. to hurl more aid at Mexico to help the government build up the middle class and needed infrastructure.
No; that's the job of Mexico's elite. If the U.S. keeps doing their job for them, they'll never find the impetus to change.
From his letter, clearly Obrador wants more U.S. development aid for Mexico, but surely he's aware that this business of the U.S. throwing Mexico aid, combined with remittances, has only helped to keep the elite off the hook. So any additional U.S. aid -- no matter how worthy the project -- should be tied to real political change in Mexico.
As to the $80 million in military aid that Mrs Clinton has promised Mexico for purchases of Black Hawk helicopters -- Sigh. Of course this is just a fancy way of handing a subsidy to the U.S. defense industry. But at the same time it sends a message to Mexico's elite that they don't have to cough up the funds for the copters.
I understand that given all the recent publicity about violence near the border, the U.S. government now feels under tremendous public pressure to Look Busy in Mexico. But if it were my call I would not allow the violence to rush me into making a move that's going to fall back on the USA because it's not good for Mexico.
Instead, I would beef up security stateside. And just to show the oligarchs that I meant business, I'd make sure that the blasted border fence is completed and fortified.
And if this hasn't been done already, which I hope it has, I would open backchannel discussions with Obrador. Of course the discussions would be leaked but that would be the point. If that gossip wouldn't light a fire under Mexico's oligarchs, nothing would.
If no one wants to go that far, why not speed dial The Washington Post and ask if they'd consider inviting Obrador to write an op-ed? An op-ed in the Post is huge. It would be money in bank for Obrador; he could wave the op-ed in the faces of the elite. They'd take one look and say, 'Uh oh. Washington is listening to him.'
The problem, however, is that Washington following common-sense policy with regard to Mexico threatens to upset a big U.S. applecart. Agri-business industries in America's southwest have been raised up on the back of dirt-cheap Mexican labor, as has the upperclass lifestyle that the middle class in those states have been able afford because of Mexican cooks, maids, nannies and gardeners.
Obrador has said 'No' to all that; he doesn't want Mexicans immigrating to the U.S. or being day laborers here. He wants Mexico to have enough decent-paying jobs so Mexicans will stay in Mexico.
But because Washington has been unwilling to acknowledge that they've promoted policies that are bad for Mexicans -- and for U.S. export trade with Mexico -- nothing has been done to move toward a sensible U.S. policy on Mexico.
Translation: If you really want to address Mexico's problems, first deal with the agri-business lobbies in the U.S. and with all those southwestern voters who weep for the plight of Mexican immigrants, but who would kill before they'd let go of their maids and gardeners.
So make your choice: Put more Americans to work as fruit pickers, hound Mexico's oligarchs to build up necessary social structures in their country, then reap the rewards in booming U.S. exports to better-off Mexicans. Or continue down the same road.
The right actions might be driven, as so much common sense in U.S. government policy has been driven in the post-9/11 era, by terrorist actions. The U.S. government is playing down the threat from large numbers of Hezbollah member slipping into the U.S. from Mexico. But you have to be born yesterday to keep telling yourself that Hezbollah is simply expanding their piece of the illicit Mexican drug business into the USA.
The increasing level of sophistication shown by the Mexican assassins has been matched by the increasing sophistication and preponderance of tunneling into the United States from Mexico.
Hezbollah (and Hamas) are tunnelin' fools. They love to tunnel. And just as in Lebanon and Gaza, take out one tunnel and they build another as soon as your back is turned. And, of course, both organizations are trained by the Iranian military.
So somebody tell me again that there's nothing to be alarmed about at this time. Whaddya want? Las Vegas captured and wired with a nuke before you'll start worrying about Hezbollah in the USA?
And actually, there's a silver lining to Hezbollah pussyfooting around on our border, and we should take advantage of it, instead of ignoring it. Hezbollah solves the sticky diplomatic problem of dealing with Mexicans who're huffy about U.S. fence-building:
'Oh, it's not you we're worried about; it's them damn Islamic terrorists.'
And I don't want to hear, 'But Obrador is a Communist.' Really? Have you read his 2006 presidential campaign platform? Yes, he did the bread-and-circus routine while he was Mexico City's mayor. What else could he do?
But read the platform, which is a straight-up plan for using tax dollars to build necessary infrastructures and shore various sectors for job creation. Then tell me whether he's a Communist. It's a jobs stimulus plan, for heaven's sake.
However, Mexico will turn much further left than Obrador unless more of the masses find some economic relief. So it's your choice, Washington. Continue supporting the elite. Or read the writing on the wall and act according to what you see there.
Before turning the floor over Obrador, I will leave you with one of the observations in Zenpundit's post: "It would be far better to prioritize Mexico as a national security issue today, than let it evolve into a transnational powder keg tomorrow."
Obrador's letter to SECSTATE Clinton. Translation to English via Narconews:
> Rejection of all interventionist behavior, Andrés Manuel López Obrador warns in a letter to Hillary Clinton, US Secretary of State.***************
> Ready to "defend our right as a free and sovereign Nation"
> "It is an error to want to confront the problems of insecurity and violence with only an iron fist, soldiers, jails, tougher laws, and stiffer penalties."
Mexico City. March 25, 2009
Mrs. Hillary Clinton
Secretary of State
Government of the United States of America
Presente
Esteemed Mrs. Clinton:
Even though only Mexicans can confront and resolve our homeland's internal issues, we consider it to be pertinent, given what you represent, to express to you the feelings of millions of citizens who struggle daily in order to make justice and democracy a reality in Mexico.
From our point of view, the problems of insecurity and violence in our country have arisen from the prevailing corruption and impunity, and because there hasn't been economic growth for 26 years and millions of youths have been marginalized from education and haven't had work opportunities.
You surely know that all of this began when a group of about 30 traffickers of influence and corrupt politicians, using the cover of so-called neoliberal economic policies, took control of the Mexican State, as well as a good part of national and so-called public goods. And these policies of pillaging that has enriched a minority in an exaggerated and obscene manner, in a way that has not occurred in any other part of the world, has condemned the Mexican people to exile and survival.
That is why we believe that it is an error to want to confront the problems of insecurity and violence with only an iron fist, with soldiers, with prisons, with tougher laws, and with stiffer penalties. The solution to the scourge of criminality lies in rescuing the State, in changing the current economic model, and in guaranteeing the people better living and working conditions. It can't be forgotten that peace and tranquility are fruits of justice.
Mrs. Clinton: As a result, as we have also made known to President Barack Obama, we maintain that the solution to the phenomena of migration and insecurity will not be found in the construction of walls nor in border militarization. Rather, it will be found in Mexico's social and economic development.
Therefore, it is essential that the relationship between Mexico and the United States is built upon cooperation for development and not in the use of coercive measures.
Likewise, we express to you that even though we suffer from a usurper and failed government, whose weakness could lead it to enter into agreements that go against the national interest, a strong citizen movement also exists that is determined to impede any interventionist behavior and to defend our rights as a free and sovereign nation.
We respectfully send you our regards and we wish you a nice stay in our country.
Sincerely,
Andrés Manuel López Obrador
Legitimate President of Mexico
UPDATES March 30
Sites that link to this post
Dan Riehl at Riehl World View
Richard Fernandez at Pajamas Media
Procrustes at RBO (crossposted with illustrations)
Memeorandum
Corrente
Malcolm Hoenlein discussed the Hezbollah presence in Mexico with John Batchelor last night. I've been listening to Malcolm's reports to John for six years; from this I know that when he's concerned about a situation, it's wise to pay attention.
To hear the discussion, click on the Hour 3 segment podcast of the March 29 East Coast part of the John Batchelor Show. The report on Mexico starts around the 5 minute mark in the interview, which is the first one on the segment.
Also see this published speculation from an African news site about a link between FARC and Iran.
On a lighter note Dan Riehl lets us know that the Mexico problem is America's fault. Thanks, Dan, for making my day.
Of course Calderón has a point about corruption among U.S. officials being a factor in the illicit drug trade. But just see what Secretary Clinton has started with her 'Kick Me Beat Me' approach to diplomacy. And as Dan's post shows, the BBC was all too happy to oblige.
7:00 PM UPDATE
In response to ZenPundit's Mexico post and mine on the same topic, Procrustes at RBO has pulled together a highly readable study, complete with graphics, on the question of failed states.
The study is titled Are Mexico, Afghanistan, and Pakistan failed states? If so, then what?
China's geopolticial ambitions, Law of the Sea Treaty, and US policy relating to both
RBO's trademark deft weaving of seemingly distinct subjects to bring out their connection and importance shines in this post, which, complete with helpful graphics, is a window on China's rising geopolitical ambitions.
The post brings out the key point of the recent confrontation between an unarmed US naval vessel and Chinese boats: while the U.S. clamed to be in international waters, China claimed the U.S. had trespassed on China's territorial waters.
China's claiming of most of the South China Sea, an important trade route, pits it against five other nations that have claims on different parts of the sea. How all this fits with the Law of the Sea Treaty (its all-too-descriptive acronym is LOST) is worth your time to understand.
The post brings out the key point of the recent confrontation between an unarmed US naval vessel and Chinese boats: while the U.S. clamed to be in international waters, China claimed the U.S. had trespassed on China's territorial waters.
China's claiming of most of the South China Sea, an important trade route, pits it against five other nations that have claims on different parts of the sea. How all this fits with the Law of the Sea Treaty (its all-too-descriptive acronym is LOST) is worth your time to understand.
Saturday, March 28
Mark Mirek Topolanek's words: the road to Hell is paved with stimulus spending
I wish Prime Minister Gordon Brown would stop hopping around the world in the manner of a flea on a hot griddle.
After all the trouble I went to the other day to prepare a welcome gift for his return to Washington, it turned out he'd already come and gone from U.S. shores again.
I guess he decided not to test President Obama's hospitality a second time. Instead of returning to Washington he made a stopover in New York on Wednesday, where he spoke at NYU, the UN, and a breakfast hosted by the Wall Street Journal, which as we all know is now owned by Rupert Murdoch.
The New York appearances did not make headlines so I assume his speeches were more of same that he's delivered every place on the planet except Antarctica to drum up support for his plan to save the world.
Mr Brown made up for the lack of press attention in New York with his appearances in Santiago and Brasilia.
In Santiago, Chile's President Michelle Bachelet embarrassed him when she explained (in English) that Chile's government had put aside money during good economic times to help it through the downturn -- something that the British government had not thought to do.
During his stopover in Brasilia, Mr Brown was informed by Brazil's President, Lula da Silva, that white bankers with blue eyes were entirely to blame for the global financial crisis.
That lets Gordon off the hook -- he's a brown-eyed politician; a one-eyed brown-eyed politician, at that -- but it was one of those moments a leader of the Western World could do without.
If he'd had his wits about him Gordon should have shot back, 'And it was brown-eyed Brazilian bankers who sent the Amazon up in flames with their tweet-brained development policies.'
But I suppose he had few wits left after hearing from his old friend Mervyn King, head of the Bank of England, that Britain could not afford another massive round of fiscal stimulus -- another massive stimulus being a key aspect of Gordon's financial rescue plan.
To add insult to many injuries this past week, on Wednesday Prime Minister Mirek Topolanek of the Czech Republic, which holds the rotating European Union presidency, said that Obama's fiscal stimulus plans were the "road to hell."
The remark was an obvious criticism of Mr Brown, who has supported President Obama's stimulus plan. Indeed, I seem to recall that he'd boasted that the U.S. fiscal stimulus plan was inspired by his.
I don't like feeling pity for politicians so I'll keep my advice to Gordon Brown brief and gruff: Get a grip, if you don't want the G20 meeting to turn into the Siege of Khartoum.
After all the trouble I went to the other day to prepare a welcome gift for his return to Washington, it turned out he'd already come and gone from U.S. shores again.
I guess he decided not to test President Obama's hospitality a second time. Instead of returning to Washington he made a stopover in New York on Wednesday, where he spoke at NYU, the UN, and a breakfast hosted by the Wall Street Journal, which as we all know is now owned by Rupert Murdoch.
The New York appearances did not make headlines so I assume his speeches were more of same that he's delivered every place on the planet except Antarctica to drum up support for his plan to save the world.
Mr Brown made up for the lack of press attention in New York with his appearances in Santiago and Brasilia.
In Santiago, Chile's President Michelle Bachelet embarrassed him when she explained (in English) that Chile's government had put aside money during good economic times to help it through the downturn -- something that the British government had not thought to do.
During his stopover in Brasilia, Mr Brown was informed by Brazil's President, Lula da Silva, that white bankers with blue eyes were entirely to blame for the global financial crisis.
That lets Gordon off the hook -- he's a brown-eyed politician; a one-eyed brown-eyed politician, at that -- but it was one of those moments a leader of the Western World could do without.
If he'd had his wits about him Gordon should have shot back, 'And it was brown-eyed Brazilian bankers who sent the Amazon up in flames with their tweet-brained development policies.'
But I suppose he had few wits left after hearing from his old friend Mervyn King, head of the Bank of England, that Britain could not afford another massive round of fiscal stimulus -- another massive stimulus being a key aspect of Gordon's financial rescue plan.
To add insult to many injuries this past week, on Wednesday Prime Minister Mirek Topolanek of the Czech Republic, which holds the rotating European Union presidency, said that Obama's fiscal stimulus plans were the "road to hell."
The remark was an obvious criticism of Mr Brown, who has supported President Obama's stimulus plan. Indeed, I seem to recall that he'd boasted that the U.S. fiscal stimulus plan was inspired by his.
I don't like feeling pity for politicians so I'll keep my advice to Gordon Brown brief and gruff: Get a grip, if you don't want the G20 meeting to turn into the Siege of Khartoum.
Thursday, March 26
Daniel Hannan's shot heard round Web 2.0, Rupert Murdoch reaches for the antacids; Britain's betrayal of the U.S. in Iraq
Well. I fully expect to see Glenn Beck bound and gagged during his appearance this evening on Fox. For those of us who were living in a cave on Wednesday, British MP Daniel Hannan extended his three minutes of fame at the European Parliament, during which he raked Gordon Brown over the coals and spoke in a manner that John Batchelor pegged as worthy of John Galt.
Daniel's speech began (and overnight he's "Daniel" to Americans starved for a political leader's uncompromising stand against socialism):
And because Daniel is not only a Member of Parliament but also a blogger and journalist, he is very media savvy; he knew that every newspaper/TV network owner who was trying to help highly globalized businesspeople and politicians hold the ancien regime together would studiously ignore his speech.
So he foxed them by getting his speech onto YouTube, where it went viral. At Wikipedia's last count (money says Daniel tends his own page at Wikipedia), his speech has been viewed 630,000 times in the past 24 hours and became the 'most viewed today' YouTube video worldwide.
This means Daniel's amazing speech is as much a testament to the power of Web 2.0 and alternate news media as it is to the rising fury of Britons about Labor government's policies.
As to what any of this has to do with Glenn Beck, it's one of those Typical Labyrinthine Globalization Tales:
Rupert Murdoch owns the company that owns Fox, which became Glenn's home recently after whatever happened between Glenn and CNN happened. Murdoch, as I explained in 2004 (British pundits get the jump on Americans and why we should care), supported the Labor government throughout the era of the Blair-Brown team, even though Rupert's associated with Conservative views and his idea of Libertarianism.
This was because Blair, as with President Clinton, was a proponent of Third Way politics, which is an attempt to meld socialist and capitalist economic policies.
Murdoch's critics have charged that he doesn't really have a political ideology, beyond doing whatever it takes to keep his global media empire together. To cut a story, I think it's fair to say that he lives in terror of Phillip Blond, and also any British politician who represents anti-globalist and anti-EU membership views. He supported Labor because it seemed safe to him; it represented stability and pro-EU and globalist policies.
So whatever Murdoch thinks of Gordon Brown today, and it's probably not much, the alternatives were unpalatable to him. At least up until earlier this month, he was still hoping that Gordon would somehow work a miracle for Labor.
And thus we return to Glenn Beck's show, on a day that Rupert Murdoch had been flogging media outlets he controls to register outrage at Barack Obama's handling of Gordon Brown's visit to the United States.
I don't know what greater honor an American President can bestow on another national leader than to allow him to speak before both sitting branches of the United States Congress. But maybe it dawned on Obama as an afterthought that because Gordon Brown had done nothing to be accorded such an honor, he should downplay the rest of his visit. This resulted in no state dinner for Gordon and his wife, an informal presser instead a full court press, and a rather offhand present to Gordon (CDs of great American films).
Coming on top of Obama's return of Tony Blair's gift to Bush (a bust of Winston Churchill)as soon as he got into the Oval Office, all this was read by Rupert as the grossest of insults to Gordon and the British people.
Glenn Beck reads enough U.S. milblogs to know what a truly gross insult looks like: Britain's betrayal of U.S. troops in Iraq and the Iraqi people, which resulted in many deaths and wounded among U.S. troops, Iraqi troops and police, and innocent Iraqi civilians.
Nonetheless, he'd barely arrived at Fox when Rupert had an aneurysm about Obama's failure to adequately fawn over Gordon's visit -- which, incidentally, is one of the few things Obama has done since coming to office that made me happy.
So Glenn called offstage, "How many papers does Rupert Murdoch own in Britain?" and then answered his own question: "All of them."
Then he turned back to the camera, hunched forward and told his viewers that at all costs they had to help smooth Britain's ruffled feathers. Then he held up a sign with the address of the British Embassy in the U.S., and said that everyone should call or write the embassy to tell them how much they loved Britain and Gordon Brown.
Of course Rupert doesn't own all Britain's papers -- and I note he doesn't own The Daily Telegraph, which is the paper that Daniel Hannan blogs for.
But talk about threading the needle. It was a great moment in television, and the more you knew of the background, the funnier the moment was. I liked Glenn Beck from that moment forward, and he'd have to screw up big-time before I'd change my opinion of him.
For Americans who're just learning that Britain betrayed the United States in Iraq -- the story did break through into the mainstream media, very briefly, a year or two ago, and it made it into at least one British paper at that time. But Americans who closely followed the war in Iraq, which includes all the milbloggers, knew at least as early as 2004.
I remember a British reader who was horrified at the news; he wrote in a British paper's comment section that this couldn't be the work of Britain's troops, that they were very brave. Yes they are very brave, but they were under orders to look the other way, as terrorists and crack Iranian army fighters piled men and weapons across the southern border. The U.S. command in Iraq and the Iraqis are still struggling to undo the damage.
The British command had worked out a 'softly, softly,' rationale, as one U.S. military analyst termed it, to justify their studious blindness to the situations: be nice to the Iranians, don't rile the natives, listen to us, America, because we ran things in this part of the world for a long time and we know how best to handle these people.
While Iraqis and U.S. troops got cut to pieces by Iranian-made weapons and roadside bombs.
No, there was no way to stop the British command and I doubt they would have left even if the U.S. command had told them to quit. They were running their own shop in Iraq. And the U.S. needed warm bodies in the south to ride herd because we didn't have enough troops in Iraq. Another thing I'll never forgive Donald Rumsfeld for.
Behind the 'softly' approach in southern Iraq stood Britain's business interests in the Middle East, including Iran; their fear that the American way would eclipse whatever power they had in that part of the world; and the Labor government's desire to tamp down anti-Muslim sentiment.
In short, they were looking out for their own interests first, which I spent considerable time in 2005 warning Americans about. This was no cause to hate the Britons, which I stressed in a 2005 essay titled Even Wendy had to grow up.
I pointed out that the United States needed to adopt a clearer-eyed view of our allies in the post-Cold War world, and wise up about the very nature of alliances, if we weren't to bounce between the extremes of bitterness and blind trust.
If a person betrays you once, that's his fault. If he keeps betraying you, that's your fault. The same applies to alliances between governments.
Alliances do not mean "best buddies."
Just because I'm your ally doesn't mean I'll put my interests above yours. Knowing that, you take precautions and play hardball behind the scenes when you need to, to make sure I don't trample you, because trampling can get to be a habit.
I interject that many Britons would turn that argument around. Just recently a British reader complained to me that Britain was having to kiss the Americans' arse, as he put it.
As you may recall many Britons saw Blair as Bush's "poodle." That was a crock. All the while Americans were getting misty-eyed over Blair's support for us in Iraq, the 'Softly' approach was going full-throttle in Basra. However, few Britons knew the story at that time.
The truth is that the U.S.-Britain alliance went from obsessive in 2003 to toxic for both nations in 2005, when the country's foreign office wanted to restart the Cold War with Russia and the 'Get Russia' faction in Washington said, 'Why stop at a cold war?'
So it came down to a day in August 2008, when I banged out a post titled To any and all U.S. forces in Georgia: STAND DOWN The savage humor I deployed did not betray my fear -- at least I don't think it did -- but over the next agonizing week of waiting, anyone who knew of the tinderbox situation was a fool not to be afraid.
The biggest concern was that Mikhail Chernoy and other ex-Oligarchs would persuade the more irrational elements in the 'Get Russia' faction that the changing of the guard in the USA was the last and best time to start a war with Russia.
I have blanked out the names in this story, but the worst moment came when a U.S. envoy told a Russian counterpart that if Russia they didn't back down in Georgia the U.S. would "have to do something."
The Russian replied wearily, "What could you possibly do to us that you haven't done in the past 13 years?"
There is nothing worse than Russians in a maudlin mood. As long as they're snapping and being sarcastic and threatening, it's okay. But if they get maudlin -- that is bad news.
Clearly, things had gone too far, which cooler heads in London and Washington had already recognized. But backing away from brink was akin to that floor game with big spots where the players move from spot to spot and get tangled up in the process.
The business and energy considerations of the globalized era combined with defense and geopolitical issues and the EU's interests had turned foreign policy for the major powers into a kaleidoscope of ever-shifting alliances and counter-alliances. To haul in another metaphor, it was like Day 30 on Survivor.
All that is to explain, if you ask why you never read in the U.S. papers that the British had betrayed the U.S. in Iraq.
That also explains why several well-known U.S. pundits had a hissy fit over Obama's treatment of Brown -- and yet never spoke a word about the British betrayal in Iraq. Those same pundits support the 'Get Russia' faction on both sides of the Pond. Talk about tangled priorities.
Gordon Brown is set to return to the U.S. any day now, as part of his whirlwind tour of Europe, Latin America, and the U.S. The Guardian reported last week that he was zipping around the world to drum up support ahead of the G20 summit in London on April 2.
Mr Brown has already visited Washington this month to drum up support for his plan to deal with the economic crisis. So perhaps he's returning in hopes of snaring a full court press in the Rose Garden, complete with twin podiums; that, to show the British public and world media that he won't be insulted by an American President.
In any case, Pundita blog has arranged a little welcome present:
For a summary of the complex relationship between Russian and Britain, see this April 2008 article A Poisonous Ally: Growing Russo-British Tensions
****************************
This entry is crossposted at RBO.
Daniel's speech began (and overnight he's "Daniel" to Americans starved for a political leader's uncompromising stand against socialism):
Prime Minister, I see you’ve already mastered the essential craft of the European politician, namely the ability to say one thing in this chamber and a very different thing to your home electorate.He was just getting warmed up.
And because Daniel is not only a Member of Parliament but also a blogger and journalist, he is very media savvy; he knew that every newspaper/TV network owner who was trying to help highly globalized businesspeople and politicians hold the ancien regime together would studiously ignore his speech.
So he foxed them by getting his speech onto YouTube, where it went viral. At Wikipedia's last count (money says Daniel tends his own page at Wikipedia), his speech has been viewed 630,000 times in the past 24 hours and became the 'most viewed today' YouTube video worldwide.
This means Daniel's amazing speech is as much a testament to the power of Web 2.0 and alternate news media as it is to the rising fury of Britons about Labor government's policies.
As to what any of this has to do with Glenn Beck, it's one of those Typical Labyrinthine Globalization Tales:
Rupert Murdoch owns the company that owns Fox, which became Glenn's home recently after whatever happened between Glenn and CNN happened. Murdoch, as I explained in 2004 (British pundits get the jump on Americans and why we should care), supported the Labor government throughout the era of the Blair-Brown team, even though Rupert's associated with Conservative views and his idea of Libertarianism.
This was because Blair, as with President Clinton, was a proponent of Third Way politics, which is an attempt to meld socialist and capitalist economic policies.
Murdoch's critics have charged that he doesn't really have a political ideology, beyond doing whatever it takes to keep his global media empire together. To cut a story, I think it's fair to say that he lives in terror of Phillip Blond, and also any British politician who represents anti-globalist and anti-EU membership views. He supported Labor because it seemed safe to him; it represented stability and pro-EU and globalist policies.
So whatever Murdoch thinks of Gordon Brown today, and it's probably not much, the alternatives were unpalatable to him. At least up until earlier this month, he was still hoping that Gordon would somehow work a miracle for Labor.
And thus we return to Glenn Beck's show, on a day that Rupert Murdoch had been flogging media outlets he controls to register outrage at Barack Obama's handling of Gordon Brown's visit to the United States.
I don't know what greater honor an American President can bestow on another national leader than to allow him to speak before both sitting branches of the United States Congress. But maybe it dawned on Obama as an afterthought that because Gordon Brown had done nothing to be accorded such an honor, he should downplay the rest of his visit. This resulted in no state dinner for Gordon and his wife, an informal presser instead a full court press, and a rather offhand present to Gordon (CDs of great American films).
Coming on top of Obama's return of Tony Blair's gift to Bush (a bust of Winston Churchill)as soon as he got into the Oval Office, all this was read by Rupert as the grossest of insults to Gordon and the British people.
Glenn Beck reads enough U.S. milblogs to know what a truly gross insult looks like: Britain's betrayal of U.S. troops in Iraq and the Iraqi people, which resulted in many deaths and wounded among U.S. troops, Iraqi troops and police, and innocent Iraqi civilians.
Nonetheless, he'd barely arrived at Fox when Rupert had an aneurysm about Obama's failure to adequately fawn over Gordon's visit -- which, incidentally, is one of the few things Obama has done since coming to office that made me happy.
So Glenn called offstage, "How many papers does Rupert Murdoch own in Britain?" and then answered his own question: "All of them."
Then he turned back to the camera, hunched forward and told his viewers that at all costs they had to help smooth Britain's ruffled feathers. Then he held up a sign with the address of the British Embassy in the U.S., and said that everyone should call or write the embassy to tell them how much they loved Britain and Gordon Brown.
Of course Rupert doesn't own all Britain's papers -- and I note he doesn't own The Daily Telegraph, which is the paper that Daniel Hannan blogs for.
But talk about threading the needle. It was a great moment in television, and the more you knew of the background, the funnier the moment was. I liked Glenn Beck from that moment forward, and he'd have to screw up big-time before I'd change my opinion of him.
For Americans who're just learning that Britain betrayed the United States in Iraq -- the story did break through into the mainstream media, very briefly, a year or two ago, and it made it into at least one British paper at that time. But Americans who closely followed the war in Iraq, which includes all the milbloggers, knew at least as early as 2004.
I remember a British reader who was horrified at the news; he wrote in a British paper's comment section that this couldn't be the work of Britain's troops, that they were very brave. Yes they are very brave, but they were under orders to look the other way, as terrorists and crack Iranian army fighters piled men and weapons across the southern border. The U.S. command in Iraq and the Iraqis are still struggling to undo the damage.
The British command had worked out a 'softly, softly,' rationale, as one U.S. military analyst termed it, to justify their studious blindness to the situations: be nice to the Iranians, don't rile the natives, listen to us, America, because we ran things in this part of the world for a long time and we know how best to handle these people.
While Iraqis and U.S. troops got cut to pieces by Iranian-made weapons and roadside bombs.
No, there was no way to stop the British command and I doubt they would have left even if the U.S. command had told them to quit. They were running their own shop in Iraq. And the U.S. needed warm bodies in the south to ride herd because we didn't have enough troops in Iraq. Another thing I'll never forgive Donald Rumsfeld for.
Behind the 'softly' approach in southern Iraq stood Britain's business interests in the Middle East, including Iran; their fear that the American way would eclipse whatever power they had in that part of the world; and the Labor government's desire to tamp down anti-Muslim sentiment.
In short, they were looking out for their own interests first, which I spent considerable time in 2005 warning Americans about. This was no cause to hate the Britons, which I stressed in a 2005 essay titled Even Wendy had to grow up.
I pointed out that the United States needed to adopt a clearer-eyed view of our allies in the post-Cold War world, and wise up about the very nature of alliances, if we weren't to bounce between the extremes of bitterness and blind trust.
If a person betrays you once, that's his fault. If he keeps betraying you, that's your fault. The same applies to alliances between governments.
Alliances do not mean "best buddies."
Just because I'm your ally doesn't mean I'll put my interests above yours. Knowing that, you take precautions and play hardball behind the scenes when you need to, to make sure I don't trample you, because trampling can get to be a habit.
I interject that many Britons would turn that argument around. Just recently a British reader complained to me that Britain was having to kiss the Americans' arse, as he put it.
As you may recall many Britons saw Blair as Bush's "poodle." That was a crock. All the while Americans were getting misty-eyed over Blair's support for us in Iraq, the 'Softly' approach was going full-throttle in Basra. However, few Britons knew the story at that time.
The truth is that the U.S.-Britain alliance went from obsessive in 2003 to toxic for both nations in 2005, when the country's foreign office wanted to restart the Cold War with Russia and the 'Get Russia' faction in Washington said, 'Why stop at a cold war?'
So it came down to a day in August 2008, when I banged out a post titled To any and all U.S. forces in Georgia: STAND DOWN The savage humor I deployed did not betray my fear -- at least I don't think it did -- but over the next agonizing week of waiting, anyone who knew of the tinderbox situation was a fool not to be afraid.
The biggest concern was that Mikhail Chernoy and other ex-Oligarchs would persuade the more irrational elements in the 'Get Russia' faction that the changing of the guard in the USA was the last and best time to start a war with Russia.
I have blanked out the names in this story, but the worst moment came when a U.S. envoy told a Russian counterpart that if Russia they didn't back down in Georgia the U.S. would "have to do something."
The Russian replied wearily, "What could you possibly do to us that you haven't done in the past 13 years?"
There is nothing worse than Russians in a maudlin mood. As long as they're snapping and being sarcastic and threatening, it's okay. But if they get maudlin -- that is bad news.
Clearly, things had gone too far, which cooler heads in London and Washington had already recognized. But backing away from brink was akin to that floor game with big spots where the players move from spot to spot and get tangled up in the process.
The business and energy considerations of the globalized era combined with defense and geopolitical issues and the EU's interests had turned foreign policy for the major powers into a kaleidoscope of ever-shifting alliances and counter-alliances. To haul in another metaphor, it was like Day 30 on Survivor.
All that is to explain, if you ask why you never read in the U.S. papers that the British had betrayed the U.S. in Iraq.
That also explains why several well-known U.S. pundits had a hissy fit over Obama's treatment of Brown -- and yet never spoke a word about the British betrayal in Iraq. Those same pundits support the 'Get Russia' faction on both sides of the Pond. Talk about tangled priorities.
Gordon Brown is set to return to the U.S. any day now, as part of his whirlwind tour of Europe, Latin America, and the U.S. The Guardian reported last week that he was zipping around the world to drum up support ahead of the G20 summit in London on April 2.
Mr Brown has already visited Washington this month to drum up support for his plan to deal with the economic crisis. So perhaps he's returning in hopes of snaring a full court press in the Rose Garden, complete with twin podiums; that, to show the British public and world media that he won't be insulted by an American President.
In any case, Pundita blog has arranged a little welcome present:
More on Perfidious AlbionWelcome back to Washington, Mr Brown.
by D. B. Light
August 08, 2008
Omar and Muhammad Fadhil [Iraq the Model and Pajamas Media bloggers] comment on the depth of the British betrayal of Basra:
"Britain’s war policy has been clear for the past several years: the country demonstrated no readiness to make sustained efforts in a prolonged war, nor did it act as a serious partner determined to win the conflict.
"There are three aspects in this British betrayal. First, striking a deal with the enemy; second, selling an Iraqi city to the enemy of their Iraqi hosts and partners; and third, by not informing their American partners of their plans, enabling the U.S. military’s reliance on an untrustworthy partner — something the British military leadership turned out to be.
"What’s worse — even assuming the “accommodation” was a thoughtful plan with good intentions — is that Britain upheld the deal even when the militias violated it. The militias did not renounce violence (attacks continued), and they did not switch to civil political activity. Still, the British didn’t take action.
[...]
"As residents of Basra for a year, we recall how the people perceived British troops. Basically people felt the British were both weak and largely indifferent to the situation. To the militias, that was seen as a golden chance to consolidate their power and take over the city; while among the ordinary people, it dealt a blow to morale and was a reason that people had little — if any — trust in the British.
"What’s even more humiliating for Britain is that British leaders couldn’t exploit the advantages they had over their American counterparts in terms of past history of military operations and involvement in Iraq. It’s not an overstatement to say that the British had been fighting on their own turf in Basra. When they returned to that city in 2003, they returned to the very bases they had built only half a century before. Moreover, they had accumulated comprehensive knowledge of the people and tribes of the region that even many Iraqis don’t have.
"Yet, their performance has been disappointing. British troops are not to blame for this poor performance; it’s the political leadership in London. The Americans handled places such as Baghdad and Anbar that used to be the most volatile parts of Iraq in 2004, and now, four years later, they largely succeeded in bring peace and order, making huge progress toward that goal. The British, by contrast, had been assigned what used to be the calmest parts of Iraq in 2004, but by spring 2008, under their watch, Basra became the most lawless city in the country. The British leaders managed to do this either with exceptional stupidity or exceptional and deliberate carelessness."
Read the whole thing here. It's damning.
Greyhawk has a wonderful assemblage of reports from Basra detailing the arrogance and imbecilic anti-Americanism of the British leadership who were absolutely convinced of the superiority of their policies even as the situation deteriorated toward disaster. It is clear that the guiding imperative of British policy was "don't do what the Americans do."
Read Greyhawk's posts here.
For a summary of the complex relationship between Russian and Britain, see this April 2008 article A Poisonous Ally: Growing Russo-British Tensions
****************************
This entry is crossposted at RBO.
Wednesday, March 25
"Mr Love is accused of five counts of writing letters." Canada's thought police top themselves.
This one's for readers who assumed I was wildly exaggerating, when I wrote last year that Canada was a police state.
I like Marc Lemire's latest essay so much, I am crossposting it here in its entirety. See Marc's Freedomsite blog for a picture of the prolific Mr Love.
Before I turn the podium over to Marc, I refuse to dignify a farce by adding a disclaimer to the effect that I do not support Mr Love's views on Zionism or Jews.
For crying out loud, the issue has nothing to do with hate speech against Jews or anyone else. The man is being persecuted by political correctness gone berserk.
Political Prisoner Brad Love May Not Write Letters to Anyone: Yes, That's In Canada, Not North Korea by Marc Lemire
TORONTO, March 24, 2009. Today, the outspoken voice of the workingman, Brad Love, was released from prison on bail conditions that his own lawyer, Peter Lindsay, suggested are more usually imposed on people facing murder charges.
Mr. Love is accused of five counts of writing letters, contrary to his previous parole conditions. (These are non-violent letters, on current political issues!)
Here are the conditions imposed on Mr. Love, who was arrested by eight burly Metro police, who burst into a free speech meeting sponsored by the Canadian Association for Free Expression [CAFÉ] in Rexdale, Thursday, March 19.
> $2,000 cash bail paid by his sister-in-law.
> $110,000 surety – the entire value eof his brother and sister-in-law’s house.
> Mr. Love is prohibited from sending mail to anyone, unless that person has specifically requested it.
> He must reside at his brother and sister-in-law’s Bolton home.
> He must get a job.
> He must keep the peace.
> A 10:00 p.m. to 6:00 a.m. curfew (just like some naughty 15 year old).
> He’s specifically forbidden to have any contact with the Canadian Jewish Congress, B’nai Brith or York University, Peter Lindsay told CAFÉ.
The Crown had demanded Mr. Love’s continued incarceration for having written letters. The female Crown commented darkly that “Mr. Love’s purpose of returning surreptitiously to Ontario was to give a lecture on ‘hate.”
In fact, Mr. Love flew openly for two weeks' vacation with his family and only as a side matter spoke to a Toronto CAFÉ meeting, as he has before.
“To the best of our knowledge, it’s not yet illegal to criticize Canada’s poxy, minority-inspired, thought gagging hate laws,” a furious Paul Fromm, director of the Canadian Association for Free Expression, said outside the court.
“Besides, he isn’t charged with speaking to the free speech meeting.”
Mr. Love’s sister-in-law promised the court, “We’re not going to have any newspapers in the house and we’ll review his outgoing mail.”
One of the Crown’s reasons for wanting Mr. Love kept in prison pending his trial, which Peter Lindsay said might not occur for six to nine months, is that he has not changed his political views:
“It’s quite obvious,” she said, “his beliefs still exist and he’s not going to stop his behaviour no matter what conditions are put upon him. Despite sentences on his record, he is going to continue [to express himself]. He is an individual obsessed with racial hated and others sorts of hatred.”
In an interview with CAFÉ tonight, Mr. Love, settling down after enjoying his first decent meal in five days, explained the writings that have stirred the powers that be to send him back to prison:
He wrote taunting comments to the York University Student Union, B’nai Brith and the Canadian Jewish Congress on the occasion of Israel Equals Apartheid Week.
Among his comments were: "If all these Third World people are against Zionism, maybe they’re right."
He also wondered in his letters whether Third Worlders demonstrating against Zionism would be called racists. Brad Love told CAFÉ: “Many of the comments I made, I borrowed from Jewish comedians.”
Mr. Lindsay told the court that the surety of $110,000 is more usually demanded in crimes of serious violence or murder, not for a man who wrote non-violent, non-threatening, even if provocative, letters.
He also suggested that the previous parole condition that Mr. Love was not to write, FAX or e-mail letters to anyone who had not asked for this communication may well have violated his Charter rights to freedom of speech.
“It’s because it’s a thought crime,” Mr. Love commented on his legal shackles and restrictions. “Fort McMurray is my fortune. I have a great job there. All my clothes and possessions and my car are there. There are almost no jobs in Toronto,” he added.
The Crown hinted that three police forces have an ongoing investigation into Canada’s most famous and most jailed letter writer.
Over a 20 year period, Mr. Love wrote over 10,000 letters to elected officials and newspapers. In 2003, he was sentenced to 18 months in jail under Canada’s thought control “anti-hate” law, Sec. 319 of the Criminal Code.
He subsequently spent a total of six months more in prison for having written letters to persons other than those elected officials that his initial parole conditions forbade him to contact.
“It seems the State is intent on shutting Brad Love up,” Paul Fromm observed.
“What does it say about the emotional fragility of the powers that be that they can’t withstand a little needling and criticism from a blunt-spoken working guy, without running to the State to have him gagged and jailed? And we’re over in Afghanistan trying to bring democracy and human rights to those people. We ought to start right here in Canada.”
I like Marc Lemire's latest essay so much, I am crossposting it here in its entirety. See Marc's Freedomsite blog for a picture of the prolific Mr Love.
Before I turn the podium over to Marc, I refuse to dignify a farce by adding a disclaimer to the effect that I do not support Mr Love's views on Zionism or Jews.
For crying out loud, the issue has nothing to do with hate speech against Jews or anyone else. The man is being persecuted by political correctness gone berserk.
Political Prisoner Brad Love May Not Write Letters to Anyone: Yes, That's In Canada, Not North Korea by Marc Lemire
TORONTO, March 24, 2009. Today, the outspoken voice of the workingman, Brad Love, was released from prison on bail conditions that his own lawyer, Peter Lindsay, suggested are more usually imposed on people facing murder charges.
Mr. Love is accused of five counts of writing letters, contrary to his previous parole conditions. (These are non-violent letters, on current political issues!)
Here are the conditions imposed on Mr. Love, who was arrested by eight burly Metro police, who burst into a free speech meeting sponsored by the Canadian Association for Free Expression [CAFÉ] in Rexdale, Thursday, March 19.
> $2,000 cash bail paid by his sister-in-law.
> $110,000 surety – the entire value eof his brother and sister-in-law’s house.
> Mr. Love is prohibited from sending mail to anyone, unless that person has specifically requested it.
> He must reside at his brother and sister-in-law’s Bolton home.
> He must get a job.
> He must keep the peace.
> A 10:00 p.m. to 6:00 a.m. curfew (just like some naughty 15 year old).
> He’s specifically forbidden to have any contact with the Canadian Jewish Congress, B’nai Brith or York University, Peter Lindsay told CAFÉ.
The Crown had demanded Mr. Love’s continued incarceration for having written letters. The female Crown commented darkly that “Mr. Love’s purpose of returning surreptitiously to Ontario was to give a lecture on ‘hate.”
In fact, Mr. Love flew openly for two weeks' vacation with his family and only as a side matter spoke to a Toronto CAFÉ meeting, as he has before.
“To the best of our knowledge, it’s not yet illegal to criticize Canada’s poxy, minority-inspired, thought gagging hate laws,” a furious Paul Fromm, director of the Canadian Association for Free Expression, said outside the court.
“Besides, he isn’t charged with speaking to the free speech meeting.”
Mr. Love’s sister-in-law promised the court, “We’re not going to have any newspapers in the house and we’ll review his outgoing mail.”
One of the Crown’s reasons for wanting Mr. Love kept in prison pending his trial, which Peter Lindsay said might not occur for six to nine months, is that he has not changed his political views:
“It’s quite obvious,” she said, “his beliefs still exist and he’s not going to stop his behaviour no matter what conditions are put upon him. Despite sentences on his record, he is going to continue [to express himself]. He is an individual obsessed with racial hated and others sorts of hatred.”
In an interview with CAFÉ tonight, Mr. Love, settling down after enjoying his first decent meal in five days, explained the writings that have stirred the powers that be to send him back to prison:
He wrote taunting comments to the York University Student Union, B’nai Brith and the Canadian Jewish Congress on the occasion of Israel Equals Apartheid Week.
Among his comments were: "If all these Third World people are against Zionism, maybe they’re right."
He also wondered in his letters whether Third Worlders demonstrating against Zionism would be called racists. Brad Love told CAFÉ: “Many of the comments I made, I borrowed from Jewish comedians.”
Mr. Lindsay told the court that the surety of $110,000 is more usually demanded in crimes of serious violence or murder, not for a man who wrote non-violent, non-threatening, even if provocative, letters.
He also suggested that the previous parole condition that Mr. Love was not to write, FAX or e-mail letters to anyone who had not asked for this communication may well have violated his Charter rights to freedom of speech.
“It’s because it’s a thought crime,” Mr. Love commented on his legal shackles and restrictions. “Fort McMurray is my fortune. I have a great job there. All my clothes and possessions and my car are there. There are almost no jobs in Toronto,” he added.
The Crown hinted that three police forces have an ongoing investigation into Canada’s most famous and most jailed letter writer.
Over a 20 year period, Mr. Love wrote over 10,000 letters to elected officials and newspapers. In 2003, he was sentenced to 18 months in jail under Canada’s thought control “anti-hate” law, Sec. 319 of the Criminal Code.
He subsequently spent a total of six months more in prison for having written letters to persons other than those elected officials that his initial parole conditions forbade him to contact.
“It seems the State is intent on shutting Brad Love up,” Paul Fromm observed.
“What does it say about the emotional fragility of the powers that be that they can’t withstand a little needling and criticism from a blunt-spoken working guy, without running to the State to have him gagged and jailed? And we’re over in Afghanistan trying to bring democracy and human rights to those people. We ought to start right here in Canada.”
Monday, March 23
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:
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:
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:
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:
(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.
************************************
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!
************************************
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.
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.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.
"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."
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.You want to throw Golden Rice at those problems?
"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."
(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.
************************************
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!
************************************
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.
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