Author Archives: dm

Does anybody else want something new?

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From One Market Under God by Thomas Frank (2000)

From Deadheads in Davos to Nobel-laureate economists, from paleoconservatives to New Democrats, American leaders in the nineties came to believe that markets were a popular system, a far more democratic system than (democratically elected) governments….in addition to being mediums of exchange, markets were mediums of consent.  Markets expressed expressed the popular will more articulately more articulately and more meaningfully than did mere elections.  Markets conferred democratic legitimacy; markets were a friend of the little guy; markets brought down the pompous and the snooty; markets gave us what we wanted; markets looked out for our interests.

Except when they didn’t, especially starting in 2008.  A different Nobel-laureate economist, Joseph Stiglitz, said of the economic crisis, “In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism….This moment is a marker that the claims of financial market liberalization were bogus.”  This is not the first time the ideology has been discredited either.  In 1926, three years before the onset of the Great Depression, John Maynard Keynes wrote about a “disposition towards public affairs, which we conveniently sum up as individualism and laissez-faire,” that sounds all too familiar, right down to its origins:

Nevertheless, that age would have been hard put to it to achieve this harmony of opposites if it had not been for the economists, who sprang into prominence just at the right moment. The idea of a divine harmony between private advantage and the public good is already apparent in Paley. But it was the economists who gave the notion a good scientific basis. Suppose that by the working of natural laws individuals pursuing their own interests with enlightenment in condition of freedom always tend to promote the general interest at the same time! Our philosophical difficulties are resolved-at least for the practical man, who can then concentrate his efforts on securing the necessary conditions of freedom. To the philosophical doctrine that the government has no right to interfere, and the divine that it has no need to interfere, there is added a scientific proof that its interference is inexpedient. This is the third current of thought, just discoverable in Adam Smith, who was ready in the main to allow the public good to rest on ‘the natural effort of every individual to better his own condition’, but not fully and self-consciously developed until the nineteenth century begins. The principle of laissez-faire had arrived to harmonise individualism and socialism, and to make at one Hume’s egoism with the greatest good of the greatest number. The political philosopher could retire in favour of the business man – for the latter could attain the philosopher’s summum bonum by just pursuing his own private profit.

Ten years later, he published his greatest work, The General Theory of Employment, Interest and Money, which revolutionized economics until the 1970’s when our leaders decided to try the magic markets thing again.

What I’m getting at is how strange it is that this remarkably stupid doctrine keeps managing to come back with disastrous consequences. Concerning the market–the one that’s rebounded to bring us a “jobless recovery” despite increasing unemployment and underemployment–public relations legend Edward Bernays noted in 1928:

…[I]t would be rash and unreasonable to take it for granted that because public opinion has come over to the side of big business, it will always remain there. Only recently, Prof. W. Z. Ripley of Harvard University, one of the foremost national authorities on business organization and practice, exposed certain aspects of big business which tended to undermine public confidence in large corporations. He pointed out that the stockholders’ supposed voting power is often illusory; that annual financial statements are sometimes so brief and summary that to the man in the street they are downright misleading; that the extension of the system of non-voting shares often places the effective control of corporations and their finances in the hands of a small clique of stockholders; and that some corporations refuse to give out sufficient information to permit the public to know the true condition of the concern.

Yet people continue to invest in it despite being more or less told to piss off when they complain about the absurd pay going to executives that should theoretically be going to them:

Group Inc.’s board of directors has received several demand letters from shareholders relating to compensation matters, including demands that Group Inc.’s board of directors investigates compensation awards over recent years, take steps to recoup alleged excessive compensation, and adopt certain reforms. After considering the demand letters, Group Inc.’s board of directors rejected the demands.

Still, they never learn.  In a recent column about the prospects of shareholder activism, the “executive director of the Millstein Center for Corporate Governance and Performance at the Yale School of Management” was quoted as saying, “Up until now, it’s been sort of a Soviet system…We have been operating in the United States under the myth that boards have been accountable to shareholders.”  What does this have to do with the Soviet Union? Its collapse didn’t bring about any magic change according to the population.

Update:

It would also be nice to see something new on this front:

You may recall the Kabul embassy guard scandal [1] that broke last fall—the photos documenting drunken, lewd behavior by embassy guards—all to the embarrassment of the U.S. State Department. Shortly thereafter, the Department fired [2] eight guards and announced it would not renew [3] the contract of ArmorGroup North America after it expires in July, but that it would grant the contractor a six-month extension “to allow for an orderly transition between contractors.”In the meantime, since ArmorGroup is still on the job until the end of this year, the State Department wants to toughen its oversight of the private security contractor, and it intends to do that by hiring another contractor [4] to oversee this one.

Empire on autopilot

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Japan’s new government has caved in to the Pentagon’s demands over a military base in Okinawa.  For background on the situation, I highly recommend reading this article by Chalmers Johnson from 2003.   As for the current conflict:

You’d think that, with so many [90] Japanese bases, the United States wouldn’t make a big fuss about closing one of them. Think again.  The current battle over the Marine Corps air base at Futenma on Okinawa — an island prefecture almost 1,000 miles south of Tokyo that hosts about three dozen U.S. bases and 75% of American forces in Japan — is just revving up.  In fact, Washington seems ready to stake its reputation and its relationship with a new Japanese government on the fate of that base alone, which reveals much about U.S. anxieties in the age of Obama.

And the reason for this insistence:

The U.S. military presence in Okinawa is a residue of the Cold War and a U.S. commitment to containing the only military power on the horizon that could threaten American military supremacy. Back in the 1990s, the Clinton administration’s solution to a rising China was to “integrate, but hedge.” The hedge — against the possibility of China developing a serious mean streak — centered around a strengthened U.S.-Japan alliance and a credible Japanese military deterrent.

What the Clinton administration and its successors didn’t anticipate was how effectively and peacefully China would disarm this hedging strategy with careful statesmanship and a vigorous trade policy. A number of Southeast Asian countries, including the Philippines and Indonesia, succumbed early to China’s version of checkbook diplomacy. Then, in the last decade, South Korea, like the Japanese today, started to talk about establishing “more equal” relations with the United States in an effort to avoid being drawn into any future military scrape between Washington and Beijing.

Now, with its arch-conservatives gone from government, Japan is visibly warming to China’s charms. In 2007, China had already surpassed the United States as the country’s leading trade partner. On becoming prime minister, Hatoyama sensibly proposed the future establishment of an East Asian community patterned on the European Union.  As he saw it, that would leverage Japan’s position between a rising China and a United States in decline. In December, while Washington and Tokyo were haggling bitterly over the Okinawa base issue, DPJ leader Ichiro Ozawa sent a signal to Washington as well as Beijing by shepherding a 143-member delegation of his party’s legislators on a four-day trip to China.

Against the background of an attempted revival of US manufacturing, this has unfolded at the same time as the scandal over Toyota cars that was dubious at the outset and has become outright embarrassing.  As if that wasn’t overdoing it enough, we now have accusations over China manipulating its currency becoming louder, including an op-ed from useful idiot Paul Krugman:

To give you a sense of the problem: Widespread complaints that China was manipulating its currency — selling renminbi and buying foreign currencies, so as to keep the renminbi weak and China’s exports artificially competitive — began around 2003. At that point China was adding about $10 billion a month to its reserves, and in 2003 it ran an overall surplus on its current account — a broad measure of the trade balance — of $46 billion.

Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.

That last sentence is the absolute money quote.  While the concerns are legitimate and there is a real problem, blaming China for it is silly when an entire world order was constructed around the dollar.  What makes this so ridiculous is that I think these arguments aren’t being put forward in bad faith so much as they are in bad memory.

I’m picking Krugman as an example because he is so stunningly inconsistent on this subject that it adds some humor to a subject that is otherwise pretty dry.  Following WWII, the Bretton Woods system was set up to prevent exactly this kind of problem, as Paul Krugman is certainly aware of considering he wrote a chapter on the subject in a textbook on international trade policy.  Following the massive war spending in Indochina during the late 60’s and early 70’s, the United States could no longer afford to guarantee this system and unilaterally dismantled it, resulting in the dollar itself becoming the global reserve currency.  As Krugman notes in his textbook:

On a single day, May 4, 1971 the Bundesbank [German central bank] had to buy $1 billion to hold its dollar exchange rate fixed in the face of great demand for its currency.  On the morning of May 5, the Bundesbank purchased $1 billion during the first hour of foreign exchange trading alone!

How is that for “the most distortionary exchange rate policy” a “major nation” has ever followed?  For a detailed explanation of the Japanese and Chinese perspective on this policy, see this interview and/or this paper.

Rather than focusing on China, perhaps it’s time to  address the elephant in the room that’s to (nearly) everyone’s detriment:

According to the 2008 official Pentagon inventory of our military bases around the world, our empire consists of 865 facilities in more than 40 countries and overseas U.S. territories. We deploy over 190,000 troops in 46 countries and territories. In just one such country, Japan, at the end of March 2008, we still had 99,295 people connected to U.S. military forces living and working there — 49,364 members of our armed services, 45,753 dependent family members, and 4,178 civilian employees. Some 13,975 of these were crowded into the small island of Okinawa, the largest concentration of foreign troops anywhere in Japan.

These massive concentrations of American military power outside the United States are not needed for our defense. They are, if anything, a prime contributor to our numerous conflicts with other countries. They are also unimaginably expensive. According to Anita Dancs, an analyst for the website Foreign Policy in Focus, the United States spends approximately $250 billion each year maintaining its global military presence. The sole purpose of this is to give us hegemony — that is, control or dominance — over as many nations on the planet as possible.

The CIA's answer to the suicide bomber

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GQ interview with military law expert Scott Horton

At a recent press conference in Islamabad, a Pakistani reporter raised this issue to a noticeably frazzled Secretary of State Hilary Clinton. “What is actually terrorism in U.S. eyes?” the reporter asked. “Is it the killing of innocent people in, let’s say, drone attacks? Or is it the killing of innocent people in different parts of Pakistan, like the bomb blast in Peshawar two days ago? Which one is terrorism, do you think?”

An international law expert from Georgetown University has recently made the same point as the journalist:

CIA drone attacks produce America’s own unlawful combatants

In our current armed conflicts, there are two U.S. drone offensives. One is conducted by our armed forces, the other by the CIA. Every day, CIA agents and CIA contractors arm and pilot armed unmanned drones over combat zones in Afghanistan and Pakistan, including Pakistani tribal areas, to search out and kill Taliban and al-Qaeda fighters. In terms of international armed conflict, those CIA agents are, unlike their military counterparts but like the fighters they target, unlawful combatants. No less than their insurgent targets, they are fighters without uniforms or insignia, directly participating in hostilities, employing armed force contrary to the laws and customs of war. Even if they are sitting in Langley, the CIA pilots are civilians violating the requirement of distinction, a core concept of armed conflict, as they directly participate in hostilities.

He also makes a point at the end that’s extremely important:

And while the prosecution of CIA personnel is certainly not suggested, one wonders whether CIA civilians who are associated with armed drones appreciate their position in the law of armed conflict. Their superiors surely do.

The big reason for the expanded use of drones and the continued use of mercenaries is the political cover they provide.  Doing it through the CIA is a great way to escape congressional oversight (if congress actually intended to exercise it very seriously–as Scott Horton put it in the interview, it’s been “a complete joke”).  It would have been nice for them to at least rubber stamp the war in Pakistan rather than just adding a few lines into the annual DoD appropriations bill.

All out mercenary ban introduced to congress

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It will almost certainly be referred off to the darkest corner of some committee just like the 2007 version, but I can hope and watch the shameless lobbying in the meantime.

From the press release:

Two congressional lawmakers have announced legislation that would effectively remove military contractors from war zones.

Sen. Bernie Sanders (I-VT) and Rep. Jan Schakowsky (D-IL) introduced the “Stop Outsourcing Security Act” on Tuesday. If passed, the act would force the United States to phase out its controversial use of private security contractors in war zones like Iraq and Afghanistan.

“The legislation would restore the responsibility of the American military to train troops and police, guard convoys, repair weapons, administer military prisons, and perform military intelligence,” the lawmakers’ offices said.

“The bill also would require that all diplomatic security be undertaken by US government personnel,” they added.

Yes, all of those things are currently done by private contractors.  The ban on private guards for diplomats is crucial as well because that’s where a lot of the money has been for armed contractors and Blackwater’s first important gig was actually keeping Paul Bremer alive in Iraq.

According to a report published last month, “As of September 2009, there were almost 22,000 armed private security contractors in
Iraq and Afghanistan.” and that “Many analysts and government officials believe that DOD would be unable to execute its mission without PSCs.”  While I wouldn’t be surprised that they believe that, it was not only possible but the way it was done up until the mid 90’s and the last 15 years or so have been far from the most impressive in US military history.  It’s more likely  that the mission needs to be adjusted.

More from  the congressional research service report:

In Iraq there are reportedly more than 50 PSCs employing more than 30,000 armed employees working for a variety of government and private sector clients. In Afghanistan, there are currently 52 PSCs licensed to operate in Afghanistan with some 25,000 registered security contractors. PSCs operating in Afghanistan are limited to 500 employees  and can only exceed 500 with permission from the Cabinet. Because of the legal restrictions placed on security companies in Afghanistan, a number of PSCs are operating without a license or are exceeding the legal limit, including security contractors working for NATO and the U.S. Government. Many analysts believe that regulations governing PSCs are only enforced in Kabul; outside Kabul there is no government reach at present and local governors, chiefs of police, and politicians run their own illegal PSCs. Estimates of the total number of security contractors in Afghanistan, including those that are not licensed, are as high as 70,000. The majority of these PSCs do not work for the U.S. government.

Pretty scary stuff.  I’m anxiously awaiting the reactions from the industry, so I’ll update this post when they get released.

California is under attack!

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While this kind of plunder is routine in California, the birthplace of corporate personhood, things are getting pretty absurd recently with a full scale attack on our lives being waged on multiple fronts.

Energy

PG&E is attempting to put an initiative on the ballot to amend the constitution to protect their monopoly:

SAN FRANCISCO — Pacific Gas & Electric Co. is funding a June ballot initiative that would amend California’s constitution to make it much harder for cities and counties to offer residents another choice for buying their power.

The investor-owned utility, which has about 15 million customers in northern and central California, has already spent $6.5 million on Proposition 16, according to state campaign records. The company is the sole source of the initiative’s funding.

The initiative would require a two-thirds, or super-majority, vote before local governments could create a new form of public power called “community choice aggregation,” or CCA. These public power entities, made possible by state legislation passed in 2002 after the state’s energy crisis, allow cities or counties to buy energy on the wholesale market to sell to residents.

The “state’s energy crisis” being a reference to Enron.   Their argument is the standard against more direct forms of democracy with a revealing little twist:

PG&E says a constitutional amendment is needed to protect taxpayers and ratepayers from possible losses incurred by inexperienced local governments entering the risky power wholesaling business.

The reference to increased costs for ratepayers seems to be a tacit admission that they’ll raise rates on the captive consumer base that stays with them–skipping the initiative and passing on $6.5 million in savings would be unthinkable–to make up for the ones they lose. Nevertheless,  it’s related to us as being the potential result of reckless city councils interfering with a benevolent private monopoly with remarkable ease.

Health Care

Blue Cross raising its rates by approximately 34% was so bad that it made national news and seems to have temporarily backfired on them:

The parent company of Anthem Blue Cross has canceled a meeting next week with investors to review its 2010 financial outlook so that executives can prepare for a congressional hearing into its large rate hikes for individual policyholders in California.

A subcommittee of the House Committee on Energy and Commerce has called WellPoint Inc. Chief Executive Angela F. Braly to testify Feb. 24 about premium increases of as much as 39% for many of Anthem’s 800,000 individual policyholders in California.

The canceled meeting understandably pissed off their investors a bit, causing their shares to drop by 2.3% today, though they’re still up from a few months ago due to the assurance they have from Congress that no real reform will take place:

In response, they’ve apparently decided to seek more vulnerable prey whose pleas for help are less likely to be heard:

Patients who are covered by Anthem Blue Cross may have trouble finding a physical or occupational therapist who will accept their insurance. A growing number of therapists are rejecting new contracts with Anthem that pay them half of their normal rate. Anthem has offered the new lower-rate contracts to physical, occupational, and speech therapists. The insurer says it’s cutting the reimbursement rate to help control rising health care costs.

Anthem has offered the new lower-rate contracts to physical, occupational, and speech therapists. The insurer says it’s cutting the reimbursement rate to help control rising health care costs.

Water

Senator Feinstein has decided to try and put a brutal end to the ongoing battle to preserve profits for both Central Valley farmers and California’s little known water robber-barons.  For a detailed explanation, check out this article by Yasha Levine at exiled, but it basically works like this:  Stewart Resnick, the politically connected owner of the massive Roll International Corporation, essentially “Enron-ized” a huge share of California’s water:

The story of how the state’s largest water bank — jump-started with $74 million in taxpayer money — ended up as an integral piece of the private empire of Stewart Resnick begins with a lawsuit, or at least the threat of it.

A seven-year drought ending in the early 1990s pitted Southern California water contractors, such as the Metropolitan Water District, against agricultural contractors, such as the Kern County Water Agency. Each region made its case to the state, telling why it deserved to receive the water guaranteed by long-standing contracts. In the drought’s worst years, urban users got 30% of the draw, while Kern farmers received less than 5%.

In 1994, agricultural and urban interests threatened to sue the state for nondelivery. The main parties gathered in a closed-door meeting in Monterey to hash out a settlement. Public interest groups, environmentalists and smaller water contractors — locked out of the meeting — cried foul.

When it was over, the very flow of California water had been redirected.

With the new direction being straight into Resnick’s private control.  This was working out (for him) quite nicely until this year.  The recession and lower than average rainfall have motivated California agribusiness to fight to retain their share of corporate welfare.  Enter Senator Feinstein to play the role of King Solomon in her own very special way:

Sen. Dianne Feinstein ignited a firestorm among fellow California Democrats on Thursday as word spread of her proposal to divert Northern California water to Central Valley farmers.

Feinstein wants to attach the proposal as an amendment to a fast-tracked Senate jobs bill. She is pitching the plan as a jobs measure to address the economic calamity in the Central Valley. It would increase farm water allocations from 10 percent last year to 40 percent this year and next, an amount that farmers say is the bare minimum they need.

Where “farmers” is meant to be understood as agribusiness.

Blackwater kicked out of Iraq

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The Iraqis have been working on this for years (and lied to about it) but it looks like they’ve finally pulled it off.  Iraq’s interior minister expelled 250 of their employees from the country yesterday:

Making the announcement on Thursday, Jawad Bolani, the interior minister, said: “We have sent an order to 250 former Blackwater employees, who today are working with other security companies in Iraq, to leave the country in seven days and we have confiscated their residence permits.

“All of those concerned were notified four days ago and so they have three days to leave. This decision was made in connection with the crime that took place at Nisur Square.”

Separately, more charges of prostitution and fraud are being reported by the Washington Post :

In court records unsealed this week, a husband and wife who worked for Blackwater said they have firsthand knowledge of the company falsifying invoices, double-billing federal agencies and improperly charging the government for personal expenses…

In their suit, the Davises assert that Blackwater officials kept a Filipino prostitute on the company payroll for a State Department contract in Afghanistan, and billed the government for her time working for male Blackwater employees in Kabul. The prostitute’s salary was categorized as part of the company’s “Morale Welfare Recreation” expenses, they alleged.

If you’ll recall, not that long ago a big fuss was being made over alleged prostitution and fraud and canceling contracts with another organization:

Multiple bills were produced with many co-sponsors, with one eventually being passed and quickly ruled unconstitutional by a federal court.  Legislation to simply restrict companies running wild with mercenaries has not been given nearly as much attention. In 2007, Illinois Representative Jan Schakowsky introduced a bill to do just that, titled the Stop Outsourcing Security Act .  It was promptly sent to die in committee.