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Friday, October 02, 2009

Pittsburgh's State of Siege

Suppressiing Dissent With High-Priced Cop Toys

James S. Henry
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You didn't hear much about it from any major US news organizations, but there was a very disturbing case of gratuitous police-led violence and intimidation at the G20 Summit in Pittsburgh on September 23rd-25th, 2009. Perhaps the only consolation is that it allowed those of us who were there to get a close look at some of the disturbing "brave new world:  technologies for anti-democratic crowd control. These were initially developed by the US military to fight terrorists on the high seas and abroad, in places like Afghanistan, Somalia, and Iraq, but are now coming home to roost.  Indeed, ironically enough, this is one of the few remaining global growth industries where the US is still the undisputed world leader, as we'll see below.


Police2 One local newspaper account described  the events at the Pittsburgh G20  as a "clash" between the police, protesters, and college students. 

Indeed, a handful of storefronts were reportedly broken on Thursday September 24 by a  few unknown vandals. 

However, based on our own visit to the summit,  interviews with several students and other eye witnesses,  and a careful review of the significant amount of video footage that is available online, the only real "clash"  that occurred in Pittsburgh on September 23-25, 2009, was between lawless policing and the Bill of Rights. 

The most aggressive large-scale policing abuses occurred from 9 pm to 11:30 pm on Friday September 25th near Schenley Park, in the middle of the University of Pittsburgh campus. This was miles away from the downtown area where the G20 had met, and, in any case, it was hours after the G20 had ended.

This particular case of aggressive policing -- "Hammer and Anvil," as the operation was described on police scanners -- was clearly not just a matter of a few "bad apples." 

Rather, it appears to have been part of a willful, highly-organized, one-sided, rather  high-tech experiment or training exercise in very aggressive crowd control by nothing less than a really scary uniformed mob.

New York police sometimes describe their firemen counterparts, tongue in cheek, as "robbers with boots." In this case we have no hesitation at all in describing this uniformed mob in Pittsburgh as "assailants with badges."

Their actions resulted in the unlawful suppression of the civil rights of  hundreds of otherwise-peaceful students who were just "hanging out with their friends on a Friday night in Oakland," or attending a free jazz/blues concert in Schenley Park. 

Essentially they got trapped in a cyclone of conflicting and inconsistent police directives to "leave the area." The result was nearly 200 arrests, gassings, beatings, and the deployment of dogs and rubber bullets against dozens of innocent people.

In addition to the students,  this aggressive policing also assaulted the civil rights of a small number of relatively-peaceful protesters and quite a few ordinary Pittsburgh residents, most of whom were as innocent as bystanders can possibly be these days. 

Why did this occur?  In addition to whatever top-down "experiment" or training action was being conducted there appears to have been an extraordinary amojnt of pent-up police frustration and anger.  For example, one student overheard a policeman piling out of a rented Budget van near Schenley Park around 9:50 PM Friday.

The officer was heard to exclaim, "Time to kick some ass!"

This is disturbing, but perhaps not all that surprising. After all, thousands of police had  basically stood around for days in  riot gear, sweltering in the "Indian Summer" heat, dealing with  the tensions associated with potential terrorist attacks as well as all the hassles of managing large-scale protest marches, even if peaceful.There was also the inevitable tensions of social class and culture among police, Guardsman, and college students.

On the other hand, precisely because such tensions are so predictable, those in direct command or higher political office, and, indeed University officials, should have acted forcefully to corral them.

JOIN THE CLUB


ArrestedstudentposedwithpoliceAll this means that Pittsburgh  has unfortunately now joined the growing list of  cities around the world that have experienced such serious conflicts -- mainly in connection with  economic summits or national political conventions.

The list of summit frays includes this summer's G-8 in Italylast Spring's G20 in London,  the September '08 RNC in Minneapolis,  the '04 RNC in New York City, Miami's Free Trade Area of the Americas Summit (11/03),  Quebec (4/01),  Naples (3/01), Montreal (10/00),  Prague 9/00), Washington D.C. (4/00),  the  November '99 WTO "Battle in Seattle," the J18 in London (6/99), Madrid (10/1994), and Berlin (9/88).

President Obama had  originally selected Pittsburgh for the G20 because he hoped to showcase its recovery  since the 1980s, especially in the last  few years, under a Democratic Mayor, in a Democratic state that he barely carried in the 2008 Presidential contest. 

In seeking to explain such events, therefore, it alway helps to keep a firm eye on the question -- whose interests did really  this serve?

In retrospect, the failure of these leaders to control the police at the G20 has created a serious blemish on the city's reputation for good government. It may have also to some extent undermined Obama’s relations with college students and other activists  who worked so hard for his election in this key state. And it certainly did not help the reputation of the Democratic Party in Pittsburgh or Pensylvania at large.

TIANANMEN FLASHBACKS

To journalists like me who happened to have been in Beijing in May 1989, during the buildup to the June 4th massacre in Tiananmen Square,  Pittsburgh also bears an interesting resemblance. The analogy may sound a little strained, but bear with me.  

(1)  As in Beijing, there was a very large deputized police force from all over the country.  These included  over 1000 police "volunteers" (out of 4000 total police and 2500 National Guardsmen) who were ported in just for the G20.

According to the conventional wisdom, not being from the same community is likely to reduce your inhibitions when it comes to macing and kicking the crap out of unarmed, defenseless young people.

The guest policeman also included several hundred police who were under the command of Miami Police 2076 Chief John F. Timoney,  pioneer of the infamous "Miami model" for suppressing protest that was first deployed at the Miami Free Trade Area of the Americas Conference in November 2003. (Here’s the Miami model checklist, most of which was repeated in Pittsburgh.)

As one writer has observed, Timoney, who  also served as Police Chief in Philadelphia,   "(L)iterally transformed the city into a police state war zone with tanks, blockades and “non-lethal” (but severely damaging) artillery."

It is unclear to what extent he played a similar role behind-the-scenes in Pittsburgh this year, but there certainly is a strong sulfurous odor.     Scaredstudents

(2) As in Beijing, In Pittsburgh there were no identifying badges on officers' uniforms, and they also refused to provide any identifying personal information in response to questions. Several photographers also complained about receiving threats and actual damage to their cameras.

(3) As in Beijing, there was simply no  direct contest between the power of the security forces once they mobilized, and those of the unarmed students.   The only kind of victory that the students could possibly have one in both cases was a moral one -- by essentially sacrificing their bodies and their rights to a tidal wave of repression.

Indeed, the "clash" theory of these events looks even odder once we take into account the  fact that on Friday night in Pittsburgh, for example, unarmed students and protesters faced  hundreds of police in full riot gear,  armed for bear with equipped  muzzled attack dogs, gas, smoke canisters, rubber bullets, bean-bag shotguns, pepper pellets, long-range pepper spray,  at least four UH-60 Black Hawk helicopters (courtesty of New York Governor Patterson and his National Guard's 3-142nd Assault Helicopter Battalion unit),  plus several brand new "acoustic cannons" (see below). There were also probably dozens of undercover agents provocateurs -- at least three of whom were actually "outed" by the students. 

The police were also actively monitoring student communications on web sites like Twitter.

 From this angle, a key difference with Bejing  in 1989 was that the Chinese authorities felt genuinely  threatened by the growth of student power and the democracy movement, and feared being ousted,from power.  and  were therefore able to justify their brutality as part of a zero-sum game. In the case of Pittsburgh, whatever police violence occurred was entirely gratuitous.

Police6 (4) As in Beijing, the Pittsburgh police  really liked deploying loud, repetitive warnings, broadcast from sound-trucks -- like the following,  broadcast  repeatedly last Thursday and Friday: 

"I hereby declare this to be an unlawful assembly. I order all those assembled to immediately disburse. You must leave the immediate vicinity. If you remain in this immediate vicinity, you will be in violation of the Pennsylvania crimes code, no matter what your purpose is. You must leave. If you do not disburse, you may be arrested and/or subject to other police action. Other police action may include actual physical removal, the use of riot control agents, and/or less lethal munitions, which could risk of injury to those who remain."

The fact is that this warning was itself completely unlawful.  Putting on the NYCLU lawyer's hat for a moment, absent a "clear and present danger" to the public peace, these threats violated the First Amendment's explicit recognition of right to "peacefully assemble.” 

In effect, the fact is that the police and National Guard in Pittsburgh  temporarily seized control over public streets, parks, and other public spaces, and exercised it arbitrarily.  By the time the victims of these outrageous civil rights infringements have their day in court, the damage will have been long since done.

(5) As in Beijing, the police and military decided  to launch their biggest raid late at nightafter the summit had ended most major mediaPolice11 had gone home, and the courts had closed for the weekend.

Of course, there were no tanks, no real bullets, and no fatalities in Pittsburgh. Unlike the April '09 G20 and the Genoa G8 protests, no civilians died as a direct result of police actions. But the Pittsburgh students who were on the receiving end of all this unprovoked police brutality -- like one who was shot four times in the back and legs with rubber bullets, and another who was gassed and shot in the face -- may be forgiven for wondering just how close they came to emulating their peers in Europe.

GLOBAL  COP TOYS

Police behavior at all these global summits has evolved over time into a rather high-tech affair that would make Iranian crowd control experts turn  bright green with envy. 

5c6c33b0-9c3f-49e6-8ca5-d5aea8751de5_300 For example,  last week's G20 featured one of the largest US deployments ever against civilian demonstrators of  "LRADS," or acoustic cannons

These sophisticated  "phase array" device s emit a targeted 30-degree beam of 100+decibel  sound that is effective up to several hundred yards, and is potentially very harmful to the human ear. 

LRAD2Manufactured by San Diego's tiny American Technology Corporation (NASDQ: ATCO), the $37,500 so-call "500X" version of the sound cannon that was used in Pittsburg was developed at the behest of the US military, reportedly in response to the USS Cole incident in 2000,  to help the Navy repel hostile forces at sea.

The Pittsburgh units  were apparently  purchased by  local sheriffs' departments across the country with the help of recent grants from the US Department of Homeland Security. Officially the grants have been justtified in the name of improving communications with the public, by permitting clearer voice channels (!), but that's a cover story -- the true purpose is crowd control. ( Roll tape: LRAD-500X_SDCo_Sheriff1).

Other recent ATCO customers include the US Army (for "force protection" in Iraq  and Afghanistan), and  the US Navy and the navies of Japan and Singapore, for communicating with potentially-hostile vessels at sea. 

In 2008 ATCO flogged its wares at the biannual China Police Forum, Asia's largest mart for police security equipment. Obviously China would make a terrific reference customer, since it is one of the global front-runners in the brutal suppression of mass dissent.

ATCO also has a 2007 contract with the US Marine Corps' "Joint Non-Lethal Weapons Program" to develop new, even more powerful weapons, euphemistically branded  "acoustic hailing devices." Saakashvili

Police3 Until recently the most widely-publicized use of LRADS had been against Somali pirates. The devices have also been deployed against "insurgents" by the US military in Fallujah,  by the increasingly-unpopular, anything-but-democratic regime of Mikhail Saakashvili in the Republic of Georgia, and by New York City at the RNC in 2005.

Just two weeks before the Pittsburgh G20,  they turned up  in San Diego, where the Sheriff's Department provoked controversy by stationing them near a Congressional town hall forum -- just in case.

This growing  use of LRADs for domestic crowd control in theSomalis_called_pirates_while_the_West_du US is worrisome, not only because it is a potent anti-civil liberties weapon, because -- just like tasers,  rubber bullets, OC gas, and other so-called "non-lethal but actually just "less lethal" weapons" -- they can cause serious injuries to ears, and perhaps even provoke strokes. 

TECHNOLOGY BLOWBACK

For all the homeland security technology buffs in the audience, you may rest assured that LRADs are hardly the  only Military potential "less-lethal" free speech-and-assembly killers in the pipeline. 

In the last decade the non-lethal weapons arena has exploded, and the US appears to be  far ahead, assisted by ample  R&D grants and purchase contracts from organizations like the Department of Justice's "National Institute of Justice," DHS's multi-billion dollar Homeland Security Grant Program, the U.S Coast Guard, and the Security Advanced Research Projects Agency, and DOD's Joint Non-Lethal Weapons Directorate (JNLWD) Program

The industry has also been aided by key contractors like ATCO, spearheaded by legendary engineer, inventor, and entrepreneur "Woody" Norris;  and Penn State's Advanced Research Lab -- home of the Institute for Emerging Defense Technologies.   NIJ also works closely with police organizations like PERF, and international organizations like the UK's Home Office Scientific Development Branch.

In the first instance, the development of such non-lethal technologies is usually justified by their potential for providing an alternative to heavier weaponry, thereby reducing civilian casualties in combat situations.

The fact that the US military now has at least 750 military bases around the world, and has also recently  been playing an important "military policing" role in countries like Somalia, Haiti, Bosnia, Iraq, and Afghanistan, underscored DOD's rationale for these technologies.

The problem is that just as in the case of the LRAD,  once developed, it is very difficult to wall such technologies out of the US, or restrict them to "pro-civilian/pro-democratic" uses, like providing clearer amplification for outdoor announcements.  

Even aside from their technical merits, the competitive nature of the global law enforcement equipment industry  virtually insures that every tin-horn US sheriff, as well as every Chinese party boss in Urumqi, will soon have access to these very latest tools in the arsenal for suppressing dissent.  

The ultimate irony, of course, is that the first generation of all  these powerful new free speech suppressors have all been developed,  not by authoritarian China, Iran, Burma or North Korea, but by US,  ostensibly still the leader of the "Free World." 

TOYS IN THE PIPELINE

So what's in store for those who are on the front lines of popular dissent?  We assume that some of the juiciest details are classified. But even a cursory review of public sources reveals that the following new crowd-control technologies may soon be coming to an economic summit near you.  (See this recent UK review for more details.). 

"Area Denial Systems." This is a powerful new "directed-energy" device that generates a precise, targeted beam of "millimeter waves," producing an "intolerable heating sensation on an adversary's skin." 

Under development by the US military since at least the late 1980s, this class of "non-lethal" weapons is now close to field deployment. Its key advantage over LRADs is that it has about ten times the range. Raytheon is already supplying its "Silent Guardian" version of the system to the US Army.

The next step required to bring this product to the police market will be to make it smaller and more mobile. According to this week's New Scientist, a new highly-portable, battery-powered version of the system, called the "Thermal Laser," will soon become available -- though it has yet to show that demonstrate conclusively that it is within the bounds of the UN Binding Protocol on Laser Weapons.
Apple-1984

New Riot-Control Chemicals and Delivery Systems.

Subject to the dicey question of whether these new "calmative," drug-like agents are outside the boundaries of the 1993 Chemical Weapons Convention (to which the US and 187 other countries are signatories), these would not irritate their targets, unlike pepper spray or tear gas, but calm them down.

In the words of one DOD/JNLWD research director:  "We need something...like anesthetic agents, that would put everyone to sleep or in a good mood..." Or as the former Marine Corps commander of the program said," "I would like a magic dust that would put everyone in a building to sleep.." Among the delivery mechanisms considered: drinking water, aerosol spray, or rubber bullet. (Apparently the old-fashioned, tried-and-true "light up, inhale, and pass on" method is not a candidate.) The College of Medicine at Penn State's ARL, locGluegunated 135 miles east of Pittsburgh, has been especially active in advocating the advantages of such new chemical weapons.
Unfortunately for it, DOD apparently believes that the CWC and its current regulations prohibit it from funding the developing such magic dust directly, so it is working through DOJ and DOE to do so.

Glue Guns. If all else fails, UK's Home Office reports that another approach to "less- lethal" crowd control weaponry is also making progress -- a gigantic glue gun that sprays at least some 30 feet, bemingling its target audience in one huge adhesive dissident-ball.

Apparently still unsolved is the question of precisely what becomes of all those who are stuck together, or how the police avoid becoming entangled with them. But undoubtedly millions of pounds  are being devoted to solving these issues even as we speak.

SUMMARY

I went to Pittsburgh last week on behalf of  Tax Justice Network, a global NGO that is concerned about the harmful impacts that tax havens and dodgy behavior by First World banks, MNCs, lawyers, and accountants are having, especially on developing countries. I was under no illusion that the reforms we   were rather politely advocating would quickly be adopted, but at least we'd  say our piece,  if anyone cared to listen.

I came away with the depressing sense that the G20 summit, like its many predecessors,  was never intended  to be a listening post for independent, outside opinions. But even worse, it had actually become, in practice, an excuse for the criminalization of dissent in capital cities all over the globe, even in those that are nominally the most free,  by way of the vast new security measures that it requires and subsidizes,and the repressive tactics that it legitimized. 

In this day and age, of course,  we are told that almost any amount of security is too little.  And this heightened sense of insecurity  is certainly not aided by having the world's top 20 leaders regularly shuffling from pitstop to pitstop,  trying to conduct the world’s business from a traveling roadshow.

But I was struck by just how unnecessary,  senseless, and counterproductive almost all of the repressive policing tactics deployed in Pittsburgh really were -- how they ran roughshod over many of our  most precious freedoms, freedoms  that we are supposedly trying to protect.   And to what a degree whatever “terrorists” there are out there have already won, by  succeeding in creating a society that is really is often ruled by fear instead of justice, by force instead of discourse.

Rather than, say,  simply allowing the overwhelmingly non-violent demonstrators and students at that peaceful Friday night blues concert  to have their say, instead some 200 people were arrested and scores were gassed, clubbed, rubber-bulleted, and imprinted with galling memories that will last a lifetime. The City of Pittsburgh and its residents will certainly be fighting criminal cases and civil rights law suits for years to come.  I supposed we are meant to be consoled by the fact that, as the New York Times chose to emphasize this week, things are much more repressive in Guinea.

So perhaps it is time to establish a permanent location for all these global summits. Perhaps one of the Caribbean tax havens, like Antigua or St. Kitts, would do -- journalists always like the sun, and after TJN gets done with them, these havens are going to need to find a new calling anyway!  

***


   









 




October 2, 2009 at 08:47 AM | Permalink | Comments (3)

Wednesday, January 12, 2005

SO-CALLED "NATURAL" DISASTERS
III. The Aftershocks to Our Religious Beliefs
James S. Henry

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Unhappy mortals! Dark and mourning earth!

Affrighted gathering of human kind!

Eternal lingering of useless pain!

-- Voltaire, Poem on the Lisbon Disaster, 1755

(T)housands of pilgrims to a Marian shrine (on India's coast) were washed away as they attended mass….(A) divinity student.. said she watched one man shout: ‘There is nothing! There is nothing! Where is God? What is God?’

-- Chicago Tribune, 12/31/04

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The powerful Sumatra quake and tsunami not only moved whole islands, caused the Earth to wobble, and took more than 220,000 lives.

They also shook our world views to the core, and placed a tremendous PR burden on the more than 100 competing members of the global “non-profit” religion industry.

This is partly because of the sheer scale of the disaster. But it is also because this was surely one of the most ecumenical "natural" catastrophes in history.

While at least half the victims are Muslim, there are also substantial numbers from most of the world's other major religions, including Hindus, Buddhists, Christians, Jews, Jains, and Sikhs, as well as many non-believers.

This has posed an interesting explanatory challenge to all these different religious perspectives at once, and has allowed us to compare their responses. When we do so, as discussed below, we find that many of them have been unhelpful, anti-humanitarian, and even downright loony.

Indeed, the aftershocks that the tsunami has caused to religious mythology, especially to the curious views held by true believers, fundamentalists and extremists of all persuasions, may be among its few benefits.

Meanwhile, of course, the crisis has also permitted those of us who are perhaps a little less certain about Divine Will to join together in what has become an unprecedented, salutary transnational effort to help some of the world's least well off.

We truly hope that the Gods are watching -- They may learn something.

A Wave of Skepticism?

On the one hand, many of the world's faithful are now questioning their religious beliefs – a logical reaction that parallels the wave of skepticism that swept across Europe after the devastating Lisbon tsunami of 1755.

According to these new skeptics,   recent events in South Asia have demonstrated that our modern gods may not be quite as powerful, helpful, or attentive as we had hoped.

As a former head of the Yad Vashem Holocaust Museum put it, we may be dealing with a real "nebbish" here.

Angry_god_sm

Certainly the notion of “praying for the victims,” as one Protestant minister blithely suggested that we do at a memorial service that I attended this week, seems a little odd in this situation.

After all, if Poseidon were willing or able to help the innocent victims of this disaster, presumably He would have done so several weeks ago.

The fact is that we may just have to rely upon each other. That leaves precious little extra time and energy to pay homage to diffident bystanders, no matter how immortal.  

Sending Us a Message?

On the other hand, some true believers are stubbornly digging in.

Under the gun to explain how the mass suffering produced by the tsunami is consistent with the existence of Supernatural Powers that deserve our respect, they have reverted to variations on the age-old theme of "blaming the victim."

As these fundamentalists would have it, Poseidon (or Allah or God or Shiva or karma or...) is just “angry” with some or all of us, and is trying to send a message.

According to this anti-empathetic view, the millions of people who have suffered from this tsunami -- and presumably all other disaster victims from the Genesis Flood on down -- richly deserved what they got, or were sacrificed to teach the rest of us "lessons."

The precise messages sent and the lessons to be learned are a bit murky, but there is no shortage of proposed alternatives:

Ghs_monument

For example, Godhatessweden.org, a website owned by the Topeka, Kansas-based Westboro Baptist Church, has suggested that the suffering of “filthy, faggot Swedes” in the tsunami disaster was punishment from God for Sweden's tolerance toward homosexuality.

This particular church has also sponsored another website that features a rather tasteless proposed design for a monument to tsunami victims. Alfawzan

Meanwhile, Sheik Fawzan Al-Fawzan, who is Imam of Prince Mitaeb Mosque in Riyadh, a professor at Imam Mohamed Bin Saud Islamic University, and a member of Saudi Arabia's Senior Council of Clerics, its highest religious body, sugggested in a recent interview on Saudi television that the tsunami was "sent by God" to punish South Asian countries for immoral sexual activity, and for letting gay people into their countries

The illustrious Sheik has also argued that "slavery is part of Islam," and that those who deny this are "infidels" who deserve to be beheaded.

One leading American fundamentalist commentator, Bill Koenig, has suggested that a disproportionate number of Christians miraculously survived the tsunami, compared with their Muslim or Hindu brethren. (Presumably Bill does know that there were more Muslims and Hindus than Christians in the region to begin with...)

Todd Strandberg, the founder of Raptureready.org, suggested that the tsunami was a clear sign of the beginning of the "end times" when Jesus returns to Earth to punish our sins. (Presumably 1755 was just a false start...)

Similarly, a Salvation Army officer in Sri Lanka commented that it was indeed very odd that "All of our officers (clergy) survived.... God spared their lives."(...Although he admitted that some of them also had SA flotation devices....)

Another proto-Christian website argues that disasters like the recent tsunami and the Flood in Genesis don't make God a "mass murderer" because "there is no such thing as an innocent human." (....and unless you are absolutely innocent, or can swim really well, you deserve to drown......)

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Korean "scientists" have demonstrated conclusively that Noah's ark was strong enough to have withstood a tsunami and floods even larger than the Sumatran one -- like those produced by the Genesis Flood. The Reverend Sun Myung Moon, who recently described himself as "the Messiah" at an event held in his honor at the US Congress, is evidently planning to enter the shipping industry.

Chief_rabbishlomo_amar120

Israel’s Chief Sephardic Rabbi, Shlomo Amar, the President of its High Rabbinical Court, also saw fit to blame the tsunami victims, asserting that God was punishing people who failed to fulfill the seven "Noahide commandments," those that G_d supposedly gave to Adam and Noah. (He also promised to tell folks around the planet what the "Noahide commandments" are.)

Pandit Harikrishna Shastri, a Hindu priest at New Delhi's Birla temple, claims that the tsunami was caused by a "huge amount of pent-up man-made evil on earth" and by the positions of the planets. (He did not resolve the perplexing question of whether we should deal first with the stockpile of evil or the planets' positions.)

To Buddhist Ananda Guruge, a former Sri Lankan ambassador who teaches at California's Buddhist-affiliated University of the West, "Buddhism makes people responsible for their own fate," and the region's "bad collective karma" explains the disaster. (He did not clarify whether regions that have never experienced destructive tsunamis necessarily have terrific collective karma.)

To Ruth Barrett, a Wiccan high priestess who heads a Wisconsin temple dedicated to the goddess Diana, the disaster was simply a chiropractic problem. It was caused by "Mother Nature stretching — she had a kink in her back and stretched."

Interestingly, the religious extremists who advocatethese hard-shelled positions take a different view when the victims of a disaster are closer to home -- in New York, Oklahoma City, or Jerusalem. But not all -- recall the Reverend Jerry Falwell's conclusion that that 9/11 was also part of God's vengeance for gay rights and abortion. Laun

The secular humanists in the audience also have to ask: Were the sixty thousand children who have died in this tsunami disaster so far, and the 400,000+ other children who have lost their parents really old enough to understand, much less deserve, such punishment? Precisely what lessons are we supposed to draw from their capricious fates, other than that we have to prepare more carefully for such disasters,   and make sure that Jehovah enrolls in an anger management course?

These extreme fundamentalist interpretations also remind us of J.L. Mackie's conundrum“If God is Good, he’s not God. But if God is God, He's not Good." In other words, if it just so happens that an arbitrary, vindictive, brutal Satan now rules the world, does that necessarily mean that we are obligated to worship Him?

As the 19th century poet John Todhunter put it:

On his cross still hangs the Saviour
Bears our sins in dreadful sum
Eighteen centuries and three quarters
Yet his kingdom is not come.

"It is finished!" Was it finished
When thy path of pain was trod?
Thou didst bear the sins of mortals,
Who shall bear the sins of God?

No Cell Phones in Hell?

From the standpoint of “sending us a message,” surely Poseidon must also understand that many of us have cell phones and email. Personally, I have preset my spam filter to let all messages from Absolute Deities pass right on through. 

Indeed, it turns out that there were thousands of cell phones and Internet addresses even in Banda Aceh, Indonesia and the Andaman and Nicobar Islands, as well as India, Thailand, and Sri Lanka.

For that matter -- a point that should be of particular interest to the dozens of seismologists and tsunami experts around the globe who received almost instantaneous warnings of the December 26 undersea earthquake's severity, but now say they  "just didn't know who to call" -- there are also online telephone directories for all these places – including Banda Aceh, Sri Lanka,numbers of Phuket, Thailand, and TamilNadu, on the southeast coast of India.

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Starting from scratch, it recently took two SubmergingMarkets journalists just 15 minutes to locate hundreds of long-distance numbers and Internet addresses for dozens of hospitals, schools, hotels, lawyers, doctors, local businesses, and government offices on the frontlines of the tsunami – not to mention US Embassies, consulates, and military bases.

Evidently all these phone numbers and Internet connections just happened to be busyprecisely when the earthquake struck. That must have prevented all the international experts from getting through.

Perhaps Poseidon was trying to send us a message after all!   

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© James S. Henry, Submerging Markets™, January 05

January 12, 2005 at 03:19 PM | Permalink | Comments (0) | TrackBack

Tuesday, January 04, 2005

SO-CALLED “NATURAL” DISASTERS
Part II. The Need for a Global Disaster-Relief Agency
James S. Henry

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_40681739_india203bap

So far, the Boxing Day 2004 Sumatra tsunami is still not quite the most destructive earthquake-related disaster in history, but this may soon change.  Until now, the casualty records have been held by the 7.8 Richter-scale earthquake that leveled Tangshan, China, in 1976, claiming at least 244,000 lives, and by the 1556 earthquake in China’s Shanxi province that claimed 830,000.

However, the Sumatran quake has already resulted in more than 150,000 deaths, including 94,081 confirmed dead in Indonesia, nearly 9000 dead or missing in Thailand, 15160 in India, (andup to 20,000 more in the Andaman and Nicobar Islands), 44,000 in Sri Lanka, and 396 in Tanzania, Somalia, the Seychelles, Madagascar, the Maldives, Burma, Malaysia, and Bangladesh. Furthermore, the latest reports from UN observers in the region indicate that even these death tolls may grow “exponentially.”

For the bankers and investors in the audience, the purely economic impact of the Sumatra tsunami is expected to be relatively slight, since most of its victims were indigenous poor people in remote areas, and the region's tourist industry will quickly recover. Japan’s 1995 Kobe earthquake, in contrast,  caused more than $100 billion of property damage. 

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However, in terms of lives lost, injuries, displaced people, and damage caused beyond the boundaries of the country where the earthquake originated, Sumatra is already a record-setter. While other tsunamis have taken lives outside their countries of origin, this one’s long-distance impact has already taken more lives in more countries than all other tsunamis since 1800. The potential human and geopolitical impact of all this is much more significant than the destruction of over-valued Kobe high-rises.

In other words, this is one of the most profound transnational disasters ever. It is therefore not surprising that, as discussed below, it has already commanded an overwhelming global response from the world's aid donors -- at least on paper.

_40684617_gloves_1 For the moment, at least, the developing world may have finally succeeded in capturing our attention, if by nothing more than the sheer power of its own suffering.  Perhaps we will finally now come to understand that both the relief and the prevention of such disasters are appropriate global responsibilities.

We may also wish to reserve some of our benevolence and good will for the victims of more "routine" Third World perils -- for example, the two million children who die from drinking dirty water each year, the 1.6 million people who still die each year from tuberculosis, and the 1.2 million who die from malaria. These continuing disasters may not be as dramatic, sudden, and visible as tsunamis and earthquakes, but they are no less worthy of our concern.    

TO THE RESCUE?

Après le fait, the world community has mounted a huge relief effort to provide clean drinking water, food, medicine, energy, medical care, and temporary shelter for 5 million displaced people.

The most rapid progress has been made on fund-raising.  In one week, 45 governments and international institutions pledged  more than $3.2 billion in humanitarian aid, more than the world spent on all such disasters from 2002 on. The tsunami pledges so far include an incredible $680 million from Germany, $500 million from Japan ($3.91 per capita),  $350 million from the US ($1.19 per capita), $182 million from Norway ($39.13 per capita), $96 million from the UK ($1.59 per capita), $76 million from Sweden ($8.39 per capita), $76 million from Denmark ($14 per capita), $250 million from the World Bank, $175 million from the Asian Development Bank, $309 million from other EU member countries ($1.06 per capita), $66 million from Canada ($2.06 per capita), about $60 million apiece from Australia ($3 per capita) and China (5 cents per capita), $50 million from South Korea, and $25 million from Qatar. Somewhat less generously, Saudi Arabia and Kuwait have each contributed $10 million, New Zealand $3.6 million, Singapore $3 million, Venezuela, Libya, Tunisia, and UAE $2 million, Turkey $1.25 million and Mexico $100,000.

Furthermore, there are also discussions underway among G-8 countries to provide debt relief for Indonesia, Sri Lanka, and the other victim countries, which might yield another $3 billion a year -- so long as these countries agreed to spend it on aid for tsunami victims.

Three days after the quake, President Bush had promised just $35 million. As several observers noted, that was just 12 cents per capita, less than 10 percent of Canada’s per capita effort. As Vermont Senator Patrick Leahy said, “We spend $35 million before breakfast in Iraq.”

Furthermore, in 2004, the US Congress had provided $13.6 billion to Florida’s hurricane victims, 5.6 times more than the $2.4 billion that the US spent on all global humanitarian assistance that year. Colin Powell rebuked the critics in public, reminding them that the $2.4 billion was 40 percent of the entire world’s budget for humanitarian relief in 2004. Apparently he also quietly lobbied the President to increase the official US aid.

Meanwhile, in addition to the pledges of official government aid, more than fifty private relief agencies have also pitched in, from Action Against Hunger, CARE, Catholic Relief, Doctors Without Borders, Islamic Relief, Oxfam, the International Red Cross, and Save the Children to UNICEF, World Action, and WorldVision.  The  American Red Cross alone reports that it has already received more than $79 million in private aid pledges for tsunami victims, while CARE US has received $3.5 million, Doctors Without Borders $4 million, Save the Children $3 million, Americares $2 million, Oxfam US $1.6 million, Catholic Charities $1.1 million, and World Vision $1 million.

Private donors from European countries have also been exceptionally generous. For example, Swedes’ 9 million people have contributed more than $60 million, in addition to the $76 million that their government has offered – more than $15 per capita. And Norway’s 4.6 million people have raised nearly $33 million in private donations, in addition to their government's $180 million -- a $46 per capita global record for tsunami relief.

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...THE PAPER THEY’RE PRINTED ON?   

Unfortunately, the historical record shows that such official government disaster aid pledges are cheap -- they often do not result in “new money,” and many countries actually renege on their official pledges completely.

For example, in the case of Iran’s Bam earthquake in December 2003,  40 donor countries also responded to a similar “UN flash appeal,”pledging $1.1 billion of aid. However, one year later, less than 2 percent ($17.5 million ) of that has been forthcoming.  Most foreign aid workers and journalists came and went in less than a month, and Bam’s reconstruction problems have long since disappeared from the headlines.  While significant progress has been made in restoring basic services like water and electricity, most of the city’s 100,000 former residents are still unemployed and living in tents.

Such reneging by the world community has also been the pattern in most other recent disasters, including Mozambique’s 2000 floods,  Central America’s Hurricane Mitch in 1998, and similar crises in Somalia, Afghanistan, and Bangladesh. 

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We will just have to see whether the victims of the Sumatran tsunami  experience something similar. UN Secretary General Kofi Annan has predicted that it will take a decade for many of the countries affected by the tsunami to recover.

ANOTHER AD HOC RELIEF EFFORT?

Each time there is a crisis, the world’s aid organizations have to scramble to pass the hat.

The outpouring of all this assistance for the tsunami’s victims on short notice has been impressive.  But perhaps we should not be so proud of ourselves. The reality is that this effort has been yet another ad hoc, “aid pick-up-game," where the world waits until there is already a life-and-death crisis with millions of people in peril to swing into action, raise money, and rush assistance to the front lines.

This reactive approach has many unfortunate side-effects:

~       Each time there is a crisis, the world’s aid organizations have to scramble to pass the hat,  even as they are also scrambling to organize assistance. 

~       The actual delivery of relief on the front lines is much slower than it needs to be.

As usual,  in the case of the Sumatra tsunami,  most of the victims are located in remote areas with poor transportation, sanitation, water, and health care systems,  and many other problems. Several key regions – in this case Indonesia’s Aceh province, Sri Lanka’s eastern regions, and Somalia – also have active guerilla movements or local warlords. Some countries -- India, in this case – have also insisted that they don’t need any foreign assistance, showing more concern for nationalism than their own people. 

However, when it comes to disaster relief, all of these problems are just par for the course, and predictable. What is inexcusable is the world has once again had to organize yet another massive relief effort from scratch.

One result is that in most of the affected countries,  it has taken more than a week to get medical aid and substantial quantities of  food, blankets, and clean water – to the victims. In a situation where hundreds of thousands are injured and each incremental day costs hundreds of lives, only Finland and Norway had relief planes in the air by Tuesday December 28, two days after the disaster. Most other donors needed a whole week.    

~       Given the semi-voluntary nature of the relief process, national interests, domestic politics and media exposure play an excessive role in deciding how much aid is given, who manages the assistance, and how much goes to any particular crisis – as compared with raw human need.

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~       One by-product of all this was last week’s unseemly spectacle, where donors like the US, the UK, and Japan conducted a veritable public auction for the value of their aid pledges. The results may have little to do with actual aid requirements. We can only hope that this time around most the pledges will be honored. 

~       There is a tendency for global aid efforts to be limited by the media’s attention span – as Bam’s victims, the residents of Sudan’s Dafur region, and the victims of other disasters have learned the hard way. When the number of “new bodies”  tapers off, so does the attention – and the aid.

THE NEEDS FOR A  GLOBAL AID ORGANIZATION

If global humanitarian aid were run on a more business-like basis, 

~       There would be an ample global “reserve” set aside for such emergencies. This would be funded by a global tax in proportion to objective measures of donor capacity like population size and wealth.

~       In case of an actual calamity, we would not try to assemble “aid brigades” on short notice from dozens of different organizations all over the globe and expect them to work well together under impossible conditions. There would be already be a solid global organization in place, ready to respond rapidly, with coordination agreements and contingency plans already worked out with local governments.

This organization would also have basic stocks of transportation equipment and relief supplies pre-positioned in key regions of likely need.  After all, the US military alone now has 890 bases around the world that are on ready-alert, prepared  to fight wars at a moment’s notice.  The world community has zero “aid bases,”  prepared to fight to save human lives at a moment's notice.

Given the increasingly global nature of  so-called “natural” disasters, the current approach to global humanitarian relief is no substitute for a permanent, well-funded, global aid organization.

èèè

© James S. Henry, Submerging Markets™, January 05

http://www. submergingmarkets.com

January 4, 2005 at 04:00 PM | Permalink | Comments (1) | TrackBack

Sunday, April 11, 2004

412.The Coffee Connection:
Globalization's Long Reach, From Vietnam To Nicaragua To Starbucks

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INTRODUCTION – THE "G" WORD

I remember the first time I heard the “G” word - “globalization.” It was 1985, and I was interviewing a new McKinsey recruit, a former assistant Harvard Business School professor who had decided to exchange the classroom lectern for a larger bank balance. He was about as excited as business intellectuals ever get about the latest HBS paradigm. This was the notion that, in the wake of the 1980s debt crisis, countries would soon be forced to “globalize.” According to him, this meant that they would soon dramatically reduce all barriers to trade, investment, and labor migration, so that, over time, the world would become one great big happy marketplace.

I reacted with the economist’s usual disdain for business school paradigms. While “globalization” might be a new term, surely the basic concept was not new. For example, the world had also experienced a dramatic rise in trade and investment in the late 19th and early 20th centuries. Nor was it nirvana. As I recalled, this earlier period of free trade been marked by numerous speculative bubbles, debt crises, and even some devastating famines in India, China, and Ireland. Then, during the 1930s, many countries had retreated from the winds of global competition behind tariff barriers, import controls, exchange controls, and fixed exchange rates. At the time these “beggar thy neighbor” policies were damaging to the world recovery. But after the world economy was revived by World War II, it did pretty well during the period from 1950 to 1973. Indeed, many economic historians now refer to that distinctly “un-global” period as the 20th century’s “Golden Era,” the only prolonged period in the 20th century when global growth and income equality have both improved dramatically at the same time.

So I could not help but tweak the young professor's nose a bit about the fact that “globalization,” as he called it, was not new, and was evidently neither necessary nor sufficient for strong performance by the world economy.

TWENTY YEARS LATER…

I t is now twenty years later, and many neoliberal pundits are still discussing “globalization” as if it were something strange and new – and as if it did not already have a very long and really quite problematic track record, including its very mixed record since the early 1990s.

What should by now be clear to any careful student of the subject is that in fact there really is no such thing as “globalization” per se. Its effects cannot be assessed or even measured apart from specific historical contexts. In other words, the liberalization of trade and investment is never implemented across all markets or trading partners at once. Its impact depends crucially on the precise sequence of deregulation, initial conditions, and on complex interactions with all the other market and regulatory imperfections that remain after specific barriers have been removed.

EXAMPLE - MEXICO Vs. CHINA

Just to take one specific example – in 1993, Mexico signed the NAFTA, giving its export sector much more access to the US market. However, the gains reaped by Mexican exports have been somewhat disappointing, because it discovered that just as NAFTA was being implemented, China was also dramatically expanding its exports to the US. This was partly just a reflection of China’s lower labor costs. However, for capital intensive sectors, it also reflected China’s artificially lower cost of capital. Unlike Mexico, where the banking sector had been privatized, China’s banking sector remained entirely in state hands, and it provided $billions in subsidized credit to the export companies that Mexico had to compete with. Having liberalized its capital market at the same time that it liberalized trade, Mexico had essentially given up one of its main weapons in its competitive battle with China.

The following case study of the global coffee market provides another example of “globalization’s” complex side effects. In the early 1990s, the World Bank and the IMF, which have been two of the most fanatical sponsors and promoters of “globalization” around the world, decided to encourage the Socialist Republic of Vietnam to boost its exports and growth rate by aggressively entering the world coffee market. Millions of poor coffee farmers around the world are still suffering from the effects of this grand strategy.

THE COFFEE BARRONS

If one is looking for a good example of the unintended impacts of “globalization,” a good place to start is with the world’s second most globalized commodity -- coffee, which is consumed almost everywhere, produced in 70 countries by more than 25 million farmers, and second only to oil as a share of world trade.

Coffee has certainly has had its ups and downs in the health literature, although the latest scientific evidence is apparently that, at least in moderation, it can do some good, at least if one is prone to gallstones, asthma attacks, cirrhosis of the liver, headaches, or heart trouble. But it has been undeniably beneficial to the shareholders of leading First-World companies like Nestle, Kraft, Sara Lee, P&G, and Germany’ Tchibo, the giant conglomerates that dominate the international business of roasting, processing, wholesaling, and at least in Starbucks’ case, retailing gourmet coffee to millions of First World customers.
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In the last decade, all these coffee conglomerates have prospered, and Starbucks, in particular, has struck a veritable gold-mine. Founded in 1985, since its 1992 IPO, Starbuck’s share price has risen at an astounding average rate of 28 percent a year, with four 2-1 stock splits along the way. In February 2004 its market value reached a 12-year high of almost $15 billion, and its revenues now exceed $4.4 billion, growing at 32 percent a year. Entering the vaunted ranks of truly global brands like IBM or Coca-Cola, Starbucks now has more than 74,000 “partners” (actually, employees) and more than 6000 stores in over 30 countries, and it expects to add another 1300 stores this year. Indeed, it is even opening stories in markets that one might have thought would be difficult to crack, like Paris, Saudi Arabia, Mexico, the Philippines, Indonesia, and Lima, Peru, where a cup of Starbucks java reportedly two-thirds of the minimum wage.

One might have hoped that the folks at the other end of the pipeline who actually grow all the coffee might have benefited a bit from all this downstream prosperity. But in fact it would actually come as a something of surprise to the world’s 25 million coffee farmers around the globe, most of whom exist at the very bottom of the income distribution in developing countries like Vietnam, Brazil, Nicaragua, Kenya, and Ghana. Even as the processors, roasters, and retailers were cashing in, conditions for these farmers became more fiercely competitive than ever before. Indeed, from 1997 to 2001, composite world coffee prices fell by two-thirds, reaching the lowest levels in 30 years. Since then, average prices have recovered slightly, but they still remain at just half their (real) 1997 levels.

Since the demand for coffee beans is price-inelastic, the result was that coffee bean exports and the incomes of coffee farmers all over the world just collapsed. The result was one of the most socially -devastating commodity market crashes in modern history, with millions of poor coffee growers from Mexico’s Chiapas region, Guatemala, and Nicaragua to Kenya and Ghana to Indonesia and Vietnam all suffering the effects.

"FAIR TRADE" - MORE OR LESS

As one of the younger, less diversified companies in the industry with a retail brand to protect, Starbucks was perhaps more sensitive to the growing contrast between its own prosperity and the farmers’ desperate situation. In the late 1990s it responded with a new emphasis on “corporate responsibility.” This included support for “fair trade-certified” and “organic” farming, the implementation of sourcing guidelines that emphasized “sustainable” farming practices, paying premium “fair trade-like” prices above market averages, providing a certain amount of credit to coffee farmers and financial aid to poor farming communities, and other measures. In 2003, for example, Starbucks’ paid an average of $1.20 per pound for its Arabica beans, at a time when the open market price was less than half that much.

True, this amounted to just 4-5 cents per cup at most for the farmers, compared with a “vente” coffee based drink that might go for $2.50 to $4.50, depending on what’s in it. True, much of the $1.20 per pound did not get through to the farmers, but was digested by middlemen – even in 2003, at least half of Starbucks’ coffee was purchased through brokers and short-term contracts.

True, the 2.1 million pounds of “fair-trade certified” coffee that Starbucks purchased in 2003 amounted to less than 1% of its bean purchases. And true, the social programs and credit that Starbucks distributed to poor coffee farming communities in 2003 amounted to just $1 million and $2.5 million, respectively, scattered across nine countries – less than 1 percent of its operating income that year. But at least Starbucks deserves credit for making an effort, which the other giants in the industry have failed to do.

However, if Starbucks had really wanted to assist poor coffee farmers around the world, it would not have wasted time with all the “fair trade” and “green farming” activity, as valuable as these symbolic gestures might be in the abstract.

As the following tale explains, Starbucks and the fair traders would have had far more social impact if they had simply persuaded the World Bank to keep its mitts off coffee production.

GLOBALIZING COFFEE PRODUCTION

In 2000-2002, an acute coffee market crisis hit poor countries like Nicaragua, Guatemala, and Kenya broadside. The tale of this fiasco is worth telling just because of its dire impact on such countries, which depend on coffee for 25 to 30 percent of their exports. But it is also a striking example of the unintended side-effects of globalization, and of neoliberal development banking at its worst. After all, as noted, coffee is grown by more than 25 million small farmers in more than 50 developing countries, including several of the world’s most heavily-indebted nations. Indeed, it is second only to crude oil as a developing country export. So if you wanted to pick one global commodity market not to screw up, this would be it. But that did not stop the World Bank, the IMF, and the Asian Development Bank from doing so.

As this story also demonstrates, even in the 21st century, countries like Nicaragua not only remain at the mercy of intransigent rightists, corrupt elites, and egomaniacal leftists. They are also at the mercy of massive screw-ups by half-baked neoliberal experiments located half-way around the globe – and by fellow “former socialist countries!”

In 1986, the Socialist Republic of Vietnam’s Communist Party leadership decided to switch from central planning to a liberalization policy called “doi moi” – “change and newness.” This was partly just because, like Cuba, Vietnam could no longer depend on the (crumbling) USSR for huge subsidies. It was also because senior economists at the IMF, UNDP, World Bank, and ADB were preaching the glories of free markets, and holding out the prospect of billions in aid.

The resulting program, designed with extensive assistance from the world’s leading development banks, was a controlled version of a standard orthodox adjustment program. It set out a 10-year plan – oops, “strategy” - for export-led growth, based on opening up Vietnam’s heretofore-closed economy to trade and investment, allowing state-owned banks freedom to lend to individual borrowers, decollectivizing the farm sector, and – in particular -- encouraging small farmers and state-owned companies to develop new cash crops for export.

At the same time, political power was to be kept firmly in the hands of the Communist Party’s Politburo. Despite that slightly-illiberal grace note, from 1993 on, this doi moi economic liberalization package was generously supported with plenty of advice and more than $2 billion a year of foreign loans and grants from the Asian Development Bank, the UNDP, Japan’s JIBC, the France’s Development Fund (AFD), the World Bank, the IMF, and the aid agencies of the US, Sweden, France, and several other Western governments.

Nicaragua’s 44,000 small coffee farmers, the 6 million small farmers in 49 other countries who collectively produced more than 80 percent of the world’s coffee beans, and the more than 100 million people whose jobs and livelihoods depended on coffee beans, had probably never heard of doi moi. But they became one of its first targets. Right from the start, evidently without much thought about collateral damage, Vietnam and its neoliberal wizards decided to embark on a brave new coffee export business.

While coffee had been grown in Vietnam ever since the 1850s, production and exports had been limited. The domestic market was small, and there were few facilities to process the raw beans. As of 1990, green bean exports were a mere 1.2 million 60-kilo bags per year. But Vietnam’s central highlands did have rich hilly, lots of rainfall, and low labor costs, which were ideal conditions for achieving high yields and low prices.

This was especially true for low-grade, easy-to-grow robusta beans. From a consumer’s standpoint, this species was inferior to the Arabica beans grown by Nicaragua and most other Central American producers, as well as big producers like Brazil and Colombia. Arabica had traditionally accounted for more than three-fourths of the world’s coffee production. But robusta had twice the caffeine content of Arabica at half the price, and it could also be used as a cheap filler and blending ingredient.

By the 1990s, bean quality was no longer an absolute barrier to entry in coffee farming. The global market was increasingly dominated by a handful of giant First World coffee processors, roasters, and grinders, including Nestle, Kraft, Sara Lee, P&G, and the German company Tchibo, as well as retail store owners like Starbucks, which generated their own blends. Increasingly, these companies sourced coffee beans from all over the planet, mixing and matching them to produce blends that not only satisfied customer tastes, but also minimized costs. These global buyers had been working overtime on new technologies that took the edge off the cheaper robusta beans and allowed them to be used for extra punch and fill. With the help of commodity exchanges, the giants had also defined standardized forward and futures contracts that allowed them to hedge against price fluctuations – making for a much more “perfect” global coffee market.

From the standpoint of small farmers, most of whom did not have easy access to such hedging devices, “market perfection” was in the eyes of the beholder. The changes introduced by the giant buyers amounted to a radical commoditization of the market that they depended upon for their livelihoods, a sharp increase in direct competition. Accordingly, even as downstream market power became more and more concentrated in the hands of the First World giants, the farmers’ share of value-added plummeted. In 1984, for example, raw coffee beans accounted for more than 64 percent of value-added in the US retail coffee market. By 2000, this share had dropped to 18 percent. From 1990 to 2000, while global retail coffee revenues increased from $30 billion to $60 billion, the revenues earned by bean-growing countries dropped from $10 billion to $6 billion. By then, for every $3.50 café latte sold by Starbucks, the farmers earned just 3.5 cents.

The farmers’ shrinking role was due in part to the basic structure of the global coffee industry. On the supply side, as noted, by the 1990s, raw beans were being exported by more than fifty countries, who were competing head-to-head. But while a few growers like Brazil and Colombia had tried to break into foreign markets with their own processed brands, a handful of global First World buyers still dominated processing and marketing. Indeed, many of the world’s leading exporters of processed coffee, like Germany and Italy, grew no coffee at all.

This long-standing First World control over global coffee processing is partly due to technical factors. There are economies of scale in processing, but not in coffee farming. Unlike petroleum or natural gas, which can be warehoused for free in the ground, coffee beans are costly to store. Unlike wine, aged beans also have no incremental value. Furthermore, most small coffee farmers depend on coffee sales for their current incomes. Global coffee demand is actually not very price-sensitive, and it is only growing at a modest 1 percent per year. All this means that prices tend to fluctuate wildly with current production, so there is an incentive for processors to stay out of farming, shifting market risks to millions of poorly-diversified producers. The fact that coffee beans be stored 1-2 years, while roasted or ground products have a much shorter shelf-life, also favors locating processing facilities close to the final consumer markets. And anyone who has been to France, Italy, or Brazil knows that tastes for particular kinds of coffee vary significantly across countries.

But the coffee industry’s international division of labor is not only based on such technical factors, many of which are actually declining in importance. It is also based on long-standing trading patterns and colonial relations – for example, the 16th century role of the Dutch in smuggling coffee plants out of Yemen to their colony in Java, which fostered Indonesia’s entire coffee industry; the role of French, British, Portuguese, and Japanese trading companies in Africa, Jamaica, Guyana, Brazil, and Asia, and the role of American companies in Colombia, Central America, and Southeast Asia. The First World’s dominance has been reinforced by trade barriers that favor the importation of raw beans over processed coffee.

The net result of all this is as if France, Italy and California were compelled to export all their grapes to Managua, Nairobi, and Jakarta, in order to have them processed into wine.

Along these lines, given the importance of small coffee farmers to debtor countries, and the World Bank’s supposed commitment to “poverty alleviation,” it may seem surprising that the World Bank, the IMF, and other development lenders devoted zero energy in the 1990s to designing a monopsony-breaking strategy for coffee growing countries, to help them break down this division of labor its supporting trade barriers.

Instead, the development bankers did just the opposite, helping Vietnam implement an anti-producer-cartel strategy that ultimately helped to drive the coffee- countries’ association, a rather pale imitation of OPEC, completely out of business in 2001. Could it be that these First World development banks were not influenced by the fact that the world’s leading coffee conglomerates also happen to be based in countries like the US, Japan, France, Switzerland, and Germany, not far from the development banks’ headquarters?

COFFEE CONTRAS

Vietnam’s decision to push coffee bean exports as a cash generator in the 1990s was not just based on rational economics. Like most critical decisions in economic development, it also had a crucial political motive. Vietnam’s best region for growing coffee turns out to be the Central Highlands, along the border with Cambodia and Laos. This region is inhabited by about 4 million people, including 500,000 to 1 million members of non-Buddhist ethnic minorities who are known collectively as the Montagnard/Dega hill tribes. These fiercely independent peoples have battled the Communist Party, and, in fact, most other central authorities, for as long as anyone can remember. In the 1960s, 18,000 of them joined the CIA’s Village Defense Units and fought hard against the NLF. They had many run-ins with South Vietnam’s various dictators. After the war ended in 1975, some Montagnard tribes continued armed resistance at least until the late 1980s.

To shore up control over this volatile region, in the early 1980s Vietnam’s government embarked on its own version of ethnic cleansing – or at least dilution. It actively encouraged millions of ethnic Kinh – Vietnam’s largest ethnic group – plus some other non-Montagnard minorities, to migrate from the more crowded lowlands to the Central Highlands. At first, these migrations were organized directly by the government. But by the 1990s, they were being driven by a combination of market forces and government subsidies. On the one hand, the migrants sought to escape the poverty and resource exhaustion of the lowlands. On the other, they were attracted by the prospect of obtaining cheap land and credit to grow coffee, the exciting new cash crop, which became known to the peasants as “the dollar tree.”

The result was an influx of up to 3 million people to the Central Highlands provinces in less than two decades. In 1990-94 alone, some 300,000 new migrants arrived in the provinces of Dak Lak, Lam Dong, Gia Lai, and Kontum, looking for land. By 2000, these four provinces alone accounted for 85 percent of Vietnam’s coffee production. This reduced the Montagnard tribes to the status of a minority group in their own homelands. They watched in anguish as their ancestral lands were reassigned to outsiders, including state-owned companies, controlled by influential Party members in Hanoi who had close ties with leading Japanese, American, and Singaporean coffee trading companies. Many Montagnards were forced to resettle on smaller plots, without compensation. Over time, as the local economy became more vulnerable to fluctuations in world coffee prices, this contributed to explosive social conflicts.

From the standpoint of Nicaragua’s campesinos, the key impact of all this was on world coffee prices. In Vietnam, the migrants and Montagnards alike turned to coffee for support on increasingly-crowded plots. At the time, in the early 1990s, coffee still offered greater revenue per unit of land, compared with other cash crops like rice or peppers, and it was also being actively promoted as a cash crop by state banks, trading companies, and the government.

It took three to four years for a new coffee bush to mature, so the real surge in exports did not occur until 1996-2000. Then, in just a four-year period, Vietnamese exports flooded the market. From 1990 to 2002, they increased more than ten-fold, from 1.2 million 60-kilo bags to more than 13.5 million bags. By 2000, Vietnam had become the world’s second largest coffee producer, second only to Brazil and ahead of Colombia. In the crucial market segment of cut-rate green robusta beans, the blenders’ choice, Vietnam had become the world leader. While other producers like Brazil also increased their robusta exports during this period, Vietnam alone accounted for more than half of all the increased exports. This helped to boost robusta’s share of all coffee exports to 40 percent.

In pursuing this strategy, Vietnam did not bother to join coffee’s OPEC, the Association of Coffee Producing Counties. Indeed, it acted rather like a scab, providing an incremental 800,000 metric tons of low-priced coffee by 2000, roughly equal to the world market’s overall surplus. The giant coffee buyers were quite happy to buy up all this low-priced coffee and swap it into blended products like “Maxwell House” and “Tasters’ Choice,” using it to discipline other leading supplier-countries. At the same time, foreign debt-ridden countries like Indonesia, Brazil, Uganda, Peru and Guatemala also boosted their coffee sales, in order to generate more exports. In September 2001, partly because of this beggar-thy-neighbor strategy, the ACPC completely collapsed and was disbanded.

The resulting export glut caused world coffee prices to tumble to a 33-year low by 2002. According to the World Bank’s own estimates, this caused the loss of at least 600,000 jobs in Central America alone, and left more than 700,000 people in the region near starvation.

Worldwide, the effects of the coffee glut were even more catastrophic, because the world’s fifty-odd coffee producing countries included many of the world’s poorest, most debt-ridden nations. Ironically, just as they were supporting Vietnam’s rapid expansion into exports like coffee, in 1996 the World Bank and the IMF had launched a new program to provide debt relief to the world’s most “heavily-indebted poor countries” -- the so-called HIPC program. By 2001, indeed, the HIPC program had made some progress in debt reduction, cutting the “present value” of the foreign debts for those countries that completed the program by a median of thirty percent. However, of the 28 heavily-indebted poor countries that had signed up for the World Bank’s HIPC program by 2003, no less than 18 of them were coffee growing countries – including not only Nicaragua, but also desperately poor places like Bolivia, Honduras, Uganda, the Congo, Cameroon, Rwanda, the Ivory Coast, and Tanzania.

Indeed, for the larger coffee exporters in this group, even when they managed to wend their way through HIPC’s complex program and qualify for debt relief, they found that most of its benefits had been offset by the coffee crisis! For example, Uganda, the very first country to qualify for HIPC relief, discovered that by 2001, just one year after qualifying for HIPC, its foreign debt was higher than ever -- mainly because it had to borrow abroad to offset the impact of the coffee crisis on exports!

Furthermore, many other “not-quite-so-heavily indebted” developing countries that produced coffee, like India, Indonesia, Peru, Guatemala, Kenya, Mexico, and El Salvador, were also hurt badly. Overall, if one had set out to create destitution and suffering in as many of the world’s developing countries as possible at one fell swoop, one could hardly have devised a better strategy than to encourage Vietnam to thoughtlessly expand its commodity exports in general, and coffee in particular – free markets be blessed, all other developing countries be damned.

In Nicaragua’s case, the average wholesale price for its Arabica beans fell from $1.44 a pound in 1999 to $.51 cents a pound in 2001 and less than $.40 a year later, compared with typical production costs of $.83 a pound.

Among the hardest hit were Nicaragua’s 44,000 small producers, who accounted for two-thirds of Nicaragua’s production and provided jobs that supported another 400,0000 Nicaraguans, most of them landless campesinos in the rural northwest around Matagalpa, north of Managua. They depended upon Nicaragua’s annual coffee harvests for most of their employment and income. The resulting crisis in the countryside set off a migration to Managua and other cities, with thousands of hungry, landless people crowding into makeshift shacks on the edge of town.

Obviously all these developments begged many questions so far as the role of the World Bank and Vietnams’ other international lenders and advisors was concerned. After all, Vietnam was just a very poor state-socialist country that was undertaking all these free-market reforms for the first time – after fighting and winning a thirty-years war of its own with the US. The World Bank, IMF, and the ADB, on the other hand, were supposed to be the experts – they had implemented such reforms all over the world, backed by billions in loans and boatloads of Ivy-League economists. And Vietnam was intended to be one of their poster stories for de-socialization, and for the claim that growth, free markets, and “poverty alleviation” could go hand-in-hand.

In April 2002, sensitive to NGO charges that the World Bank and the other development lenders might actually bear some responsibility for this fiasco, the World Bank went out of its way to issue a press release denying any responsibility for the crisis whatsoever. Or more precisely, it denied having directly provided any financing to expand coffee production in Vietnam. It also maintained that its $1.1 billion of lending to Vietnam since 1996 had tried – though evidently without much success – to diversify farmers away from cyclical crops like coffee. It also argued that, after all, its lending to Vietnam’s rural sector had only started up after 1996, while coffee production had increased since 1994, and that none of its investments had been “designed to promote coffee production. (emphasis added) ” It did identify two World Bank projects that “could be linked” to coffee production – a 1996 Rural Finance Project that helped Vietnamese banks lend money to farmers, and a Agricultural Diversification Project. But for these projects, the Bank simply observed that it didn’t dictate how Vietnamese banks re-loaned the funds that it had loaned to them.

Overall, then, World Bank basically washed its hands of the coffee crisis -- one of the worst disasters to strike small farmers, their dependents, and debtor countries in modern times. The World Bank did assure the public that it was extremely concerned about the plight of these farmers, and promised to address their woes.

On closer inspection, this defense had more than a few holes. First, whether or not the Bank financed any new coffee farms, clearly the World Bank and its cousins at the IMF, the UNDP, and the ADB were up to their elbows in designing, managing, and financing Vietnam’s economic liberalization program. In the first place, they played a key role in pushing Vietnam to liberalize trade, exchange rates, and banking quickly. To set targets for Vietnam’s macroeconomic plans, they had to have known which export markets the government planned to go after. After all, coffee was not just another export. After the removal of Vietnam’s quotas on coffee and other exports in 1990, partly at the request of IMF, coffee quickly became the country’s number-two export, second only to oil. It continued to be one of the top ten exports even after prices cratered. The ADB and the World Bank also worked closely with Vietnam’s Rural Development Bank, the country’s largest rural lender, to improve management and structure new lending programs. They also advised Vietnam on how to set up a Land Registry, so that rival land claims could be settled and farms – at least the non-Montagnard claimants who found it easier to get titles -- could borrow to finance their new crops more easily.

At the same time, far from encouraging Vietnam to work with other coffee producers to stabilize the market, or design an overall long-term strategy to break up the buy-side power in the market, the development banks bitterly opposed any such interference with “free markets” – no matter how concentrated the buyers were, or how many artificial restrictions had been placed by First World countries on the importation of processed coffee. As one senior World Bank economist remarked in 2001, at the very depths of the coffee glut:



Vietnam has become a successful (coffee) producer. In general, we consider it to be a huge success...It is a continuous process. It occurs in all countries - the more efficient, lower cost producers expand their production, and the higher cost, less efficient producers decide that it is no longer what they want to do.

So, despite its 2002 press release, the World Bank’s true attitude about this whole fiasco appears to have been a combination of “not my problem,” sauve qui peut, and Social Darwinism.

Meanwhile, back in Vietnam, the small farmers in the Central Highlands learned the hard way about the glories of global capitalism – thousands of them had decided that it was “no longer what they wanted to do,” but were finding few easy ways out. After the 1999-2002 plunge in coffee prices, Vietnam’s export earnings from coffee fell by 75 percent from their level in 1998-99, to just $260 million in 2001-02. In 2002-03, they fell another 30 percent. In the Central Highlands, thousands of the small farmers – low-lenders and Montagnards alike -- had gone deeply into debt to finance their growth, and were struggling to feed their families and send their children to school, because market prices now covered just 60 percent of their production costs.

In short, ten thousand miles from Managua, on the opposite side of the globe, these highland farmers were facing the same bitter truths that Nicaraguan campesinos were facing -- that they had more in common with each other than with the stone-hearted elites who governed their respective societies, and designed futures that did not necessarily include them.

In Vietnam, the resulting economic crisis severely aggravated social and political conflicts in the Central Highlands. In February 2001, several thousand Montagnards held mass demonstrations in Dak Lak, demanding the return of their ancestral lands, an end to evictions for indebtedness, a homeland of their own, and religious freedom ( since many Degas are evangelical Christians). Vietnam responded with a harsh crackdown, sending thousands of elite military troops and riot police to break up their protests. They arrested several hundred of them, and then used torture to elicit confessions and statements of remorse. They also destroyed several local churches where the protestors had been meeting. Those protest leaders who did not manage to escape to Cambodia were given prison sentences up to 12 years.

From one angle, this repressive response was the typical handiwork of a Communist dictatorship. From another angle, however, it was just another example of the repressive tactics that neoliberalism required to implement free-market “reforms” by non-Communist regimes, in countries like Venezuela, Ecuador, Bolivia, Egypt, Indonesia, the Philippines, Argentina, and post-FSLN Nicaragua.

In Vietnam’s case, far from helping to solved its political problems in the Central Highlands, the Politburo discovered that their neoliberal reforms had inadvertently helped to revive the Dega separatist movement. Evidently, economic and political liberty did not always go hand in hand.

At least the Politburo and their foreign advisors did have something to show for the coffee strategy, however. In 2000-2002, the profit margins earned by the five giant companies that dominated the global coffee market were higher than ever. Furthermore, cocaine producers in the Andean region no longer had to worry about small farmers substituting coffee for coca. In Colombia’s traditional coffee-growing regions, just the opposite started to happen in the late 1990s, as many farmers converted coffee fields to coca, in the wake of the coffee glut.

Indeed, from 1995 to 2001, coca cultivation more than tripled in Colombia, including a 20 percent increase in 2000-01 alone. This occurred despite hundreds of millions of dollars spent by the USG on coca eradication efforts, the so-called “centerpiece” of its “Plan Colombia.” In 2000-01, coca production started to increase again in Peru, Bolivia, Ecuador and Venezuela. There were also reports that farmers were even turning away from coffee and towards coca in areas that had never before seen coca, like the slopes of Kenya’s Mount Kilimanjaro. Cocaine production from the Andean countries also rose sharply from 1998 to 2002.

After all, unlike coffee, at least coca and cocaine were products for which both the farming and the processing could be done at home.

EXAMPLE - THE IMPACT ON NICARAGUA

Overall, by 2003, Nicaragua’s real per capita income had fallen to $400 (in real $1995), roughly its 1951 level. With population growth averaging 2.4 percent a year in this overwhelmingly Catholic country, the economy would have to grow at 5 percent a year for 30 years just to recover the 1977 per capita income level – compared with the actual average growth rate of 1.3 percent during the 1990s. By now, the country’s entire national income is just $11.2 billion, less than three Starbuck’s annual revenues.

By 2003, underemployment levels exceeded 60-70 percent in many parts of the country, and the overall proportion of people living in poverty was 67 percent, second only to Honduras in Latin America. This means that there were some 1.6 million more Nicaraguans living on the borderline of existence than in 1990, at the end of the contra war.

Earlier, in the 1980s, the Sandinistas had been justifiably proud of their health, education, and literacy programs. Even in the depths of the contra war, rates of infant and maternal mortality, malnutrition, and illiteracy had declined. Infant mortality fell sharply from 120 per 1000 live births in 1979, immunization coverage rose, and the share of the population with access to health care increased from 43 percent to 80 percent.

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In the 1990s, however, there were sharp increases in all these maladies, aided a 75 percent cut in public health and education spending by 1994. By 2000, Nicaragua was spending four times as much on debt service as on education, and a third more than on public health. The infant mortality rate was still 37 per 1000, and the under-age-five mortality rate was 45 per thousand, among the highest in Latin America. (Cuba’s equivalent rates, for comparison, were 7 and 9 per thousand.) As of 2000, 12 percent of Nicaraguan children were underweight, and 25 percent were under height. More than 22 percent of children under the age of 9 – 300,000 children -- were malnourished. By 2000, 37 percent of school-age children were not enrolled in classes, and illiteracy, which an intense campaign by the Sandinistas in 1980-81 had reduced to 15 percent, had climbed back up to 34 percent, and was even higher in rural areas. Women’s rights also suffered, as the Church conspired with the new conservative governments to drive abortion underground, even at the cost of higher maternal mortality rates because of botched illegal abortions.

Coincidently, Nicaragua’s $400 per capita income was almost exactly the same as that of the Socialist Republic of Vietnam, its new direct competitor on the other side of the planet. Indeed, in one of history’s many ironies, these two formerly “leftist” countries were now passing each other on the globalization escalator, heading in opposite directions. By 1998, if we believe the statistics published by the UNDP, Vietnam’s poverty rate had dropped to 37 percent, below Nicaragua’s, while adult literacy had reached 94 percent, above Nicaragua’s (declining) rate of 63 percent. Vietnam’s average life expectancy had also matched Nicaragua’s 68.3 years. And far from having a chronic foreign debt crisis, which Nicaragua has had since 1979, Vietnam became one of the development banks’ darlings, as we saw earlier, drawing down $2 billion a year in concessional finance throughout the decade, plus more than $30 billion in foreign investment. Yet Vietnam’s ratio of debt to national income was just 35 percent – not exactly low, but only one-tenth that of Nicaragua’s.

Furthermore, with all the outside help, on top of its entry into the coffee export market, Vietnam’s growth rate averaged more than 9 percent a year in the 1990s, even as Nicaragua’s growth stagnated. In 2001, when Vietnam’s Ninth Communist Party Congress adopted its “Tenth Ten Year Strategy” for the period 2001-10, the World Bank and the IMF were both on hand in Hanoi to celebrate with yet another generous structural adjustment loan program – carefully shielded, of course, from any angry Montagnards who might wish to complain.

All told, by the New Millennium, out of 173 nations ranked by the UNDP according to their “human development” metrics, by the year 2000, Nicaragua had dropped from 68th in 1980 to 118th. It passed Vietnam on the way down, which was in 101st place and rising. The responsibility for Nicaragua’s decline appears to have been almost evenly divided between the contra war of the 1980s and the neoliberal war of the 1990s. Relative to more prosperous (haven) neighbors like Panama and Costa Rica, as well as to the pro-US, military-dominated abattoirs to the north, Guatemala and El Salvador, Nicaragua’s relative decline has been even more striking.

So evidently it wasn’t enough to pull off a revolution and defeat a US-backed puppet army, as both Vietnam and Nicaragua had succeeded in doing. Daniel Ortega and his comrades must have occasionally wondered a little wistfully, “If only we had managed to install a full-fledged, centrally-planned Communist dictatorship, as we were accused of trying to do! Maybe the world would have been as generous to us as it has been to the Socialist Republic of Vietnam!”

***

© James S. Henry, SubmergingMarkets™, 2004. All rights reserved. No reproduction without express consent of the author.

April 11, 2004 at 08:46 PM | Permalink | Comments (0) | TrackBack

Monday, March 01, 2004

Pentagon Strategy Crisis? "New "Secret" (Actually, NOT! Report:" "Global Warming a Greater Threat Than Terrorism!!"

"U.K. Climate Becomes"Siberian" in 17 Years"
"Neth. Floods by 2007"
"Massive Droughts, Famines, Water Shortages in Asia, Africa, Middle East"



Printable PDF Version-This Article

Download PDF -"Unthinkable" Schwartz/Randall Report

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As if the world did not already have enough problems, the last few months have raised the ugly specter of global warming once again, perhaps more forcefully than ever. As we'll see below, there are indeed many recent indications that this problem is -- beg your pardon -- now "heating up." Moreover, one of the more interesting developments comes from the belly of the beast itself, the Pentagon's Office of the Secretary of Defense (OSD), by way of a so-called "secret report" ( according to The Guardian/Observer) that the Pentagon reportedly solicited from two prominent California "futurists" and part-time Hollywood war/disaster-film consultants.

In fact, it turns out that the The Guardian/Observer reporters didn't do their homework. While their February 22 story claimed that this Pentagon report on global warming by California futurists Peter Schwartz and Doug Randall was "secret," Fortune Magazine had obtained and released a copy from the Pentagon on January 26, and SubmergingMarkets has obtained a copy of the so-called "secret" report's Executive Summary, which may be downloaded above or below.

The report, entitled "Imagining the Unthinkable: An Abrupt Change Scenario and Its Implications for US National Security," does make for interesting reading. The authors, private consultants who work for Monitor Group/GBN in California and specialize in "long-run scenario planning," have generated a provocative scenario for the effects of an abrupt, discontinuous change in the world's climate. It involves a hefty diet of chaos, famine, drought, and war, as well as a whole new ice age. The melodrama is perhaps not surprising -- after all, one of the two consultants, Peter Schwartz, has also advised on plot development for films like Minority Report , War Games, and Deep Impact. And, of course, scenario designers, like script writers, don't get paid very well for imagining minor variations on the status quo.

As the Pentagon report itself acknowledges, it is not a "forecast," but a "what if?" exercise in "thinking about the unthinkable,"in the great tradition of Dr. Edward Teller and DOD's "wintry doom" scenarios of the late 1950s and the 1980s. The aim was to construct a "plausible," if not necessarily probable, scenario, in order (in the authors' words) to "dramatize" the possible consequences of "an abrupt slowing" of the ocean's "thermohaline circulation" (TC), the deep ocean currents that have a profound influence on subsidiary ones like the Gulf Stream and the Humboldt Current.

The possible link between global warming and TC is not a new idea. Most of us probably imagine, and certainly hope, that the effects of global warming will be gradual, leaving us -- and our trusted technologists -- plenty of time to react. But in fact there is a growing body of evidence that global climate change can occur quite fast and be very destabilizing. The notion of "abrupt change" has been gaining ground in the world's scientific community since at least the 1980s. And many scientistshave expressed concern about the potential impacts of global warming on TC.

As the authors of the Pentagon report acknowledge, at this point most leading scientists probably believe that the impacts of a TC shift would be "considerably smaller" and more localized than their report assumes. However, what is perhaps most frightening is just how limited our understanding of the potential for "abrupt change" apparently is. Just this month, the US's National Science Foundation and the UK's National Environmental Research Council launched a new four-year project aimed precisely at understanding the TC-global warming relationship.
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By dramatizing the importance of this relationship, this "pseudo-secret" report has served a useful purpose. Of course its release is unlikely to please the Bush Adminstration, which has so far adopted a head-in-the-sand attitude toward global warming, including its refusal (together with Russia and Australia)to sign the Kyoto Treaty.

The hapless Guardian/Observer also erred in its claim that the report was "suppressed by US defense chiefs." It also claimed that the report's release "will prove humiliating to the Bush Administration..." So far the report has only clearly proved 'humiliating" to The Guardian/Observer.

However, SubmergingMarket's review of the global warming issue suggests that -- well, my goodness, as Donald Rumsfeld might say, someone in the Bush Administration really should take these matters more seriously! Evidently we have someone in the Pentagon OSD, or at least Monitor/GBN, to thank for underscoring this fundamental point.
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We just hope that the task is not just left up to folks like Andrew Marshall, the 82-year old waspish Dr. Strangelove who has been in charge of the Pentagon's "long-range strategic planning" since 1973. He may have contracted for this doomsday report, but he also recently raved about giving our troops "bio-engineering" drugs to make them fight harder. Clearly he has too much time and money on his hands. (See below). Nor should it be left in the hands of his two hip California futurists, neither of whom has any scientific credentials, and one of whom (see below) predicted in 1999 that the US was on the verge of 25 years of uninterrupted economic growth(..just a year before the 2000-2003 global recession)! As the Secretary might say, My golly! Can't we do better than this? Is this why we're spending $401 billion this year alone on non-Iraqi "defense?"

BACKDROP - SINKING ISLANDS, TARDY ICE, MISSING BEARS

Before we turn to the Pentagon report, let's examine the context -- a growing body of evidence that we may indeed have to pay a very high price for our inactions on global warming. Among the recent indicators:

  • In December 2003, Russia followed in the footsteps of the US and Australia, and refused to ratify the Kyoto Treaty. This was probably more of a short-run bargaining tactic than a Bush-like idee fixe. Absent US support for the Treaty, Russia's vote is needed to make it an international law, which requires its signature by countries responsible for at least 55 percent of all greenhouse gas emissions. Without US participation, Russia lost a huge market for the "pollution credits" that it hoped to sell to over-polluting American companies. It also has its own oil and gas industry to protect, and is bargaining with the EU for more favorable terms, as it enters the WTO.
  • In any case, further consideration of the issue will now be deferred until another conference in 2004. The EU and Russia had wanted to hold off until after the US elections, but a coalition of 40 small island countries blocked the delay -- several of them, including the Marshall Islands, Kiribati, and Tuvalu in the South Pacific, are already sinking into the sea, literally becoming "submerging markets."

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  • In late December, the prestigious American GeoPhysical Union reported that carbon dioxide emissions are now growing faster than ever, and concluded that "It is virtually certain that increasing atmospheric concentrations of carbon dioxide and other greenhouse gases will cause the global surface climate to become warmer."
  • Meanwhile, in December, representatives of Alaska's 155,000 Inuit tribespeople filed a human rights complaint against the Bush Administration with the Inter-American Commission on Human Rights in Washington, D.C., on the grounds that they face virtual extinction because of global warming. According to them, the oceans that surround them are now warmer than ever, the permafrost that supports their homes and roads is melting, the ice arrives later and leaves earlier every year, and polar bears and seals are disappearing.
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  • In early January 2004, Nature, the influential peer-reviewed science journal, published a study that predicted that by 2050, 15% to 37% -- up to 1 million in all-- of all animal and plant species on the planet may be made extinct by climate changes.
  • Also in January, in a vivid demonstration of just how concerned many scientists are about this issue, a conference of leading experts from the UK and the US met at Cambridge University, and considered a variety of rather extreme technical solutions to global warming, including the deployment of "tens of billions of wafer-thin metal plates... into the Earth's low orbit," the growth of huge algae beds in the oceans, and the construction of massive cloud-generating machines that would shield the earth from the sun.
  • Just this month, in a warning that captured the attention of everyone who enjoys scuba diving, a study by scientists at Queensland's University concluded that Australia's Great Barrier Reef will completely disappear by year 2050, if ocean temperatures continue to rise at current rates. This is significant because, as noted, Australia, like the US and Russia, had refused to sign the Kyoto Treaty.
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  • In January, Scottish fishing experts also reported a decline in wild salmon stocks, just as the fishing season was opening. They attributed the decline to global warming.


BACKGROUND - THE PENTAGON'S GLOBAL WARMING STUDY

On top of all this, we now have this week's dramatic leak of a new Pentagon analysis of the national security implications of global warming. According to this report, which The Guardian described as "secret," the implications would be nothing short of catastrophic. Indeed, according to The Guardian, "The few experts privy to its contents.....(say) (T)he threat to global stability vastly eclipses that of terrorism.."

Since this report collides head on with the White House's antipathy toward the whole concept of global warming, and also undermines its case for the primacy of fighting terrorism, the Pentagon has a few strategic challenges to sort out. It will be helpful for us to understand the origins of the report.

INVISIBLE MAN

According to The Guardian, the Pentagon global warming study was undertaken at the instance of its 82-year old in-house futurist, Andrew W.Marshall . Marshall is a life-long military strategist, one of the few who worked with such legendary war-hawks as Dr. Edward Teller and Albert J. Wohlstetter. Throughout the 1950s, Marshall worked at The Rand Corporation in Santa Monica as a cold war gamer. In 1969, he succeeded Dr. James Schlesinger as Rand's Director of Strategic Studies, when Schlesinger joined the first Nixon Administration.

During the next four years, Marshall authored what turned out to be one of the seminal works on US-Soviet strategy -- "Long-Term Competition with the Soviets: A Framework for Strategic Analysis," published in 1972. This report basically ported the whole concept of competitive strategy to the world of military planning. At the Pentagon, which had heretofore evaluated programs and budgets in terms of narrow, technical criteria rather than their contributions to strategic value, this approach was considered revolutionary. In May 1973, Schlesinger, who had just become Nixon's Secretary of Defense, appointed Marshall to be the Director of the Office of Net Assessment a new post in the Office of the Secretary of Defense that assumed responsibility for long-run military strategy. Marshall has held this post more or less continuously ever since.

In this capacity, Marshall has reportedly exerted enormous influence, as a kind of eminence gris -- the equivalent of George F. Kennan, the State Department's resident intellectual and policy planner during the 1950s -- only with twice the tenure. Marshall based his longetivity not only on strategic insights, but also on political skills -- he was content to stay in the shadows, bringing others along and helping them to succeed. Over time, he cultivated a loyal group of increasingly influential Pentagon officials, many of whom later converged on the second Bush Adminstration.

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This group is often referred to collectively as "neoconservatives." This is really a misnomer -- there is nothing at all about their policies that is "conservative." A more accurate term is "ultra-imperialists," or simply, ultras. Among the best known are Rumsfeld, Paul Wolfowitz, Richard Perle, Eliot Cohen, and James Roche, the Secretary of the Air Force.

Partly through Marshall's influence, this group came to share several strong beliefs about national security.


  • They have all regarded 'long-term competitive military strategy" as a serious, high-minded intellectual enterprise -- a rational endeavor that one could count on for useful results.
  • They have all generally believed that the demise of the Soviet Union, their old long-term "enemy," owed a great deal precisely to this kind of rational military and economic competitive strategy -- as implemented by Ronald Reagan during the 1980s. It was no longer just a theory; its value had been proven in combat.
  • Most of the ultras have also shared Marshall's boundless technological optimism -- his confidence in the capacity of the US economy and technology to provide a continuing, even growing competitive advantage over potential rivals.
  • They saw the US as a largely innocent "democracy," with clean hands and high principles. In their view, the US has never had a desire to possess or occupy other countries -- well, not at least since 1946, that is, when the US occupation of the Philippines formally ended. It only wished for other countries to develop "free market" economies, which it saw as a guarantor of peace, development, and prosperous trade for all concerned. As such, they believed that the US had every moral right to leverage its superior powers to its advantage, regardless of what the rest of the world might think. It had, first of all, the absolute right to act in its own (perceived) defensive interests. It had, moreover, the right to act on behalf of other important interests that it might deem necessary, even unilaterally.

    As the novelist Graham Greene once said, "No country has had better motives for all the damage that it does."

  • The ultras also were traditionally quite proud of the fact that, unlike many of its enemies (especially the Soviets, the Chinese Communists, the Cubans, and so forth), the US has always maintained a relatively open society, with relatively free and open borders, a long history of welcoming immigrants regardless of financial means, or (with notable exceptions) even national and ethnic origins, and relatively modest police controls on ordinary citizens that were in case subject to a very strong bill of rights.

These shared values are important for us to understand, because every single one of them is now being called into question, not through abstract disputations, but by the new harsh realities that the US faces on the ground. This is evident, not only in the Pentagon's recent experiences in Iraq, Afghanistan, and the "global war on terrorism." It is also evident in the recent immigration crisis, occasioned by the growing tide of immigrants, mainly from Mexico and Central America, that has recently crossed our borders. And it is also evident in the challenges noted in the Pentagon's recent global warming study, which has profound implications for all these other problems.

OTHER PROPENSITIES

Along the way, there were also many other Marshall sympathizers whose motives were perhaps a little less high-minded than those who had been his intellectual comrades and proteges. These included many leading US defense contractors and their Congressional allies. Over time, Marshall's ONA developed strong, mutually beneficial ties to such key constituencies, and provided on-the-job training to a steady flow of future top industry executives and Congressional staffers.

In his procurement recommendations, Marshall also tended to err on the side of (a) perceiving huge threats that -- quite coincidentally, of course -- almost always required extremely costly, technology-intensive weapons systems, from anti-ballistic missiles systems, precision-guided missiles, remote sensing, and meteorological manipulation to unmanned combat vehicles, holographic projectors, sea-bed robotics, and particle beam weapons. As the Batman's Joker once said, "Where do they get all those FABULOUS TOYS?"

Of course, most of Marshall's activities took place behind closed doors. (See the recent Submerging Markets white paper on Intelligence Failures).So we only have a few snippets in the public record to help us assess his performance, like his reported exaggeration of the continued Soviet threat in the early 1990s, and his agonizing search for a worthy successor to the Soviet Empire, for which he ranged from China to North Korea, and finally, with the help of fellow ultras like Bernard Lewis and Samuel P. Huntington, ended up with (the somewhat confusing blend of ) the "Islamic fundamentalist horde" and the "Axis of Evil."

But there is at least one good publicly accessible example of Marshall's appetite for expensive, hair-brained technologies -- one of his most recent fetishes, "bio-engineered soldiers." This involves the use of behavior-modifying drugs to achieve specific battlefield conduct. (I am not making this up.) As he observed in a rare public appearance at the University of Kentucky in August 2002,

“The drugs would affect specific receptors and would act just like the internal chemistry (of the brain). We could create fearless soldiers, soldiers that would stay awake longer or be quicker and more alert... These new types of drugs or biochemical agents could create a new model of man."

For Mr. Marshall, apparently "the war on drugs" meant "(DOING) the war on drugs"! One would of course suppose that he must have discussed this loony idea -- which would open the door to all sorts of misbehavior -- with Rumsfeld,,his immediate boss, who, after all, had in the late 1970s served as the CEO of GD Searle, one of the nation's largest drug companies. Evidently the boss did not discourage him from these meditations. The mind boggles at the prospect of thousands of young men and women, no longer consciously serving their country as proud citizens, with honor and dignity, but "doped up," marching fearlessly slavishly into battle, doing whatever they're told......

Of course, if Marshall was willing to ponder this kind of policy in public, just imagine the other flights of fantasy that might be available to those with the security clearances to see them! (Admiral Poindexter, where is thy sting!) Given what we do know, it is not really surprising that Marshall was almost ousted in the late 1990s by President Clinton's Defense Secretary, William Cohen -- a sober Maine Republican. The dismissal was reportedly avoidedat the last minute by way of Marshall's many friends in Congress and the defense industry, plus the neocon press, which portrayed him as lying awake nights, worrying about defending our freedoms, not about how to induce killing sprees by the infantry with pharmaceuticals.
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After President George W. Bush took office in 2001, Rumsfeld became Marshall's boss again, and soon placed him in charge of a strategic panel that was one key part of a fundamental rethink that Rumsfeld described, with typical modesty, as a "Revolution in Military Affairs." (RMA)

One might have thought that, even apart from his age and eccentricities, Andrew Marshall might not have been the best choice to lead such a strategy validation, especially after 9/11. After all. he'd spent thirty years designing strategies for a very different kind of adversary. The contrasts between the Soviets and the new global threat environment were many:


  • "Competitive strategy" was much easier to define when the conflict was among more or less symmetrical "hegemons" like the US, China, and the Soviet Union. When opponents are not battling for nations, but for the vindication of ideas, movements or deeply-felt antipathies, and are disbursed across the globe rather than concentrated in a few countries, notions like "competition," "wartime," "combatant," "preemption," "deterrence," "victory," and "power" are no longer well-defined.
  • Arsenals of conventional "anti-state" weapons, like jets, aircraft carriers, missiles, and tanks, are designed to destroy fixed positions, attack large groups of mobile forces, or wipe out concentrations of troops and seize territory. These may no longer be decisive against the latest post 9/11 generation of adversaries. At the same time, they can easily become resource sinkholes, because of their "semi-custom" production economics and very high maintenance and logistics costs.


  • "High technology," can easily become a narcotic, while "low technology" can be surprisingly effective -- partly just because relying on it "enforces" creativity. The limiting case here is of course the box cutter and the hijacked plane. But once an enemy has defined "victory"as simply being able to disrupt civilian society, the list of potential "weapons of massive-enough destruction" becomes endless. Yhe cost of defending against all the endless possibilities also becomes prohibitive, so that even "successful" defense is bittersweet.


  • In this context, Marshall's conventional "competitive strategy/scenario planning" apparatus of the Cold War period had became a clear disability, probably as early as the mid-1990s, and certainly by the end of the 1990s. Similarly, "strategic planning" in the private sector also went the way of all flesh in the 1990s, for most large companies. In the private sector, when such practices ceased to be productive, there were at least some natural forces that encouraged them to disappear -- though even there, many companies failed to move quickly enough. (Viz. AT&T, Polaroid, Xerox, etc.) In the context of the massive Pentagon bureaucracy, with its hundreds of thousands of staff, government regulations, security procedures, restrictions on hiring, limited performance bonuses, restrictions on firings and transfers, and endless red tape, casting such entrenched practices aside in favor of greater focus on creativity, rapid adaptation, and innovation is almost impossible.

    In effect, these bureaucratic "diseconomies of scale" go a long way toward evening the odds between the "1-bullet guerilla" and the entire US military. One imagines poor Marshall, sitting in his Pentagon bastion, ruing the day that the enemy stopped being the mighty Red Army. He had met the enemy, Pogo, and he recognized the face.



Despite all these disabilities, Rumsfeld decided to rely on Marshall for the strategic panel of his RMA assessment. Marshall, in turn, must have realized that when it came to analyzing non-conventional threats like state-less terrorism or global warming, he needed to pull in some outside resources who were perhaps not so captive of traditional approaches. That set tthe stage for the production of the confrontational global warming analysis that has just now reached the light of day.

BACK TO THE FUTURISTS

To get a handle on such non-traditional issues, Marshall reached out to Peter Schwartz, a well-known "futurist," and the co-founder and Chairman of California's Global Business Network,, now part of Cambridge-based Monitor Group. GBN's other co-founder and fellow futurist, Stewart Brand, was the author of the "Whole Earth Catalogue," and founder of the "Long Now Foundation," an organization devoted to extremely long-term thinking, including the construction of a 10,000 year clock. Schwartz, the elder of the Pentagon report's two authors, is not trained in environmental science, but he does have a B.S. in Aeronautical Engineering from Troy's Rensselaer Polytechnic. He also served as director of the Stanford Research Institute's "Strategic Environment Center," and a "Scenario Planner" for Royal Dutch Shell from 1982 to 1986, during the heyday of corporate planning, before GBN's creation in 1987. In addition to the Pentagon, Schwartz has also consulted to the CIA, Darpa, and many Fortune 500 companies. He's also advised Hollywood film-makers on the plots of several successful war/action films, including Deep Impact, War Games, Sneakers, and Tom Cruise's Minority Report.

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Schwarz

Schwartz has also authored several books, including a 1991 best seller on "scenario planning," "The Art of the Long View." In 1999 he published a less fortunate book The Long Boom (1999),co-authored with Peter Leyden and Joel Hyatt, in which they predicted "25 years of uninterrupted economic growth and prosperity." Of course, as we now know, this prediction was undermined by the global recession that started just one year later.

However, this did not deter Schwartz from continuing to pursue long-range planning and analysis. In an interview associated with the publication of his latest book, Inevitable Surprises (June 2003), he still maintains that his "long term boom scenario" will hold up, at least over the next half century. And while there will always be shocks and surprises, he still sees great value in scenario planning -- according to him, "September 11 was the most predicted event in history."

For purposes of the Pentagon report on global warming, Schwartz teamed up with Doug Randall, a Wharton graduate and a GBN "senior practitioner," who also had no environmental science training. This was not their first collaboration. In an April 2003 article in Wired Magazine, they argued that the US Government should undertake a massive 10-year, $100 billion program to develop hydrogen power as a substitute for imported oil.

That timetable is much more aggressive than the "several decades" that many other experts regard as necessary to develop the economical fuel-cell technology and hydrogen distribution systems required for basing mass transportation on hydrogen. But this difference of opinion may really just derive from the fact that, unlike Peter Schwartz, most of the other experts have not invested "in two companies that are now developing hydrogen power." Apparently in this instance, President Bush agrees with Schwartz, because he has also recently advocated the development of fuel-cell-based "Freedom Cars" as an alternative to requiring any better fuel efficiency from car manufacturers now.

DIRE STRAITS

The "secret" Pentagon report produced by the two GBN futurists is nothing if not dramatic. According to them, the world may now be headed for a period of profound, sudden, discontinuous changes in climate, with a possible reversal of the gradual recent trends toward warming, followed by rapid cooling and perhaps even a new ice age in much of the world. Among the many side-effects that all this might have:

  • Flooding of the Dutch seacoast and the Hague as early as 2007;
  • By 2010, the US experiences a third more days per year with peak temperatures above 90F.
  • The imminent prospect of historically low mean temperatures in Western Europe, including "Siberia-like" conditions in the UK by 2020;
  • Large-scale famines in southern Africa, India, and China;
  • Acute water shortages in the Middle East, the Amazon Basin, and the Nile Delta;
  • The likelihood that the US and Europe may become "virtual fortresses," to prevent inundation by millions of destitute immigrants from the increasingly-uninhabitable Third World, where the lives of more than 400 million people become at risk.
  • Low-lying countries like Bangladesh become virtually uninhabitable.
  • As international tensions over food and water increase, there are much greater incentives for countries like Japan, Germany, and South Korea to acquire nuclear weapons, and to use them.


Not surprisingly, this scenario lines up almost exactly with the pro-hydrogen logic that Schwartz has recently been propounding around the country and in his recent book. But it does appear to be a bit too choppy to reconcile with his other favorite scenario, the vintage 1999/03 "long-growth boom. "

In any case, the disturbing portrait provided by Schwartz and Randall of the possible downsides of global warming is not likely to curry much favor with the Bush White House, or with other persistent critics of global warming theory. After all, the "secret" Pentagon report on global warming has appeared just five months after the Environmental Protection Agency, at the instruction of the White House, deleted the entire chapter on global climate change from its annual report on air pollution, and for the first time in six years made no reference at all to the problem in that report. Perhaps the Adminstration's insouciance explains why the Pentagon report was leaked in the first place -- certainly it would have done little good, locked up forever in some classified vault. The leak probably would also not have harmed the stock prices of certain hydrogen-related investments - assuming there are any.

All told, the report does offer a pretty nightmarish set of scenarios. Less polite commentators might also apply words like "pseudo-scientific." Evidently there's no real effort here to build a complex forecasting model, and no way to the scenarios that were constructed, other than to double-check their internal consistency. Even if there had been an effort to construct a full simultaneous-equation system, our actual knowledge of underlying natural and economic relationships is often so weak that the game is often not worth the candle. One is reminded of the disparity in forecasting performance between the huge, complicated, multi-equation econometric models that try to specify detailed relationships about what is really going on, and simple one-line autoregressive models -- the latter routinely outperform the former. So "theory" is neither necessary nor sufficient for prediction. And the Pentagon report, as Schwartz is wont to say, is happy just to provide "scenarios," not forecasts.

Despite this limitation, a good hard-hitting, logical scenario can be very useful as a way of galvanizing pubic attention. At this point, pending the declassification and release of the full study, it is impossible to judge its real quality. Still, perhaps Andrew Marshall really just wanted enough "meat on the bone" to make his underlings think, call attention to the wide range of potential outcomes, or -- who knows -- perhaps even to toss a bone to the President's opponents, for reasons of their own. I suspect that what the Pentagon planners really got for their money was not much more than a wild-eyed Hollywood script and a few days of media attention for their long-run thinking. Beyond that, they almost certainly did obtain a release from the straightjacket of "competitive strategy" and their really quite restrictive ultra assumptions.

CONCLUSION

So what do we conclude from all this? Stepping back from the Pentagon report's apocalyptics, it does concur, in broad strokes, with the growing sense of urgency among many professional scientists about global warming, and our own sense that the case for taking action is now stronger than ever.

For example, the UK's chief science advisor, Professor Sir David King also stated just last monththat he now sees global warming as a much larger threat than terrorism, and he condemned the Bush Administration for "failing to take up the challenge of global warming."

Whether we really needed the "graphic arts" of Schwartz and Randall's detailed scenarios to drive this home is not clear. The point is that the time for preventive action is here.

Unfortunately, this being a US election year, with many people still preoccupied with jobs, health insurance, Social Security, and the costs of education, let along Iraq and terrorism, we are unlikely to find many politicians who are willing to give this issue top billing. After all, they'd have start with the basic fact that, with just 4 percent of the world's population, the US still generates at least 20-25 percent of the world's greenhouse gas emissions. And then they'd have to move on to discuss the purgative diet of tax increases, emissions controls, other regulations and new investments that would be required to cut this fraction significantly. Having failed to tackle this issue for so long, through Democratic and Republican Administrations alike, by the time we get around to it, the solution will be no doubt very costly. The only consolation is that if there is anything to the Pentagon scenarios, the alternatives could be even worse.

***

©James S. Henry, SubmergingMarkets.Com, 2004. All rights reserved. Not for reproduction or other use with express consent.

March 1, 2004 at 07:00 AM | Permalink | Comments (2) | TrackBack

Sunday, February 01, 2004

Third (and First) World Ferry Accidents – “Tragic Misfortunes” or Predictable Consequences?

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News Flash! - Another Tragic Ferry Accident in the Congo! - Hundreds Missing!
Ferry Accident on Zambezi Claims 18 Lives!
Flash! - Ferry Mishap in Bangladesh, 300 Feared Dead!
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Evidently January 31st is not the best day of the year to take a ferry ride. This marks the 50th anniversary of one of the worst ferry disasters in the UK’s history – the 1953 sinking of the Princess Victoria, a British Rail car ferry that was caught out in unusually stormy seas in the Irish Sea, with the loss of 130 lives. And just today (1/31/2004), in northwest Congo, an overloaded ferry caught fire and sank on the Congo with the loss of at least 200 lives.
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Such ferry mishaps have long been a staple item of disaster news all over the globe. With few exceptions, most conventional media coverage presents them -- and of course all the damage done by mudslides, forest fires, and earthquakes as well -- as "tragic accidents," the almost-unavoidable byproducts of happenstantial factors like overcrowding, bad weather, crew mistakes, fires, and collisions that are (ala Les Liason Dangereux)"beyond our control."

However, a closer look reveals that more systemic factors are also at work, not only in the Third World, but also in the First.


STATEN ISLAND “MISHAP”?

The Staten Island Ferry, the US’ second most popular, is normally safe and reliable. It carries an average of 70,000 people back and forth each day to Manhattan. So New Yorkers were suitably shocked last October when the 3335-ton ferry plowed into the docks on Staten Island at 17 knots, killing 11 people and injuring at least 42.

As a result, financially-strapped New York City has already been sued for more than $3 billion in damages, and has had to ask a court to invoke a maritime statute that may limit its liability to the value of the vessel -- a paltry $14.4 million.

But this limitation could depend on where the blame is ultimately placed. Initially the City tried to place it entirely on individual crew members – for example, a possible medication-induced blackout by the pilot, the alleged absence of the ferry’s captain from the wheelhouse, and the possibility that other crew members may have been playing cards rather than keeping watch.

However, since Federal prosecutors and the US Department of Transportation’s (DOT’s) National Transportation Safety Board have entered the investigation, it seems that other more systemic contributing factors are emerging. These include the Port Captain’s alleged failure to distribute and enforce safety rules, the absence of state-of-the-art navigational equipment and warning systems that are routinely used, for example, on Seattle’s ferries, and inadequate training programs for crew members. There also appears to be a general pattern of nepotism and corruption in the management of the entire Staten Island ferry system.

While it is premature to reach final conclusions about the relative influence of these various factors, it is already clear that the "pure accident" theory of this event -- the worst accident in Staten Island Ferry history -- is inadequate.

THIRD WORLD FERRY “ACCIDENTS”?

The residents of sub-Saharan Africa, as well as countries like Bangladesh, the Philippines, Indonesia, and China, are intimately familiar with all these pathologies. They must have marveled at the attention that was showered on the comparatively small Staten Island accident by the global media. After all, these countries routinely suffer ferry accidents that take hundreds and even thousands of lives.
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We’ve already noted the latest Congo River mishap. A cursory review of other accident reports shows that in 2003 alone, another Congo ferry “accident” claimed 163 lives, one in Bangladesh claimed “hundreds,” and there were others in Tanzania, Somalia, Zambia, and Burundi that took an average of fifty lives each. In 2002, yet another Bangladesh ferry “accident” claimed 300 lives, one in Indonesia took 60, and in Senegal, a ferry loaded with 1800 people, twice its capacity, flipped over, with no survivors. There have been literally hundreds of other such sinkings. The all-time record appears to have been a Philippines sinking in 1987 that claimed 4,341 lives – the greatest number of ocean fatalities in nautical history.

Of course any one of these incidents, taken in isolation, may be understood as a “tragic mishap.” But from a slight distance, what is most striking is how repetitive they are – not only in terms of the specific countries involved, but also the very same locations in the rivers and oceans, the very same ferry owners, the same regulatory authorities, and in some cases even the same (salvaged) vessels.

(Indeed, in the case of the Staten Island Ferry, the most recent 2003 incident had similar, though much less costly, precursors in 1998, 1992, 1978, and perhaps others.)

All this suggests that, as is now coming to light in Staten Island, what we have here are not just random accidents and errors, but recurrent market and regulatory failures.

In particular, the fact is that, especially (but not exclusively) in the developing world, ferry owners – whether public or private -- almost never face any substantial civil liabilities or criminal sanctions for such mishaps after the fact, and the safety and training regulations that they implement before the fact are often wanting. Furthermore, as in the case of New York City’s efforts to limit liability, lawsuits in these countries may not afford any adequate relief where ferries are state-owned. And pursuing them is also often beyond the means of the victims' families.

Given this after-the-fact impunity, there is little incentive for ferry owners or managers to enforce restrictions against overcrowding, or to invest in adequate crew screening, training, and drug testing, as well as up-to-date navigational and safety equipment. New Yorkers, be warned….

The implication is that unless such conditions change, those of us who relish a regular diet of “tragic ferry accidents,” especially from the Third World, are unlikely to be disappointed. “Oh, the horror…..”

***

© James S. Henry, 2004. SubmergingMarkets.Com


February 1, 2004 at 02:15 AM | Permalink | Comments (1) | TrackBack

Monday, November 17, 2003

First World Criminals, Third World Crimes - Part 2: France's Heart of Darkness: The ELF Story.

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Loik Le Floch-Prigent


On November 13-14, 2003, the former CEO Loik Le Floch-Prigent and 22 other former executives of France’s Elf Aquitaine, plus seven other accessories, were sentenced by a French court to a few €millions in fines and no more than 5 years apiece in jail –- 14 of the accused got suspended sentences -- on charges that they had embezzled €300 million ($346.8 million) from the company from 1989 to 1993. These sentences, the culmination of an investigation that started in August 1994, determined that most of these thefts had been skimmed from secret slush funds managed out of Switzerland, Luxembourg, and Liechtenstein.

From our standpoint, the key fact is that these secret funds had originally been created in order to pay up to $130 million of bribes a year to senior officials in African countries like Gabon, Congo-Brazzaville, Cameroon, Angola, Guinea, and the Congo, as well as in Venezuela, Russia, Taiwan, Central Asia, China, Uzbekistan, and Kazakhstan.

Significantly, this extraordinary global corruption eventually “blew back” to France itself, where, according to Le Floch-Prigent, Elf paid at least €5 -€20 million in bribes per year to France’s leading politicians, ministers, and political parties -- not only Gaullist parties like Chirac’s RPR/UMP party, and former Interior Minister Charles Pasqua’s RPF, but also the Socialists and other parties.

Even after this extraordinary 9-year trial, we still lack much of the detail on precisely where all this payola went. However, as usual, some things can be said.

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de Gaulle and Chiraq


To begin with, it appears that most of Elf's transgressions were committed with the knowledge and tacit or active approval of every French President from Charles de Gaulle on down to Chirac, after de Gaulle created Elf and the original “black box” system in the 1960s.

In addition to these domestic political subsidies, Elf also paid out an extraordinary amount of personal payola to France’s political elite – including free airfare, sweetheart deals and payoffs for ex-wives and girlfriends, and fancy apartments. For example, when President Mitterrand's weekly golfing partner was threatened with losing his house near their favorite golf course, Elf bought the house and let him continue living there, all expenses paid.
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Francois Mitterand


Many of the key figures involved with these funds turned out to have top-level connections in the French government. After his stint at Elf ended in 1993, its former CEO, Le Floch-Prigent, was appointed by Mitterand and Jacques Chirac to serve as head of the state-owned utility Gaz de France and SCNF, the French National Railroad. Roland Dumas, President Francois Mitterand’s close friend and Foreign Minister in the 1980s, was convicted in 2001 of receiving Elf bribes in connection with an arms sales to Taiwan – though the conviction was overturned on a technicality in 2003.
Tarallo.jpegAndre Tarallo was a close friend and former classmate of French President Jacques Chirac (Ecole Nationale d'Administration, class of ’59), and an Elf employee since 1967.

From our standpoint, Tarallo is an especially important figure. During the course of his long career, he became known as Elf’s “Monsieur Afrique,” the “real boss of Elf-Afrique,” in charge of the company’s relationships with corrupt regimes all over Africa. Meanwhile, he also helped himself to $27 million worth of property, including a mansion in Corsica and one of the largest apartments in Paris. For all these efforts, 74-year old Tarallo received a four-year sentence and a €2 million fine.

This huge case has been nine years in the making. As it slowly wended its way to a conclusion, many cynics predicted that because the case is one of France’s most sensational corruption scandal ever,few convictions would ever be seen. However, mainly because of the perseverance of a handful of courageous judges and magistrates in France and Switzerland, the embezzlement charges ultimately stuck. But for evidentiary reasons as well as “pour raison d’Etat,” the French court limited the investigation to personal enrichment by Elf’s own officials. When it came to exposing the details of the many bribes paid in the Third World and the First, they drew a complete blank.
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Alfred Sirven

As noted, because of the sensitive nature of Elf’s payoffs, we are unlikely to ever learn the full story. Nevertheless, it is already clear from many other sources that Elf – France’s largest multinational company at the time, with owned refineries and gas stations throughout Europe, Africa and the West Indies -- became a cornucopia of global corruption. As Alfred Sirven, Elf’s second-in-command in the early 1990s, and the former head of Elf’s Geneva office, said at the trial this year, “I know enough to eliminate the whole French political class.” Or as the former CEO, Loik Le Floch-Prigent, said, “If the money sometimes ended up in an orphanage then I am very happy - but let's say it didn't always end up in an orphanage.”

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Gabon's Bongo


Among Elf’s many unsavory activities around the globe: (1) Elf developed incestuous, mutually profitable relationships with key African autocrats like Omar Bongo, Gabon’s ruler, the Congo-Brazzaville’s Sassou Nguesso, the Cameroon’s Paul Biya, PaulBiyaCameroon.jpg>

Cameroon's Biya

Jonas Savimbi, the Angolan rebel leader; Jose Eduardo dos Santos, Angola’s “Marxist” President; and Nigeria’s Sani Abacha.
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Congo's Nguesso


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Angola's dos Santos

For example, according to an investigating magistrate, $30-$50 million a year was placed in a secret bank account belonging jointly to Bongo and Tarallo, his close friend, and Bongo’s Presidential Guard was partly paid for by Elf. In Congo-Brazzaville, where Elf has lucrative refineries and other concessions, it supplied helicopters and financed arms supplies for rival leaders. In Nigeria, it reportedly paid bribes to secure a lucrative oil concession in 1995. All told, according to the French magistrate, Elf ran "a vast and opaque system aimed at paying commissions, via intermediaries, to certain African personalities.” saniabacha_and_kofi_annan.jpg

Kofi and Sani

fig. 3.1. Carlos Andres Perez.JPG

Carlos Andres Perez


(2) Elf allegedly paid $2.5 million in bribes to Venezuela’s President Carlos Andres Perez and other Venezuelan politicians in 1991-92, part of some $20 million in commissions that Elf was alleged to have spent in Venezuela.

(3) Elf allegedly made still more payoffs in China and Taiwan in connection with a 1991 arms deal – including millions of dollars that were allegedly paid to Zhu Rongii, the former Mayor of Shanghai who served as China’s Premier from 1998 to 2003, and to Foreign Minister Dumas, to secure their tacit approval for the deal. ZhuandClinton.jpg

Zhu Rongii and Clinton


These payments were reportedly made by Elf’s network in connection with the sale of six frigates to Taiwan by Thompson-CSF, another French company, in 1991. On this deal alone, the commissions reportedly totaled more than 30 percent of the $2.5 billion purchase price.

(4) Elf also allegedly made huge payoffs to Nadhmi Auchi, an obscure Iraqi-British billionaire who is reputedly Britain’s seventh wealthiest man, the largest shareholder in BNP Paribas, and – according to some – one of Saddam Hussein’s oldest cronies and private bankers. (They both took part in the attempted assassination of Iraqi leader Abdul Karim Qasim in October 1959.).
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Nadhmi Auchi


The Elf payoffs to Auchi, which he reportedly passed on to Spanish politicians and partly kicked back to Elf officials, were made in connection with its 1991 purchase of Ertoil, a Kuwaiti-owned oil refinery in Spain. Auchi, one of the 37 people charged by the French court, was given a two-year suspended sentence and fined £1.4 million, after having been found guilty of accepting illegal commissions from Elf worth $84 million.

(5) Meanwhile, back in the First World, Elf also allegedly paid at least €47 million ($54.8 million) in commissions to senior German ministers and a slush fund for former German Chancellor Helmut Kohl’s Christian Democratic (CDU) Party.

fig. 2.3. Dr. Dr. Batliner and Helmut Kohl.jpg

"Kohl and Liechtenstein Money Man"

These payments were made in connection with a corrupt privatization deal, Elf’s purchase of a chain of gas stations and the Leuna oil refinery in eastern Germany in the early 1990s. Elf received more than €1 billion in German subsidies to help it finance €2.4 billion cost of modernization costs for the refinery. Former Chancellor Kohl denied any involvement in the scandal, and German prosecutors were unable to make a case against him – especially after Kohl’s government destroyed millions of documents and two-thirds of its computer files during the three weeks after the CDU lost the 1998 German elections. However, one of those recently convicted in the November 2003 case in France was Dieter Holzer, a German lobbyist who had handled the refinery. He got 15 months in prison and was ordered to pay a €1.5 million fine and return at least €24 million in commissions.

  • A TOTAL REFORM?
Most of the alleged behavior listed above pertained to the period before Elf was privatized in 1994, and then merged with Total/Fina in 2000. So some have argued that the core problem here was that Elf was simply a corrupt state-owned bureaucracy, at the mercy of French politicians, and that privatization would fix the problem.

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However, it turns out that this “neoliberal” view of reform is extraordinarily naive. First, it usually take a long time to change corporate culture and interests. Second, as this recent 9-year Elf prosecution showed, even if senior executives are caught and convicted, the initial “loot” is so large, the investigations are so lengthy and complex, and the ultimate jail sentences and fines for such white collar crimes are so modest under present laws, on a “net present value” basis, crime really does pay quite handsomely.

So it should not be surprising that misbehavior by Elf and its new parent Total S.A. appears to have continued long after privatization. For example:
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Nazarbaev and Clinton<


(6) Total S.A. has recently been implicated by the US with participaitng with five other leading oil companies – including ExxonMobil, BP, and Royal Dutch Shell – in a consortium that allegedly paid millions in illegal bribes to Kazahkstan’s President Nazarbaev and former Prime Minister Balgimbaev in the late 1990s, to secure oil concessions.

(7) Elf and Total S.A. have also compiled an unsavory record of dealing with Burma’s SLORC/SPDC, one of the world’s most repressive military regimes. Together with Unocal and Thailand’s National Oil Company, in July 1992 Total struck a deal with the regime to exploit the Yadana offshore gas field, and to build a $1.4 billion gas pipeline across rebel territory to Thailand – with the help of forced labor. Throughout the 1990s, Total S.A. and Unocal were Burma’s largest foreign investors, with the pipeline and a related railroad accounting for more than a third of all foreign investment in Burma, and will provide the military its largest source of foreign exchange other than heroin. The “clean currency” provided by Total and Unocal to the regime helped Burma source mortars in Portugal and helicopters in Poland.

All told, then, what we have here is a clear demonstration of just how contagious corporate corruption can be -- and how it interacts with the power of the state to generate a long-term venal alliance that is extremely hard to unravel, once it is in place. From one standpoint, French justice worked -- after all, all these former Elf senior managers have at least been jailed and fined. But it took almost a decade to catch up with them, and apart from social disgrace, the actual fines and sentences they will suffer are relatively minor, compared with all the hundreds of millions still missing. Moreover, out of all the senior French officials who knew about Elf's behavior and tolerated or encouraged it, only one saw any jail time -- and his conviction was overturned on appeal.

Finally, perhaps the worst damage from this scandal has been suffered by the scores of developing countries where Elf/ Total has long used bribery to wield undue influence. While the names of those Elf bribed are still in many cases secret, we can be sure that this not only tilted public policy unfairly in Elf's favor; it also helped to spread corruption from the First World to the Third, and helped undermine the rule of law in these fragile environments.

So those who blithely criticize developing countries for having "corrupt governments" -- which many of them no doubt do -- might do well to remember the case of Elf. As this tale indicates, the fact is that for more than forty years -- and quite possibly still to this day -- the Government of France joined together with leading French corporations and banks, plus quite a few friendly bankers in Europe's top havens, and made it national policy to foster corruption throughout the developing world, in order to serve its own perceived national interests, and pocket a few bucks for influential insiders on the side. If this does not constitute "crime against humanity," the term has little meaning.

***

(c) James S. Henry 2003. Not for reproduction or other use without express consent from the author.

November 17, 2003 at 02:42 AM | Permalink | Comments (1) | TrackBack

Friday, November 07, 2003

South Asia - The Mystery of the "Missing Women," High Population Growth Rates, and The Limits of Choice

Indianwomen.jpg In the 1990s, India and its non-Communist neighbors on the Asian subcontinent -- Pakistan, Bangladesh, and Nepal -- followed the advice of UN experts and "pro-maternal choice" advocates, and bet heavily on a laissez faire approach to population control. This approach, which emphasizes education, family planning, maternal control, and the voluntary use of contraceptive devices, was supposed to be more humanitarian than the coercive approach that had been adopted by China, and briefly by India itself, in the 1970s. That approach had relied heavily on forced sterilzations, IUDs, and abortions, and heavy-handed ceilings on the number of children per family.

A decade later, as recent research on this region's demographics makes clear, both these approaches turn out to have serious limitations. For different reasons, they have both facilitated very high levels of infanticide against infant girls. And the laissez-faire approach has also utterly failed to restrain South Asia's population growth rate, which remains among the highest in the developing world. To transcend these problems will require the state to intervene, but in a much more intelligent way, by providing positive incentives to parents to "do the right thing."

Private Choice, Collective Insanity. To begin with, the voluntary approach to population control has not succeeded in reducing the overall populaton growth rate fast enough. As this The New York Times report indicates, population growth in India, and for that matter, in the whole South Asia region, continues at a very strong pace -- 1.7 percent a year. While this is below the 2 percent average recorded by South Asia in the early 1980s, it is 40 percent higher than the average for the rest of the developing world, and more than 2.3 times the population growth rate in China.

There are many factors responsible for these persistent growth rates, but among the most important are the relatively limited voluntary prevalence of contraceptives -- just 28 % of women in Pakistan and 49 percent in South Asia as a whole, compared with 82% in China, where the use of contraception was heavily subsidized and, indeed, mandated.

All told, South Asia now contains more than 1.35 billion people, a fifth of the world's population, compared with China's 1.28 billion. India alone is well on its way to displacing China as the world's largest country by the year 2020, absent a nuclear war or some unforeseen famine or epidemic. All these people are living on a land area just two-fifths the the size of the US or China, so this means intense pressures on living conditions, labor markets, and the environment.

Sexual Infanticide In both South Asia and China, another pathological byproduct of current family planning approaches, on top of cultural traditions, has been to reinforce one of the most abhorrent ancient forms of sexual discrimination. This is the age-old practice of eliminating what the Chinese called "the maggots in the rice" -- terminating pregnancies or new-borns, once it is determined that a child is a girl.

In the aggregate, the magnitude of this sexual infanticide activity is astonishing. To arrive at a very rough estimate, we've examined the World Bank's latest (2002) figures for the average "population sex ratio" -- the percentage of a country's total population that is female. For the developing world as a whole, excluding China, India, and the rest of South Asia, the average is 50.4 percent. But for China and South Asia it is 48.5 percent. The World Bank reports that India and China both have have almost identical rates, at 48.4 percent, but both rates appear to be dropping. A Chinese census in 2002 reported, for example, that the sex ratio for live births is now just 46.7%. As shown in Table 1 below (scroll to the end) , this implies that for these countries to record the same average sex ratio as other developing countries, South Asia and China would need to have almost 100 million more females in their populations than they currently do. So where are they?

The odds of conceiving a female child are 50-50 in the population at large, and certainly do not vary by country. Furthermore, life expectancy for women in all these countries actually exceeds that for men by at least 2-3 years -- so long as the women are allowed to be born in the first place, and are not snuffed out in their cribs.

So the only plausible explanation for these sex ratio differentials in South Asia and China is that something is killling off unborn and just-born girls at an extraordinary rate. Since there do not appear to be diseases or other health factors that discriminate against female children in this way, the only conceivable explanation appears to be willlful infanticide by the parents themselves, under the influence of cultural institutions like the dowry, unprincipled medical counselors and abortionists, and the state.

This is hardly an entirely new observation; other observers, like the World Health Organization, have also (rather quietly) observed that, for example, in China's case there appears to be at least 50 million women who are "missing" from the population statistics, compared with the sex ratios that one observes in other countries. But there is new evidence (see below) that the magnitude of this pathological activity may be on the increase.

The "sexual infanticide" explanation is supported by recent UN field studies that show that it is indeed a widespread practice. For example, an October 2003 study by the UN Population Fund reported a growing problem of sex-selective abortion and infanticide in India. The study found that the sex ratio for the country as a whole had declnied from 48.59% in 1991 to 48.11% in 2001, and that in some states, like Punjab, Haryana, Himachal Pradesh and Gujarat, the ratio had fallen “drastically" to 44 percent -- less than 800 girls for every 1,000 boys. Interestingly, the study also found declining sex ratos even in the country's most affluent districts of Delhi, where prospective parents use all the latest medical technology, including pre-conception gender selection practices, amniocentesis and late-term abortions, to support their curious, culture-bound preferences for male babies.

There have also been numerous press reports that corroborate similar findings with respect to China. In China's case, the impact of traditional preferences for male children was undoubtedly further aggravated by the notorious "1 child per family" that was introduced by the CP in 1979. In addition to increased infanticide and sexual discrimination, this system also produced a huge underground market in "unregistered" children, and has been widely criticized for its punitive nature.

So there are real dilemmas here, both for advocates of "choice" and "regulation" alike. Fans of "free choice" have to explain how we can square unfettered individual choice in these matters with the important goals of reduced violence and discrimination against women, as well as with the goal of securing aggregate rates of population growth that are sustainable in the long run. Fans of "regulation" have to explain how they can provide positive incentives for couples to make better choices, without using such the heavy hand. Ultimately, of course, everyone would like to leave the state out of these delicate, private matters. The problem is, that doesn't always seem to work.

***

Table 1: Asia's "Missing Women," 2002







Category Population%Women Female Population
High Income Countries964,738,60050.71% 489,218,944
China1,280,975,00048.42%620,248,095
India 1,048,279,00048.41% 507,471,864
Other South Asia304,708,41048.94% 149,118,930
China/ South Asia Total2,633,962,410 48.48%1,276,838,889
All Other Developing Countries2,602,674,99050.35%1,310,446,857
World6,201,376,00049.61% 3,076,502,634
"Missing Women:" China/ South Asia***-1.87%99,418,297

***Assuming that the China/ South Asia sex rato would otherwise equal the average in other developing countries

© Submerging Markets (2003)

(c) James S. Henry, 2003. Not for reproduction or other use without express consent of the author.



November 7, 2003 at 02:01 PM | Permalink | Comments (2) | TrackBack

Wednesday, October 29, 2003

Iraq: GW's First Vietnam, the Second Battle of Algiers, Chechnya, or Afghanistan?

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Bush, Johnson, McNamara, the Wall, and Reality



George W. Bush may have dodged military service in Vietnam the first time around, but the bloody, badly mismanaged, not to say grossly illegal US invasion of Iraq is rapidly turning out to be a real baptism under fire -- by far his most important "faith-based initiative" to date.

Already President Bush has admitted that it was a bit premature to hoist the "Mission Accomplished" banner. According to the latest opinion polls, the American people are far ahead of him. Not only have almost half of adults (and a majority of women) now concluded that the Iraq War was "not worth it," but nearly forty percent now favor an immediate US troop withdrawal, with another significant share "undecided." Gradually American opinion is coming into alignment with world opinion, including that in the UK, Australia, Spain, and Italy, our leading official allies in this conflict.

Of course, as the neocon intellectuals who designed this sinking ship like to bluster, the US is not trying to win some global popularity contest here. But since we are supposed to be championing democracy, in Iraq in particular, presumably public opinion still counts for something. Moreover, the almost unanimous international rejection of this policy, even by our long-standing friends and allies, should give the rest of us pause. Certainly it is not making it any easier to find others to help fund and staff this costly endeavor.

For the time being, however, the Bush Administration seems determined to stay the course, assuring us that victory is just around the corner. This is beginning to sound like the Johnson Administration in the mid-1960s. Indeed, those of us who are old enough to recall the Vietnam War are already detecting many of the same disturbing signs -- (#1) the stage-managed pretext for US intervention in the first place, which later turned out to be concocted; (#2) the serious underestimation of necessary US troop commitments; (#3) the thin multilateral support, with intervention undertaken without a UN mandate; (#4) a Secretary of Defense who oscillates between being in denial and growing doubts; (#5) increasingly desperate ground-shifting attempts by senior Administration officials to defend the policy "as is," and to assert that progress really is being made, even as the headlines deny this day after day; (#6) misplaced reliance on local allies (Thieu, Chalabi, etc.) who turn out to be, by turns, inconstant, incompetent, and corrupt; (#7) a steady drip-drip-drip of US and UK troop casualties, with more than 1200 now dead or wounded, and no positive trends in sight; (#8) a growing number of civilian casualties, with at least 7000-11,000 combants and 3500-4000 civilians killed during the first month of the war, another 4-5000 civilians killed since then, 20,000 Iraqi civilians wounded, and the local population trapped in the middle of escalating violence, with US troops forced to make agonizing choices about the use of their awesome firepower; (#9) war-weary veterans with low morale, already pleading to come home after less than six months of active duty; (#10) a national security establishment that has been stripped of its independence, in thrall to a set of "pre-baked" policy choices dictated from on high; (#11) the war's huge unexpected costs, to be born almost entirely by the US, forcing domestic spending priorities to be put on hold just as Lyndon Johnson's plans for a "Great Society" had to be tabled in the mid-1960s; (#12) the simple-minded characterization of all our enemies as "terrorists," "Baathists, and "dead-enders," (or in Vietnam's case, as "Communists"), denying the role of nationalism in the opposition to US intervention -- as if Americans have not themselves waged long hard fights against foreign occupants in the interests of nationalism; and (#13) the complete absence of a clear "exit" strategy other than to simply hunker down.

Of course no one should have any regrets over Saddam Hussein's demise -- though it would be easier to celebrate if we could actually find him. But we have so mishandled his removal that we have actually managed to encourage many ordinary Iraqis to oppose our intervention. It is very hard to make all this look like an achievement. And there is also the strong possibility that (#14) decades from now, we will hear the same kind of begrudging admission from the architects of this war that Henry Kissinger Photos/fig. 8.8. Henry Kissinger
finally made just last year about the Vietnam War -- that it would have made"little difference" after all to world events if we had never intervened in the first place. Of course aging war planners like Vice President Richard Cheney and Secretary of Defense Donald Rumsfeld may not last the three decades that were required for that stunning concession.

We can always hope that the many glaring differences between Iraq and Vietnam will save us. But it is not necessarily clear which way these cut. Militarily, there are no neighboring sanctuaries like North Vietnam Cambodia, or Laos, no protected supply lines from superpowers like Russia and China, and no dense jungles. We also supposedly have a vastly superior professional army -- though it appears that without the reservists, we would be in very deep trouble.

On the other hand, Iraq's borders are porous, there are so many abandoned arms dumps and hidden stockpiles of weapons and explosives that our opponents' lack of external supply lines may not be a key disadvantage, and the enemy so far appears to have ample hiding places, despite the missing jungles. Furthermore, the region is not exactly devoid of hostile volunteers -- "terrorists," in the Administration's vernacular. In fact they are probably delighted to have thousands of green US troops, civilian aid workers and (in their view) Iraqi "Quislings" within reach, available to shoot at like fish in a barrel. Furthermore, there are still all those missing WMDs. If the Adminstration is ever proved right and they do exist, one hopes that they are not discovered first by the wrong people.

In this sense the right analogy may not be Vietnam, but the Russian Army's painful experiences with guerilla war in Chechnya, the bloody French colonial war in Algeria during the 1950s and early 1960s, and the Soviet Army's costly adventure in Afghanistan during the 1980s. Of course "we are not colonialists. We are there for the good of the people," unlike the French or the Russians. Perhaps so. But a similar story line did little for us in Vietnam...

The only good news in all this is that, compared with the Vietnam Quagmire, US public opinion is moving much more quickly. Just six months into the conflict, we already have several popular anti-war candidates. This is true, despite the fact that the median American voter is now 35 years old, and was only just being born in 1968. Perhaps there is a collective memory. Or, as President Bush himself said yesterday, "As a matter of fact, the American people — the electorate — is (sic) a heck of a lot smarter than most politicians..."


***

(c) James S. Henry, October 29, 2003. Not for reproduction or other use without express consent from the author.

October 29, 2003 at 10:46 AM | Permalink | Comments (0) | TrackBack

Saturday, October 18, 2003

Uzbekistan -- Our Own Little Cuba, Minus the Mambo and the Beaches

uzbekmap.jpgkarimov-bush-ap.jpg Karimov and Bush, 2002

The UK's courageous, outspoken Ambassador to the Central Asian "Republic" of Uzbekistan, Craig Murray, has raised quite a ruckus over his complaints about that country's repressive dictatorship. More to the point, he appears to have offended the USG by inconveniently reminding a few too many people in public that President Islam Karimov, (see http://www.uzbekistanembassy.uk.net/main/President/biography.htm for a glowing official bio), the former Soviet Politburo member who has ruled Uzbekistan with an iron fist and innumerable offshore banking relationships since 1989, has recently received more than $160 million a year of US economic and military aid, apparently without many scruples attached. All told, this has made the US by far the largest bilateral aid donor to Uzbekistan, althought the ADB, the EBRD, and the World Bank have also been very generous. Wherever that aid is going, evidently not much of it is reaching Uzbekistan's 7-10,000 political prisoners. (For more about their plight, including torture and murder, see http://www.csce.gov/press_csce.cfm?press_id=305). Many of them are probably in much greater need of health care than Ambassador Murray, when and if they emerge from Karimov's jails, but he has now been recalled to the UK on "sick leave." The beleagured Blair Government has been compelled to reject nasty insinuations that the recall might have anything to do with Washington's pique. (See the following report: http://observer.guardian.co.uk/politics/story/0,6903,1066291,00.html)

Meanwhile, US Secretary of State Colin Powell has twice certified that Uzbekistan is making "substantial and continuing progress" toward meeting its human rights obligations -- thereby permitting the aid dollars to continue flowing. Compare that with the Bush Administration's October 2003 decision to tighten the screws again on Castro's evil dictatorship in Cuba. (See http://usinfo.state.gov/xarchives/display.html?p=washfile english&y=2003&m=October&x=20031010181621relhcie0.3876459&t=usinfo/wf-latest.html)

This neatly puts in play the question of precisely which traditional American values, if any, are influencing our foreign policy priorities these days.

Obviously it would have helped if Cuba had anything like Uzbekistan's strategic location, or at least its natural gas reserves, which are at least 10 times the size of Cuba's. Clearly our tilt toward Karimov has nothing to do with comparative rates of political and religious repression, net rates of out-migration (Uzbekis are fleeing their country at a rate almost twice that of Cuba's), the degree to which the regime's top leader has "paid his dues" in Soviet service, or even the degree of state ownership in the economy. Perhaps it made a slight difference that there are some 500,000 Cuban emigres living in south Florida -- probably a few more than their Uzbeki refugee neighbors. For the interested reader, the following table provides a convenient side-by-side summary of these two submerging markets, and invites you to explain these contrasting US attitudes -- and also see which place you'd prefer to visit! (As a diver, I have to admit a slight bias -- Uzbekistan's Aral Sea, once the world's fourth largest lake, and one of the planet's worst environmental disasters, is well on its way to becoming the world's eighth largest lake, basically an undivable, dessicated flatland. But at least the Soviet Union dominated cotton exports! ( See Download file.)

(c) James S. Henry, October 2003. All rights reserved. No reproduction or other use without express consent from the author.

October 18, 2003 at 10:17 PM | Permalink | Comments (1) | TrackBack

Wednesday, October 15, 2003

Bush the Younger -- The "Thrilla in Manila"

Printable PDF Version BushinManila102003BB.gif BushinManila2.jpg George and Gloria in Manila The latest grim news from Manila is not very comforting to those who once celebrated the fall of the Marcos dictatorship in 1986 and hoped that its replacement would eventually become a vigorous democracy. The entire 130,000-person Philippine military was placed on 24-hour alert, three days before the arrival of President George W. Bush for an 8-hour (actually it turned out to be a 4-hour) visit on October 18. (See how the visit turned out: http://www.guardian.co.uk/worldlatest/story/0,1280,-3280686,00.html.) Bush, on his way to a conference of the 21-member, hopelessly-ineffective Asia-Pacific Economic Cooperation (APEC) forum in Bangkok next week, decided to pay a call on President Gloria Macapagal-Arroyo, because she has been one of the staunchest supporters of his global war on terrorism, and -- not coincidently -- one of the largest recipients of US military aid and training in the region. (See http://www.inq7.net/brk/2003/oct/15/brkpol_11-1.htm.) Anticipating the possibility that Bush's visit would trigger huge anti-American protests in Manila, where many people still recall the pro-Marcos stand of his father ("We love your adherence to democratic principles and democratic process," Bush the Elder toasted the dictator in Manila in March 1981), her government also decided to confine such protests to so-called "freedom parks" far from the Bush entourage, and to have the police enforce a strict "no permit, no rally" rule. In light of the visit, New Zealand also warned its own citizens that "terrorists" might try to stage attacks to embarrass Ms. Macapagal-Arroyo's government. (The freedom parks concept may actually have been a US export, since the US Secret Service has actually been implementing something very similar here.)

The concern about embarrassment might not be so serious, since M-A's government seems eminently capable of embarrassing itself. In the run-up to Bush's visit, for example, the authorities proudly announced on Sunday that they had killed an Indonesian terrorist, Fathur Rohman Al-Ghozi, on the southern island of Mindanao, after a fierce gun battle. Al_Ghozi, ostensibly an Indonesian bomb-maker for the "al Qaeda-linked" Jemaah Islamiyah, had been convicted of a December 2000 bombing in Manila that killed 22 people.

Some doubted the official account of his death, however, suspecting that he might have simply been murdered well after capture, since the timing seemed so perfect and the authorities told conflicting stories about how much resistance al-Ghazi had really offered. The killing also erased the embarassing fact that only last July, al_Ghazi had easily escaped from a maximum security police prison in Manila, where he was supposed to be serving a 17-year sentence.

In any case, the killing certainly awarded Madame M-A a convenient and timely victory in the "war on terrorism." But the suspect behavior by her own police -- even escaped terrorists presumably have some legal rights -- on top of all the precautions against public demonstrations, in a country that is supposed to be a democracy, not in a state of Marcos-like martial law -- is very disturbing. It is, however, consistent with the new "post 9/11" theory of constitutional rights, according to which constitutional rights may be freely dispensed with, any time some senior official imagines a "terrorist threat."

Meanwhile, a nationwide survey of 1200 heads of households that was conducted in September 2003 in the Philippines found that 62 percent rated their family condition as "mahirap," or poor. And 45 percent of them expected their living conditions to deteriorate in the next year. If we thought that President Bush might actually have some direct discourse with such people, rather than enlisting the entire nation's military in his own defense to keep them at a safe distance, his visit might seem more worthwhile.

But Bush went to Asia primarily to meet with sycophants like Gloria and to "jawbone" the Chinese into floating their exchange rate -- even though they've managed the most successful developing economy in the region for more than a decade (knock wood.) He wanted to badger them into revaluing the yuan, hoping that this would cut their $110 billion trade surplus with the US. His latest undistinguished Treasury Secretary, John Snow, tried to do this summer. That kind of rhetoric may be useful for domestic political purposes, but the Chinese are too busy watching their economy grow at 9 percent and lofting astronauts into space to respond -- unlike the hapless Filipinos. Rather, the Chinese may be tempted to point to the Philippines itself as an example of the severe damage that fifty years of wide-open capital markets, freely-floating exchange rates, and one-sided "free" trade can do to a country's welfare.

Bush went out of his way during his remarks to cite the Philippines as a role model for the US occupation of Iraq -- conveniently skippling over the fact the US seized control of the islands after its 1898 trumped-up war with Spain, did not cede them formal independence until 1946, continuously supported puppet regimes and dictators like Marcos from 1946 until 1986, and then has been a rather diffident observer of Philippines democracy since then.

Today, after a century of apprenticehip and tutelage to the US economy and international banks, the fact is the Philippines remains one of Asia's most troubled economies, and a wobbly, corruption-ridden militarized semi-democracy," with several rebel armies still in the bush. The Philippines' foreign debt now exceeds $52 billion, more than twice the level when Marcos left, and a rather high 70 percent of national income (compared with China's 15 percent). Its per capita income, adjusted for purchasing power parity, has actually fallen 10 percent below China's ($4021 vs. $4475, 2002 -- according to the latest World Bank WDI data, 10/2003). Its largest export is still maids, more than sixty percent of its population still depends on coconuts for a living, and the country still boasts one of the highest per capita debts and least equal distributions of wealth and land in Asia.

The shocking notion that such conditions might actually have something to do with the fact that the Philippines is also the only country in Asia still fighting an active Communist insurgency -- as well as two other long-standing rebel armies, who've been fighting for decades, years before al-Qaeda was a gleam in bin Laden's eye -- is a thought that China's leaders, albeit nominal Communists themselves, might usefully explain to Gloria and our own Fearless Leader.

(c) James S. Henry, October 2003. Not for reproduction or other use without express consent from the author.

October 15, 2003 at 02:14 AM | Permalink | Comments (0) | TrackBack