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SOCIALISM FOR BANKERS, SAVAGE CAPITALISM FOR EVERYONE ELSE? Bailout Jeopardizes Entire Progressive AgendaJames S. Henry

"“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” --  Warren Buffet, June 2008

Ladies and gentlemen: pardon my intemperance,  but it is high time for some moral outrage --  and a little good old-fashioned class warfare as well, at least in the sense of a return to seriously-progressive taxation. 

After all, as this week's record-setting Wall Street bailout with taxpayer money demonstrates once again,  those in charge of running this country have no problem whatsoever waging "class warfare" against the rest of us -- the middle classes, workers and the poor -- whenever it suits their interests.

At a time when millions of Americans are facing bankruptcy and the risk of losing their homes without any help whatsoever from Washington DC,  the CEOs and speculators who created this mess, and the top 10 percent of the wealth distribution that owns 85 percent of financial stocks, have teamed up with their "bipartisan" cronies in Congress, the US Treasury and the White House to stick us with the bill -- in a bum's rush toward a cockamamie solution.

This time they have gone too far. 

As discussed below, the cost of this bailout could easily jeopardize our ability to pay for the entire economic reform program that millions of ordinary citizens across both major parties have been demanding.

Some kind of bailout may indeed be necessary from the standpoint of managing so-called "systemic" risk to the financial system.

But it should come at a price -- a hefty part of which should be paid by the tiny elite that was most responsible for creating this mess in the first place.

THE "GET REAL" NEW DEAL

To make sure that real economic reform is still feasible, we need to demand a "Get Real/ New Deal" from Congress right now. 

At a minimum, this Get Real/New Deal package should include measures like:  (1) the restoration of stiff progressive income and estate taxes on the top 1 percent of the population (with net incomes over $500,000 a year and estates over $5 million) -- especially on excessive CEO and hedge fund manager compensation; (2) much more aggressive enforcement and tougher penalties against big-ticket corporate and individual tax dodgers; (3) tougher regulation of financial institutions  -- possibly by a new agency that, unlike the US Federal Reserve, the SEC, and the US Treasury, is not "captive" to the industry; (4)  a crackdown on the offshore havens that have been used by leading banks, corporations,  and hedge funds to circumvent our securities and tax laws; and (5) the immediate revision of the punitive bankruptcy law that Congress enacted in 2005 at the behest of this now-bankrupt elite.

We also need (6) a National Commission to investigate the root causes of this financial crisis from top to bottom, and actually (unlike the hapless, ineffectual 9/11 Commission) hold people accountable.

Over time, this progressive Real/ New Deal would help raise the hundreds of billions of new tax revenue that will be needed to offset the costs of this bailout.

It is essential if the Federal Government is to be able to afford key reforms like health insurance, clean energy, and investments in education.

These may not matter very much to Wall Street executives, financial analysts, Treasury and Federal Reserve executives, or the more than 120-130 Members of Congress and 40-45 US Senators who earn more than $1 million a year -- and are already covered by a generous "national health care" package of their own design. But these  are the key "systemic risks" that ordinary Americans face. 

These reforms may sound ambitious. So is the bailout.  And the reforms that we are discussing are only fair.

After all, we the American people have been  the very model of forgiveness and understanding lately. 

We have tolerated and footed the bill for stolen elections,  highly-preventable terrorist attacks, gross mismanagement of "natural" disasters, prolonged, poorly conceived, costly wars, rampant high-level corruption, pervasive violations of the US Constitution,  and the systematic looting of the Treasury by politically-connected defense contractors, oil companies, oligopolistic cable TV and telecommunications firms, hedge fund operators, big-ticket tax evaders,  and our top classes in general. 

Does "class" still matter in America?  You betcha -- perhaps more than ever. But enough is enough.  Call your Congressperson now.  Demand a"Get Real/ New Deal" qualifier to the bailout package before it is too late.

(c) SubmergingMarkets, 2008

NARRATIVES, NOT IDEASMcCain's Contradictory, Fearful Vision of the Next Four YearsJames S. Henry

Outside the Republican convention hall, Twin City cops and National Guardsmen in full-scale battle gear were arresting credentialed journalists like Amy Goodman and pepper-spraying peaceful demonstrators -- though you didn't hear much about that from the respectable TV commentators who were safe inside, battling balloon drops.   

Inside the hall, we were treated to an odd combination of "Naughty Librarian" Gov. Sarah Palin, John McCain trying for the nth time to appear natural while reading the teleprompter and bashing his own party, and 2380 raucous Republican delegates -- 1.5 percent black, 5 percent Hispanic, 32 percent female,  80 percent over 50, and nearly 100 percent over-fed  -- trying to appear jubilant, grinding to the heavy-metal rhythms that someone in the RNC hierarchy must have thought were a cool idea.   

We also had yet another recapitulation of the Arizona Senator's horrific five years in a POW camp, after being shot down on his 23rd mission over Hanoi back in 1967.

Indeed, if McCain somehow manages to win this election, he will have no one more to thank than Nguyen Van Dai, the 68-year old retired  Vietnamese colonel who actually launched the SAM missile that downed McCain's A-4 Skyhawk on October 27, 1967.

In any case, after watching the Republican Convention from mind-numbing start to finish, it is now crystal clear that,  apart from McCain's 41-year-old combat narrative -- supplemented by the less familiar narrative about Palin's decade-long  battle to combine procreation, small-time government, and the Assembly of God's "Plan for Alaska" -- the Republican Party has become the equivalent of the US housing industry.

It is intellectually bankrupt, with almost no new ideas. As former Reagan speech writer Peggy Noonan correctly put it, "They went for this, excuse me, political bullshit about narratives."

Worse than that, the Republican Party has also turned its back on many of its old favorite best ideas and brand values -- for example,  "small government," "balanced budgets," "non-intervention," "environmental protection," and "the US Constitution."

Palin's first 15-minutes of fame temporarily blinded many commentators  to this basic fact.  But even the most faithful die-hard Republican strategists now agree that, apart from the novelty of her Bat Mitsvah,  this abbreviated convention was a gigantic, expensive messaging mess -- and, on balance,  a gift to the hapless Democrats -- who are otherwise still fully capable of losing this race, even with a full-scale political and economic gale at their backs.

We'll explore the numerous contradictions in McCain's program below.

(c) SubmergingMarkets, 2008

MCCAIN's MIGRAINEIs His VP Choice a "Natural," Or An Eagleton/Quayle Combo?James S. Henry and Matthew Maly

By law the US is required to have a Vice President. Do we really want it to be this one?  

Many serious countries with Presidential systems -- like Finland, Germany, France, Ireland,  and South Korea -- have long since dispensed with the role of Vice President completely.

In the wake of the uproar -- indeed, shock and awe -- provoked by John McCain's  surprising selection of 44-year old Gov. Sara Palin of Wasilla, Alaska, on top of all the hoopla over Barack Obama's dissing of Hillary Clinton and our collective nightmare with "Darth" Cheney, some pundits have  suggested that it may be time for the US to follow the Finnish model and have no US Vice President at all.

With each day's new revelations about Gov. Palin's complex personal life and rather extreme views, some pundits have also suggested that she may quickly go the way of former Missouri Senator Thomas Eagleton, who lasted just two weeks as George McGovern's VP pick in 1972 -- or perhaps worse yet for the Republicans, a reprise of the legendary Indiana lightweight, Dan Quayle.

They are wrong.

Ms. Palin's nomination is a perfect demonstration of the incredible entertainment value that only the VP role can provide.

At a time when our economy is in serious trouble, state and federal budget deficits are out of control,  energy costs are unaffordable, the US Constitution is under attack, tax evasion is at a record level, we're still tied down in two major wars in Iraq and Afghanistan, tensions are mounting with Russia, social inequality is soaring, environmental calamities abound, Freddie Mac and Fannie Mae are about to fail, our education system is broken, the drug wars continue unabated, and millions of Americans lack jobs, decent housing and health care,  filling the VP slot with this more-or-less unknown quantity adds a nice soupçon of uncertainty to the entire situation.

It permits the whole nation to "double down" at once,  experiencing a kind of risk-taking that none of us would ever be able to achieve on our own.

This is precisely the kind of entertainment that government, at its best, is supposed to offer.

Indeed, Sara's selection is bound to make our peculiar "imperial electocracy"  the envy of the world -- once again!  

I. FINALLY A BABE!

Ms. Palin may not yet be a household name, but upon closer examination, her qualifications for the Vice Presidency --  just one bad biopsy away from the world's most powerful office -- are overwhelming.

First and foremost, just take a look -- this woman is a looker, a true MILF!

Carla Bruni, where is thy sting?  Angela Merkel, bite your knuckles!  

To paraphrase Joe Biden, Ms. Palin is an "articulate, bright, clean, good-looking" white woman.

And young! Why she was only 4 years old when 72-year old John McCain was bombing peasants from 30,000 feet, and 9 years old when he was released from the POW camp in 1973.

Indeed, Sara was first runner-up in the 1984 Miss Alaska beauty pageant, after being voted Wasilla Alaska's "Miss Congeniality."

True, back then,  Wasilla only had about 5000 residents. But so long as you were not a moose or an environmentalist,  Wasillans were the most congenial people on the planet. And Ms. Sara was the most "congenial" of them all.

Anyone who has ever attended public high school knows what that means - religion or no.

We think we can all trust "Bomber" McCain's judgment on this one.  John may have only met his VP choice two or three times,  but he is an expert on beauty queens.

His first wife Carol was a model  and  his second wife Cindy was Junior Rodeo Queen of Arizona in 1968. 

(Just in -- McCain has also  reportedly expressed interest in naming Sherri McNealley, the real winner of the 1984 Miss Alaska contest, as his future Secretary of State, but so far she's still MIA.

He's also expressed interest in appointing Wasilla's current mayor, Dianne M. Keller, to be his Attorney General, once she completes her law degree.)

In any case, unfortunately, this VP choice will probably not swing Hillary's disaffected female supporters to the McCain camp. Most of them are die-hard feminists who have serious issues with Palin's political views -- for example,  her opposition to abortion even in the case of rape or incest, and her unsympathetic description of Hillary Clinton as a "whiner."   (Where on earth would she get such an idea?)   

From a strictly male hormonal perspective, however, this may be the best VP selection in history -- precisely the kind of candidate we need to arouse our interest and get us up off the couch. After years of enduring so many talented but extraordinarily plain women in national politics (viz Senators Clinton, Hutchinson,  Mikulski, Boxer, and Feinstein, for example), -  finally the US Senate will be presided over by someone who still leaves something to the imagination.

II. SHE'S HYPER-PRODUCTIVE!

Sara Palin is a doer, not a talker.  Not only is she the Governor of Alaska, but she is a "hockey mom" with five children by birth (but no adopted ones, unlike the 72-year old McCain). These include an unmarried pregnant 17-year old, a son on the way to Iraq, and a 5-month old infant with Downs Syndrome. She hunts and fishes. She runs 5-10 miles a day.  She's under investigation by Alaska's State Ethics Commission for "using her public office to settle a private score." (Who could resist doing that?) 

When Sara was pregnant with her fifth child, her water broke while she was attending a Republican Governors' conference in Dallas, and she flew all the way back to a Wasilla Alaska hospital to have the child delivered at home.

That's precisely the kind of crazy, life-threatening behavior that we need much more of in the highest echelons of the US Government! Shock-Treatment Tom (Eagleton), we hardly knew ye!!!

Adding the burden of the US Vice Presidency to this full plate will no doubt give us a shining example of just how to precisely strike that delicate balance between family life, work life, and blind ambition -- as well as the many benefits of the "Just Say No" approach to birth control!

(c) Submerging Markets, 2008 

 

SNATCHING VICTORY?The Democrats Descend Into the Politics of Mutually-Assured Destruction James S. Henry

On an occasion of this kind, it becomes more than a moral duty to speak one's mind. It becomes a pleasure.

-- Oscar Wilde

Isn't this a pretty picture? 

On the one hand, after seven long years of catastrophic incompetence in Washington, our country is literally begging for new ideas and leadership, especially from the erstwhile Party of the Opposition.

Recent polls show that an unprecedented 81 percent of Americans believe their country is "on the wrong track," while President Bush's approval rating has sunk to an all-time low of 28 percent. There is a growing popular demand for decisive government action on any number of issues that have been festering while "Nero" Bush and "Imperator" Cheney have been fiddling.

THE DEMAND FOR CHANGE

John "McSame's" feisty personality notwithstanding, this is not the ideal moment to be plumping for free-market solutions, let alone more tax cuts for the extremely rich,  hands-off deregulation for our wondrous mortgage banking, health care, automotive, airlines, handgun, coal-fired utility, and social insurance industries, and the unending prospect of more unilateral, open-ended wars.

No -- this is a time that cries out for smart, can-do, progressive, and -- yes -- youthful government.

Its precise slogan should be:  Yes, we had better -- or else.

 
REAL ISSUES

At the risk of depressing our readers, among the many tough issues that demand this  pragmatic approach right now are the following:

>Containing the mortgage crisis and the deep recession that it has produced.
>Withdrawing from Iraq as soon as possible, while discouraging Iran from filling the void.
>Intensifying the hunt for Bin Laden, without losing Pakistan and Afghanistan to a Taleban revival.
>Protecting our nation against the genuine on-going global terrorist menace.
>Fixing our high-cost, inhumane health insurance system once and for all.
>Biting the bullet on climate change and global warming.
>Rebuilding public education and college assistance.
>Guaranteeing the financial integrity of Social Security and Medicare.
>Restoring civil liberties and reversing the drift toward a state of siege.
>Reviving American's reputation in the world and its relations with key allies.

> Revising our increasingly disfunctional "free trade" agreements.
>Reviving efforts to prosecute corrupt politicians, war profiteers, and big-ticket tax evaders to the limits of the law, as opposed to granting them Presidential pardons.
>Slashing government waste, especially the bloated $800+billion "total war"  budget and the huge agro-industry subsidies that are literally wiping out poor farmers all over the world. 

All together,  this adds up to a demand for nothing less than at least a decade of intense regime change right here at home.

Blood DiamondsPart 1: The Empire Strikes Back!by James S. Henry

"...(O)ne of the great dramas of Africa: extremely rich areas are reduced to theaters of misery...."

-- Rafael Marques, Angolan journalist (July 2006)

"For each $9 of rough diamonds sold abroad, our customers, after cutting them, collect something like $56..." 

-- Sandra Vasconcelos, Endiama (2005)

"We found the Kalahari clean. For years and years the Bushman have lived off the land....thousands of years...We did not buy the Kalahari. God gave it to us. He did not loan it to us. He gave it to us. Forever. I do not speak in anger, because I am not angry. But I want the freedom that we once had."

-- Bushman, Last Voice of an Ancient Tongue, Ulwazi Radio, 1997 

 

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The global diamond industry, led by giants like De Beers, RTZ,  BHP Bililton, and Alrosa  Co Ltd., Russia's state-owned diamond company,  a handful of aggressive independents like Israel's Lev Leviev,  Beny Steinmetz's BSG Group, and Daniel Gertier's DGI, a hundred other key "diamantaires" in New York,  Ramat-Gan, Antwerp,  Dubai, Mumbai, and Hong Kong,  and leading "diamond industry banks" like ABN-AMRO, is not exactly renowned for its abiding concern about the welfare of the millions of diamond miners, cutters,  polishers, and their families who live in developing countries.

But the industry -- whose top five corporate members still control more than 80 percent of the 160 million carets that are produced and sold each year into the $70 billlion  world-wide retail diamond jewelry market -- certainly does have an undeniable long-standing concern for its own product's image.

PERENNIAL FEARS

Indeed, for decades, observers of the diamond industry have warned that it was teetering on the brink of a price collapse, because the industry's prosperity has been based on a combination of artificial demand and equally-artificial -- but often more unstable -- control over supply.

Most of the doomsayers have always predicted that the inevitable downfall, when it came, would arrive from the supply side, in the form of some major new diamond find that produced a flood of raw diamonds onto the global market.

The precise culprits, in turn, were expected to be artificial diamonds (in the 1960s and 1970s), "an avalanche of Australian diamonds" (in the 1980s,) and Russian diamonds (in the 1990s.)

This supply-side pessimism has lately been muted, given the failure of the earlier predictions and the fact that raw diamond prices -- though not, buyers beware,  retail diamond resale prices!! --  have recently increased at a hefty 10-12 percent per year.  There is also some evidence that really big "kimberlite mines" are becoming harder and harder to find.

However, there are still an awful lot of raw diamonds out there waiting to found, and one does still hear warnings about the long-overpredicted Malthusian glut, now from new sources like deep mines in Angola, Namibia's offshore fields, Gabon, Zambia, and the Canadian Northwest.

THE REAL THREAT?

Meanwhile, the other key threat to the industry's artificial price structure -- where retail prices are at least 7 to 10 times the cost of raw diamonds -- comes from the demand side. This is the concern that diamonds may lose the patina of glamour, rarity and respectability that the industry has carefully cultivated since the 1940s.

It is therefore not surprising that the industry has been deeply disturbed by the December 8, 2006, release of Blood Diamond, a block-buster Hollywood film that stars Leonard DiCaprio, Jennifer Connelly, and Djinmon Hounsou.

While extraordinarily violent and a bit too long, the film is entertaining, mildly informative, and far from "foolish" -- the sniff that it received from one snide NYT reviewer -- who clearly knew nothing about the subject matter, other than, perhaps, the fact that the Times' own Fortunoff- and Tiffany-laden ad department didn't care for  the film. 

Indeed,  this film does provide the most critical big-screen view to date of the diamond industry's sordid global track record, not only in Africa, but also in Brazil, India, Russia, and, indeed, Canada and Australia, where diamonds have often been used to finance civil wars, corruption, and environmental degradation, and  indigenous peoples often been pushed aside to make room for the industry's priorities.

Surely the film is a small offset to decades of the diamond cartel's shameless exploitation of Hollywood films, leading ladies like Marilyn Monroe, Elisabeth Taylor, and Lauren Bacall, and scores of supermodels, rock stars, and impresarios.

INDUSTRY WHITE WASH
 

Dismayed at the potential negative impact of the film ever since the industry first learned about Blood Diamond in late 2005, it is reportedly spending at least an extra $15 million on a  PR campaign that responds to the film  -- in addition to the $200 million per year that the World Diamond Council already spends on regular marketing.

For example, if you Google "blood diamonds," for example, you'll see that the industry has purchased top billing for its own version of the "facts" regarding this film. Always eager for a new marketing angle, some diamond merchants have also seized the opportunity to pitch their own product lines as "conflict diamond - free."

DEF JAM'S  BLACK WASH

This shameless PR campaign has also included a "black wash" effort by the multimillionaire hip hop impresario Russell Simmons, who launched his own diamond jewelry line by way of the Simmons Jewelry Co. in 2004,  in partnershp with long-time New York diamond dealer M. Fabrikant & Sons.

Simmons, who admits to "making a lot of money by selling diamonds," rushed back to New York on December 6 from a whirlwind nine-day private jet tour of diamond mines in South Africa and Botswana -- but, admittedly,  not in conflict-ridden Sierre Leone, Angola, the Congo, the Ivory Coast or Chad.

Simmons was originally scheduled to travel with one of his latest flames, the  27-year old Czech supermodel and Fortunoff promoter, Petra Nemcova. But Petra reportedly preferred to stay home and accept a huge diamond engagement ring of her own from British singer/soldier James Blunt, whose 2005 pop hit "You're Beautiful" was recently nominated the "fourth most annoying thing in Britain," next to cold-callers, queue-jumpers, and caravans.

The timing of Simmons' trip, which he filmed for UUtube, just happened to coincide with the December 8 release of the Warner Brothers feature.

Upon his return, Simmons held a press conference, accompanied by his estranged wife Kimora Lee Simmons and Dr. Benjamin  F. Chavis Mohammed, a former civil rights activitist and fellow investor in the jewelry company who is perhaps best remembered for being fired as NAACP Director in 1994  after settling a costly sexual harassment suit, and for joining the Rev. Louis Farrakhan's Nation of islam. Simmons' astounding conclusion from his wonder-tour: "Bling isn't so bad."

Whatever the credibility of Simmons and his fellow instant experts, it was  evidently not enough to save M. Fabricant & Sons,  which filed for Chapter 11 in November.

THE GODS MUST (STILL) BE CRAZY

Simmons managed to tour a few major diamond mines on his African safari, but apparently he lacked time to examine the contentious land dispute between the Kalahari  San Bushmen, the members of one of Africa's oldest indigenous groups,  and the Botswana Government -- with the diamond industry's influence lurking right offstage.

In the 1990s, after diamond deposits were reportedly discovered on the Bushmen's traditional lands, the Botwana Government -- which owns 15 percent of De Beers, is a 50-50 partner with De Beers in the Debswana diamond venture, the largest diamond producer in Africa, and derives half its revenue from diamond mining -- has pressured the Bushmen to leave their tribal lands.

The methods used were not subtle. To force the Bushmen into resettlement camps outside the Reserve, the Botswana Government closed schools and clinics, cut off water supplies, and subjected members of the group to threats, beatings, and other forms of intimidation for hunting on their own land -- all of it ordained by F.G. Mogae, Botswana's President,  who declared in February 2005 that he 'could not allow the Bushmen to return to the Kalahari." Those who have been resettled have been living in destitution, without jobs and little to do except drink. (See a recent BBC video on the subject.) 

Thankfully, on December 13, 2006, Botswana's High Court ruled that in 2002, more than 1000 Bushmen had been illegally evicted by the Botswana Government from the Central Kalahari Game Reserve, where they'd lived for 30,000 years.

The Botswana Attorney General has already attempted to attached strict conditions to the ruling, so this struggle is far from over. But at least the first prolonged legal battle has been won -- thanks to the determination of the Bushmen, public-spirited lawyers like Gordon Bennett, their legal counsel, courageous crusaders like Professor Kenneth Good, and  NGOs like Survival International, which has supported the legal battle.

In the wake of this decision, as usual,  the global diamond industry, led by De Beers, has denied that any responsibility whatsoever for the displacement of the Bushmen.

However, the fact is that De Beers and other companies has been prospecting actively in the Kalahari Reserve, especially around the Bushman community of Gope (see this video), where De Beers has falsely claimed that no Bushmen were living when it started mining. It has actively opposed recognizing the rights of indigeneous peoples in Africa. In 2002, at the time of the eviction, Debswana's Managing Director -- appointed by De Beers -- commented that "The government was justified in removing the Basarwa (Bushmen)….’.

De Beers' behavior in Botswana has so outraged activists that they have joined together with prominent actors like Julie Christie and several Nemcova-like supermodels who used to appear in De Beers ads, in an appeal for people to boycott the now-UK-based giant -- which has lately been trying to move downstream into retail diamonds.

However, De Beers is far from alone in this effort.  Indeed, as has often been the case with  "conflict diamonds," less well-known foreign companies have been permitted to do much of the nastier pioneering. 

In Botswana's case, these have included Vancouver-based Motapa Diamonds and Isle of Jersey-based Petra Diamonds Ltd. both of which have have obtained licenses to explore and develop milliions of acres, including CKGR lands. Petra is not unfamiliar with "conflict diamonds;" it is perhaps best known for a failed 2000 attempt to invest in a $1 billion diamond project in the war-torn DR Congo, in which Zimbabwe's corrupt dicator, Robert Mugabe, reportedly held a 40 percent interest.

In the case of Botswana, in September 2005 Petra acquired the country's largest single prospecting license -- covering 30,000 square miles, nearly the size of Austria -- by purchasing Kalahari Diamonds Ltd, a company that was 20 percent owned by BHP Billiton and 10 percent by the World Bank/IFC -- which apparently saw the sponsorship of CKGR mining as somehow consistent with its own financial imperatives, if not its developmental mission. (!!!). Petra has also licensed proprietary explorations technology from BHP Billiton, and offered it development rights, a front-runner for the Australian giant.

Meanwhile, at least 29 of the 239 Bushmen who filed the lawsuit have perished while living in settlement camps, waiting for the case to be decided, and many others are impoverished. 

Perhaps the diamond industry's $15 million might be better spent simply helping these Bushmen return to their homes -- and also settling up with  the Nama people in South Africa, the Intuit and Kree peoples in Canada, and the aborigines in Australia.

FAR CRY

Meanwhile, as we'll examine in Part II, despite the "Kimberly Process" that was adopted by many -- but not all -- key diamond producers in 2003, the fact is that diamonds continue to pour out of conflict zones like the Congo, Ghana, and the Ivory Coast, providing the revenues that finance continuing bloodshed.

The industry's vaunted estimate that they account for just "1 percent" of total production is based on thin air -- there are so many loopholes in the current transnational supply chain that there is just no way of knowing. Of course, given the scale of the global industry, and the poverty of the countries involved, even a tiny percent of the global market can make a huge difference on the ground.

Furthermore, in cases like Angola, the Kimberly Process has provided an excuse for corrupt governments to team up with private security firms and diamond traders to crack down on independent alluvial miners.

Finally, the diamond industry still has much work to do on other fronts --  pollution, deforestation, and, most important, the task of creating a fairer division of the spoils, in an industry where the overwhelming share of value-added is still captured by just a handful of First World countries. 

The objective here is not to kill the golden goose. In principal, the diamond industry should be able to reduce world inequality and poverty, since almost all retail buyers are relatively-affluent people in rich countries, while more than 80 percent of all retail diamonds come from poor countries.

But beyond eliminating traffic in "blood diamonds," however,  we should also demand that this industry starts to redress its even more fundamental misbehaviors.

                                                           ***

(c) SubmergingMarkets,2007

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ISRAEL'S STRATEGIC BLUNDERS, ROUND TWOLessons (Re)-Learned?James S. Henry

LESSONS (RE)-LEARNED?

In hindsight, Israel and the US  should have just re-learned some very costly lessons about the risks of taking on a highly-motivated, well-trained and adequately-armed guerilla army on its own turf. They also have an opportunity to remember some important lessons about the limitations of purely-military solutions to such conflicts.    

> As in the case of  the US strategic bombing campaign in Vietnam, Nato's air war in Kosovo (1999), and, indeed, the Allied air war against the Nazis during World War II, Israel's month-long air war against Hezbollah has largely failed to accomplish its strategic objectives. In particular, Hezbollah's ability launch dozens of missiles into northern Israel went utterly unscathed, with the largest single number of missles launched on August 12, the day before the ceasefire.

>Given the elaborate ground defenses, arsenal, and trained force that Hezbollah was able to pre-position in South Lebanon, its ground forces also avoided the knock-out blow that Israel and Washington had hoped for.

>By far the most effective "weapons" on the ground were not Iranian-supplied long-range missiles, cruise missles, or even Katushyas, but a combination of hard-core tactical training, heavy investments in combat engineering, and anti-tank missiles, many of which appear to have been supplied by Russia, by way of Iran and Syria.

>At the same time, the widespread bombing campaign exacted a horrific price from Lebanon's civilian population, uniting most political factions within Lebanon against Israel rather than against Hezbollah, at least temporarily.

>It has also greatly boosted political support for Hezbollah on the "Arab street" throughout the Middle East, converting the initial anti-Hezbollah reactions by the Saudis, Egypt, and other conservative regimes into official expressions of support.

>Syria, which had been under strong political pressure to continue its detachment from Lebanon, has been "reaccredited" by Israel's excesses during the conflict -- able to assume the self-righteous role of Lebanon's protector against foreign aggression. On the other hand, the Baathist regime may also now be in a stronger negotiating position with respect to the West.

>Iran's hardcore anti-reformers have so far only been strengthened by Hezbollah's performance to date in this conflict, and by Israel's costly tactics. Nor were they discouraged from pursuing their nuclear development program.

>Most important, Hezbollah's ability to define victory as "not losing" against one of the world's most powerful armies has certainly not encouraged other radical groups around the planet to lay down their arms and pursue peaceful alternatives.

>For every Hezbollah fighter that was killed by the Israelis in the last month, the heavy bombing campaign probably generated several new recruits -- not only in Lebanon, but also in Afghanistan, Iraq, Kashmir, and the West Bank.

• In short, as a result of this strategic setback, Condi Rice's Panglossian "birth pangs of democracy" are likely to prove more prolonged and painful than ever.   

WAS THERE ANY ALTERNATIVE?

• At a tactical level, clearly Israel and the US both need to do much work to do regarding the failures of their intelligence operations with respect to Hezbollah's arsenal and military preparations. We can add this to the lengthy list of their  other intelligence failures in the last decade alone.
  

• The preference for high-altitude offensive bombing,  naval shelling, and open-field tank/ heavy vehicle warfare over hard-slog ground offensives also needs to be reexamined. To the extent that this reflects a preference for arms-length "hi-tech warfare," and a reluctance to sacrifice infantry for the sake of defeating dedicated militants like Hezbollah, this may indeed rise to the level of the same "morale/ will to die"  handicap that has crippled other many colonial armies,  in places like Vietnam, Algeria, China, and (long ago) the US itself.      

• At a strategic level, the notion that the "enemy" simply consists of a finite stock of "fanatical terrorists," motivated primarily by "Islamo-fascist" dogma, or -- as Benjamin Netanyahu put it last week -- "12th century religious doctrines," is simple-minded and unhelpful. Unless military planners come to appreciate the political implications of what they do, they may lose the war off the battlefield.

• True, it is now very late in the day, and the long-term failure of Israel and its enemies in the region to make any progress at the bargaining table may indeed mean that this overall story is headed for a terrible climax.

• From this angle, however, perhaps the one good thing about this strategic disaster is that it may remind Israel and the US that, whatever the final outcome of any attempt to solve the problems of the Middle East by military means,  it will not be cheap, easy, or devoid of surprises.

• (c) JSH, SubmergingMarkets, 2006     

"IRAQ'S MOMENTOUS ELECTION, ONE YEAR LATER"Iraq War Supporters Are Running For CoverJames S. Henry

For those who have not been paying attention in class, the so-called "Iraq War" has recently been setting new records for violence, brutality, and terror -- with at least 379 to 1300 iraqi fatalities in the last week alone, in the wake of the bombing of the 1,062-year old Al-Askariya shrine at Samarra.

Nor did the apprentice Iraqi Army -- with its 20,000-man force, trained by the US military at the phenomenal cost of $15 billion to date, or $750,000 per soldier -- prove to be much help in quelling the violence. This is not really surprising --  after all, this Army shares the same divided loyalties as the population at large.

While a few senior US military officers have issued  Westmoreland-like statements assuring us that "the crisis has passed," and that this is not -- I repeat --  not a "civil war," it is hard to know what else to call it.

A few journalists have speculated that, ironically enough,  all the increased violence and polarization may undermine the Pentagon's "hopes" to reduce the number of US troops in Iraq to 100,000 by year end.

Those "hopes," however,  are vague. One suspects that they have always been mainly for public consumption,  including the morale of US troops. We only began to hear about them last fall when opposition to the war really soared in the US.

The Pentagon's not-so-secret hope -- among senior planners, at least -- is different. This is to turn Iraq into a neutered or even pro-US -- better yet for cosmetic purposes,  "democratic" -- regime right in the heart of the Middle East, complete with permanent basing rights,  immunity for US personnel from war crimes prosecution by the International Criminal Court, and, naturally enough, the occasional juicy construction, security, arms, and oil contract for friendly US and UK enterprises  -- at least so long as they are not owned by Dubai. 

ALL AGAINST ALL?

It is this vision that is most threatened by the recent surge in Iraqi violence.  Clearly this is no longer just a "foreign terrorist/ dead-ender-led insurgency" against the US and its apprentice army.

Nor has the US-guided constitutional process, and continuous interventions by our heady Ambassadors in Baghdad -- safe behind the walls of the world's largest US embassy -- succeeded in stabilizing the country.

Rather, Iraq is now engaged in a complex, multi-sided bloodbath, fought along age-old religious, ethnic, and clan lines by well-armed groups. While American battle deaths continue, almost all the casualties are now Iraqis felled by Iraqis.

Furthermore, this inter-Iraqi violence goes well beyond the suicide bombings that still garner most of the media's attention. It escalated sharply in the last year, long before the Samarra bombing, and even as the vaunted constitutional process was unfolding.

For example, as reported by the Guardian this week, the former director of the Baghdad Morgue recently fled the country, fearing for his life after reporting that more than 7000 Iraqis had been tortured and murdered by "death squads."

According to the former head of the UN's human rights office in Iraq, most of these victims had been tortured by the Badr Brigade, the military wing of SCIRI, the Supreme Council for the Islamic Revolution in Iraq.

As we reported over a year ago on this site, SCIRI is not just some fringe element. It is one of Iraq's two key Shiite-led political factions, and one of the principle victors in the December 2005 parliamentary elections. Unfortunately, our expectations have been fulfilled. Upon acquiring power, SCIRI has behaved exactly as anyone familiar with its history -- but apparently not the US military -- would have expected.

TOUGH LIBERALS?

Meanwhile, among America's befuddled liberal intelligentsia, hard-nosed realism has been sorely missing.  The December election and its January 2005 predecessor were events that most neoliberal observers --  for example,  the American Prospect  -- could not praise highly enough:

Iraqis have concluded one of the most successful constitutional processes in history. Rarely, if ever, before has an important country moved from tyranny to pluralism so quickly, with so little bloodshed, and with such a quality and degree of popular participation.

This assessment was spectacularly wrong. Iraq's constitutional process has not led to "pluralism," much less staunched the bloodshed. 

Rather -- no doubt with ample assistance from Iranian secret agents,  "foreign fighters," and other officious intermeddlers  --  the process has exacerbated social and religious  divisions --  divisions that Iraq was always noted for mitigating.

The continued US presence has also helped to legitimize the extremists, letting them fly the "national liberation" flag. We have reached the point where country's armed private militias are expanding faster than the US-trained police and army. 

In this perilous Somalia-like situation, with US troops viewed as part of the problem, and shot at by all sides, it is harder and harder to justify incremental American casualties.

Indeed, about the only thing that all Iraqi factions  -- apart from some Kurds and the country's dwindling minority of remaining secularists -- agree on now is the desire for the US military to leave.  We should respect their wishes.

TOO FEW TROOPS?

By now, even arch-conservative pundits like William F. Buckley have agreed that the Iraq War was a costly mistake, and that a US withdrawal is called for. 

Meanwhile, however, some die-hard US neoliberal defenders of the war -- including tough-guys like the New York Times' Tom Friedman and Vanity Fair's Christopher Hitchens -- are still denying the existence of Iraq's deep-seated, historically-specific obstacles to democratization and unified self-rule, as well as the overwhelming opposition in Iraq to the US presence.

Of course, admitting that local history actually matters might require one to study Middle Eastern history a little more closely, or perhaps even learn Arabic.

It might also interfere with certain pet theories, like the "inevitable triumph of technology and free markets over local markets, nations, peoples, customs and practices," or the "inevitable struggle to the death between Islamic extremism and Western democracy."

From the standpoint of these and other warhawks, our only mistake in Iraq was really quite simple -- the Bush Administration sent in too few troops.

On closer inspection, this claim spins itself into the ground faster than a Halliburton drill bit. 

• One key reason why more troops were not available was the fact that the war's supporters -- not only the Bush Administration, but also leading Democrats like Hillary Clinton, John Kerry, and Joe Lieberman,  and their pundit camp followers -- failed to persuade anyone other than Mad Tony Blair that a variety of cockamamie  theories about "democratizing the Middle East," the "connection" between Saddam and al-Qaeda,  and WMDs had any validity whatsoever.

• Second, while a handful of Pentagon skeptics did support larger troop commitments before the invasion, they were in the minority -- and not just because of Rumsfeld's desire to fight the war with a high-tech army. Most of the war planners and pro-war enthusiasts alike were swept away by Friedman-like naievete about the enthusiasm of ordinary Iraqis for US-backed "liberation." They systematically underestimated the Iraqis' nationalism and their resentment of occupation -- especially by  armies of "Christian" nationals from the US and the UK. In retrospect, it is easy to say that even more troops were needed to maintain order and suppress resistance. But the larger US presence would have provoked even more resistance. 

• As most US commanders agreed, the "more troops" answer is flawed from a technical perspective, given the nature of the insurgency. It would have provided more targets for suicide bombers, without delivering a remedy for their simple IED and sniper tactics.  While more troops might have provided better border interdiction, Iraq has a larger land mass than Vietnam, and twice as many neighbors. For the "more troops" claim to work with any certainty,  the number would have had to rival Vietnam proportions -- at least 500,000, probably for several years. The US military manpower system has already experienced great strains trying to sustain its 133,000 commitment to Iraq with a volunteer army -- to be effective, the "more troops" approach might well have required a military draft. 

Apart from New York's Congressman Rangle, who may have just been tweaking the establishment's chin for his black constituents, not even the most aggressive neoliberal warhawk has ever proposed that. 

Ever since WMDs failed to turn up and Saddam's connection to al-Qaeda turned out to be a canard,  the neoliberal warhawks have been running for cover -- worried, quite rightly, that history will not take kindly to their dissembling, and their collaboration with the Bush Administration's neoimperialists.  

For much of the last three years this cover story was provided by the expectation of "nation building," "democratization," and the "training of the Iraqi Army" --  achievements that always seemed to be, conveniently enough, just around the corner.   

As the last week's events have dramatized, these are all more mirages in the desert. We've run out of time and excuses.  

   (c)SubmergingMarkets, 2006.

 

 

"PORT WHINE, DUBAI-OUS LOGIC"The Impressive Power of Sheer DemagogyJames S. Henry

We must realize that it is very hard to save a civilization when its hour has come to fall beneath the power of demagogues. For the demagogue has been the great strangler of civilization....(One) is not a demagogue simply because he stands up and shouts at a crowd...The real demagogy..is rooted in...irresponsibility toward... ideas...Demagogy is a form of intellectual degeneration.

-- Jose Ortega y Gasset, History as a System

World oil markets may be tight, but evidently the world has an inexhaustible supply of ethnic and religious enmity -- and not only in the Middle East. If we are looking for a sustainable alternative energy source, perhaps we should start here.

Just this week,  at least five more Palestinian "terrorists" --  or "freedom fighters" and "martyrs,"  as many Palestinians regard them -- were shot dead by Israeli paramilitaries in the West Bank. Seven US soldiers were blown to bits in Iraq, more than 165 Iraqis perished in fighting between Sunnis and Shiites, and at least 100 Nigerians died in conflicts that were aggravated by Denmark's gratuitous Muslim-baiting cartoons. 

Meanwhile, back on the center stage of Western democracy,  many of our best-known  Congressional Democrats and Republicans -- including Senators Hillary Clinton (D), Charles Schumer (D), Bill Frist (R), Richard Shelby (R), and George Allen (R), as well as many media pundits -- were focusing on the Bush Administration's decision to approve the acquisition of a P&O Ports, a leading British ports services company,  by DP World, a Dubai government-owned ports services company that already operates 22 container terminals in 15 countries.

On closer inspection, that opposition amounted to little more than a combination of knee-jerk prejudice, dubious economics, even more gratuitous Muslim-baiting, and the worst form of political pandering.

If recent experiences with similar port licensing conflicts in the US are any guide, it is likely that the Dubai company will eventually get its way.

Unfortunately, given President Bush's weak political position and the paucity of principled statemanship and wisdom in both of our two leading "cartel-like" parties,  we are likely to see much more of this kind of demagogy in the next few years.

  (c) SubmergingMarkets, 2006.

BUSH HEADS SOUTHReceives Rousing Welcome In Argentina...Fox News Analysis

President Bush received an incredibly warm welcome at the 34-nation Summit of the Americas in Mar de la Plata, as thousands of ordinary people from all over the Continent turned out to hail his presence.

The effervescent US President was clearly buoyed by polls that showed that he still commands the support of an incredible 80 percent of Republicans -- otherwise known as his "base."

True, "non-base" support is reportedly a little less certain. Overall, in this week's latest polls, 59 percent expressed "disapproval," while 42 percent expressed "strong" disapproval." A quarter of the US population surveyed reported "violent morning sickness...."

However, knowledgeable insiders have called this a "temporary setback" that will be easily corrected if and when Presidential advisor Karl Rove, recently distracted by the Pflame investigation, starts covering the bases again.

The President, speaking through an interpreter, voiced optimism that "Free trade and liberal investment policies, plus a few billion dollars on defense, corn subsidiies, and our brand new military base in Paraguay" would completely change the lifestyles of the estimated 100 million Latin Americans who remain below the $1 per day world poverty line.

Said Bush, "These policies have only been tried for a decade or two. They need to be given a chance. Right here in Argentina, you've seen how well they've worked, right?"

Bush's sentiments were echoed by Vincente Fox, Mexico's amazingly popular lame-duck President, and Paul Martin, the astonishing Canadian PM, whose own popularity ratings have recently been taken to record levels by the Gomery Report, which documented the disappearance of $250 million of government funds, mainly by way of Mr. Martin's own party.

Said Martin: "We are quite pleased to have become a wholly-owned subsidiary of US multinationals. We didn't think we'd like the sensation, but it has become an experience that we really look forward to every night. You will also learn to enjoy it. Now if only the US would pay us that $3.5 billion...."

Said Fox: "Yes, it is true, millions of Mexican small farmers have been wiped out by free trade. But this criticism is baseless. Just look at all the remittances they are sending back home from the US !"

Meanwhile, the US President had an especially warm greeting from Diego Maradona, the famous Argentine soccer star, now in recovery. Maradona used a colloquial Argentine expression to describe just how delighted he is to finally have this particular American President visit his country.

Elsewhere, Cuba's Fidel Castro, who was not permitted to attend the summit, was reported to have decided to remove all restrictions on US trade and investment with Cuba, after having listened to President Bush's persuasive arguments.

Said the aging inveterate leftist leader, "I knew we were doing something wrong. Now I finally know what it was. We were way off base!"

After a prolonged negotiating session on Saturday, in which Summit delegates basically agreed to continue to debate the merits of free trade for a long time to come, Bush departed for a Sunday meeting in Brasiia with yet another embattled President, Luis Ignacio da Silva ("Lula.")

Brasilia is a pretty lonely, desolate, and distinctly un-Brazilian place on a Saturday night, because all the whores and politicians have flown back to Rio or Sao Paulo for the weekend, and one is just left with all these 1950s-vintage monuments to Brazil's cement industry. But perhaps President Bush will find a little solace taking a moonlit walk on the empty esplanades, wandering through the otherwise flat, lifeless landscape that Robert Campos once called "the revenge of a Communist architect against capitalist society."

(c)SubmergingMarkets, 2005

"LIBBYGATE"Why Scooter Will Skate.....James S. Henry

Irving Lewis Libby, Jr. was finally arraigned today, after the Special Prosecutor Patrick "Bulldog" Fitzgerald's two-year investigation. It's always nice to see warmongers twisting in the wind,  but what have we really learned from all this? 

Unfortunately, the five-count federal indictment of Vice President Dick Cheney's 55-year old Chief of Staff did not actually reveal who outed CIA spookette Valerie Pflame. But at least we do now know "Scooter's" real first name and the origins of his cute little boys' school handle.     

Before Big Media's attention was deflected back to bird flu and another contentious Supreme Court nomination, the indictment also produced much speculation about whether Libby would cop a plea; whether "Official A" -- Karl Rove -- or even the Veep himself might eventually be charged; and how long the judicial torments suffered by Libby, Tom Delay, Jack Abramoff, and other inner-circle Republicans will persist.

For a few moments, it also appeared that  Patrick "Bulldog" Fitzgerald might finally get down to a few of the really important issues:

• (1) To what extent did the White House, the Pentagon, its operatives, and its allies in the media and foreign governments conspire to orchestrate the fraudulent case for the Iraq War -- as opposed to just being victims of "faulty intelligence?" (E.g., "Tenet made me do it.")

• (2) How often were "house journalists" like Judith Miller, Tim Russert, and Bob Novak  -- whose principle skill is trading various kinds of favors with officials in high places -- used as distribution channels for the Administration's agitprop? campaign If they didn't learn about Valerie Plame's identity from Libby or Rove, who did they learn it from?

• (3) What special interests - energy companies, defense contractors, and several Middle East countries, would-be countries, and religious/ ethnic factions -- helped weave the cobweb of distortions and lies that got us into this War, and have kept us in it long after even Brent Scowcoft and William Odom agree that it is a monumental US strategic blunder?

• (4) What was the role of these same interests in insuring that so many leading Democrats have been completely supine on the War? And what other wars do they have in store for our sons and daughters?

Alas, the case against Libby & Co. is unlikely to ever reach these issues, because, as argued below,  Scooter Libby will almost certainly escape scot-free... just like his oldest client, Mark Rich, who's recently been implicated in paying bribes to Saddam Hussein -- post-pardon.  For the incredible story, read on......