Friday, January 29, 2010

Level Playing Field for the Big banks

A Level Playing Field for the Super Banks?

The world's economic big-wigs are meeting, as they do every so often, in the Swiss ski resort of Davos. The bankers among them expressed concern about plans to subject the banks in the US and elsewhere to stricter regulations in order to prevent another meltdown. The head of the Swiss bank, USB--one of the biggies in global banking--is quoted as saying:“Global banks would like to have a level playing field, . . . .’’

There are two teams competing on this playing field. One of the teams consists of the big banks. The other team? Well surely the businesses that had to close as a result of the massive miscalculations of the large banks are on that team as are their employees who are now without a job and the millions of Americans who lost their homes due to the mortgage crisis set in motion by the big banks.

What would a level playing field for these two teams consist of? If the banks had a level playing field so would all the other players, including the unemployed, the homeless and the clients of food banks--the hungry. The big banks would not have all the advantages as they do today--receiving massive bailouts because they are “too large to fail” while small businesses and their employees and homeowners are small enough to be allowed to fail. Today the playing field is not level; it gives a huge advantage to the big banks.

If the playing field were really level and one side took unfair advantage there'd be a time-out and the team that engaged in unfair practices would have to pay a penalty. Since the misjudgments of the big banks caused millions to lose their jobs and their homes, it would be the responsibility of that team to take their penalty by alleviating the suffering those errors caused. Instead of giving million dollar bonuses to the execs who gambled (with other peoples' money, mind you!) and lost, the banks would be told to use their profits to create jobs and to help people hold on to their homes.
How's that for a level playing field?

Sunday, January 24, 2010

The United States and Haiti

The US and Haiti

Copious reporting about the terrible suffering of earthquake ravaged Haiti never fails to mention that the effects of the major earthquake are magnified many times by the prevailing poverty and political chaos. 99% of the population are stunningly poor with most persons earning $1 a day, or less, most people living in slums without electricity, running water, or the most elementary sanitary facilities. Haiti has rarely achieved political stability. Its history is a series of political coups, political murders, and massacres.

While few observers say so in so many words, the implication is clear: The Haitian people have grossly mismanaged their country. They are, at least in part, to blame for their suffering. Other countries, above all the US, have for many years been most generous in their support for Haiti. But our generosity has not been able to overcome the self-destructive choices of the Haitians themselves.

It is time to set the facts straight. The myth of Haitian incompetence and self-destructiveness that won out over the generosity of the US and other Western nations conceals the fact that Haiti has been brought to its present tragic collapse by the deliberate interference of Western countries, above all the United States.

In the 18th century, Haiti was a French colony, home to large plantations, where slaves were literally being worked to death, but which thereby created a large portion of the wealth of France. A slave uprising in early 1800s created the free nation of Haiti--the first republic, the first country to abolish slavery, and the first Black nation on the American continent. France refused to recognize that nation until Haiti agreed to a very large restitution payment (which they did not finish paying until the 1870s)--the former slaves in Haiti had to pay France for their liberty which deprived the French of valuable possessions. The US, where Thomas Jefferson was then President, imposed a trade embargo on Haiti. The slave owner Jefferson was not about to recognize a republic founded by slaves who freed themselves. The US did not recognize the Republic of Haiti until 60 years later, after the Civil War.

Burdened by crushing debt, embargoed by the US and thus unable to sell the produce of its fertile farms, Haiti sank into poverty, not from its own ineptitude but the superior power of the Western nations.

In the years before World War I, German companies had considerable influence in Haiti. With the first World War approaching, the US government worried about German influence in a country so close to Florida. In addition a period of political instability threatened US commercial interests such as HASCO--the Haitian-American Sugar Company. Our response was to send in the Marines in 1915 and keep them there until 1934. The national bank of Haiti was taken over by National City Bank of New York, the country was run by us. U.S. Railroad interests soon followed, and it wasn’t too long before a host of American business interests, including W.R Grace Corp., lobbied President Woodrow Wilson to demand the revenue coming in from Haitian customs as repayment for the Haitian government’s debt: in effect, turning over the administration of Haiti’s independent government to the U.S. During that period, the US built roads and schools and thus contributed to progress in Haiti. The US also forced the Haitians to adopt a constitution which, unlike previous Haitian constitutions, allowed foreigners to own property in Haiti. Besides, it organized the Haitian military--the faithful servants and executioners of the Duvalier dictatorship (1932 - 1986) which we left in Haiti after quitting the country in 1934. The association between Haiti's military and ours continued into the present century when coups and repressions of democratic movements in Haiti were organized by the CIA and military officers who had been trained at the School of the Americas at Fort Benning, GA.

Under the heel of a murderous dictatorship of the Duvaliers from the early 1930s through the presidency of Ronald Reagan and the elder Bush, Haiti was a victim of the Cold War. The Duvaliers had the support of our government because they were staunchly anti-Communist, close to Communist Cuba and capitalist Florida. Their regime was as murderous as that of Saddam Hussein in Iraq and we sacrificed the liberties, the very lives of Haitians to what we considered our own interests in the Cold War.

Since the end of the Duvalier dictatorship, Haiti has had two democratically elected presidents, but their tenures have also been disrupted by coups, military take-overs and repressions. The detailed history of that period is full of controversy but a series of very unsavory American political operatives, several of them intimately involved in the secret and illegal Contra operations in the 1980s, weaves in and out of events in Haiti.

The Haitian people never have been and still are not independent masters of their country or their history. Our country bears a heavy responsibility for the suffering of the Haitian people.

Friday, January 22, 2010

Disaster Lessons

Disaster Lessons

In Port-Au-Prince, devastated by an earthquake, the police are armed and looking out for violence. Newspaper reporters of a law-and-order orientation, many of them with racist agendas who project their own thirst for violence, are reporting gangs, armed with machetes, and looting. “Roaming bands of young men were carrying machetes, looting and robbing everywhere you go said one aid worker. “ ( 2010/01/haiti-sees-140000-dead-fe.html). No doubt some people become violent in desperate situations. Some people are looking to take advantage of chaos and disorder; some people react violently to their own suffering. But most other observers see the terrible desperation of people who have lost everything, who lack food or water, and marvel at how peaceful they are. “Reports of armed gangs, including video of young men with machetes, have appeared in citizen and news video today. . . . But blog and media reports of looting appear to be based on only a few cases.”

It is Katrina all over. The poor and largely black population who survived the flood were reported to be violent and looting. The National Guard, armed to the teeth, were there to maintain law and order. Later reports showed that the violence reported existed mostly in the imagination of reporters. The greatest threat of violence came from the heavily armed troops. “Shades of Katrina emanate from the descriptions of "anarchy" engulfing the streets. Remember the Superdome, the "looting," the alleged explosion of mayhem? The media conjured images of death and destruction with voyeuristic zeal, while curating the stories to fit a prevailing narrative of savagery and social breakdown. Sharp criticism eventually emerged, too late, to debunk the initial portrayals of lawlessness as distortions, colored by latent anxieties about how black people might act in the absence of white domination. ” (http://www.

There is a frightening lesson to be learned here. During natural disasters, the element of violence is mainly introduced by the heavily armed soldiers whom governments send to the scene of devastation-- in the case of Katrina, long before they sent any help for the victims. Reports of violence are often manufactured by angry persons, by haters, or persons terribly scared who are constantly expecting violence--hoping perhaps for an opportunity to be violent themselves. In Haiti too complaints have been heard that the US is preventing relief supplies from entering the country by giving preference to flights bringing in troops over flights bringing in relief supplies.

Violence is not primarily introduced by the victims of the disasters but by the heavily armed troops. Governments send in their soldiers, allegedly to prevent violence, but they actually are the most violent actors. Governments, whom we expect to preserve the peace, are often its greatest enemies. Its is they who introduce heavily armed men and women and promote the possibility of mayhem.

Iraq was a violent country to be sure under Saddam Hussein. But the damage he did to the Iraqi people pales besides the loss of life inflicted by allied troops. The same is true in Afghanistan. When will our government learn that war does not promote peace and killing does not save lives?

Sunday, January 17, 2010

Privatizing Government services

Privatizing government services.

Many people believe that privatizing government functions will provide the public with improved services. In some cases that's clearly false; in others it is doubtful; in others again it is not clear what is the best policy.

Two years ago my region of the country experienced a serious ice storm. Trees were down everywhere, utility lines were damaged; in the dead of winter many people were left without heat or hot water. One part of our region is serviced by a private utility company. After the storm. its customers were without services for a week or more. Some neighboring towns have had public, municipal utilities for many years. Their services were restored in a day or two. Subsequent inquiries also showed that the customers of the privately owned, for-profit utility payed higher rates than the customers of public, municipal utility companies. This is one example where private, for-profit companies provided worse service at a higher price than government owned and run services..

No big surprise, once you think about it. The municipal utility has one job, namely to provide cheap electricity to its customers. The private, for-profit company has a different goal it needs to make as much money as possible for its stockholders. The customers of the municipal utility company pay for the power and the service they get. So do the customers of the private, for-profit utility company. But in addition they have to provide a profit to the utility company on top of paying for the service and the power. It makes sense that, at least in some cases, the private company is more expensive and/or provides worse service.

That is, of course, not always true. Private companies can provide products and services more cheaply than publicly owned companies, if the public employees belong to a union. The private company may hire nonunion employees, it may hire immigrant workers, it may even hire workers without papers and pay them a lot less than the unionized employees. Their lower wage bill may benefit the customers. The private companies still makes its profit, the customers pay a lower price but the saving comes at the expense of the people who provide the services. They may be forced to work two jobs to support their families. Here outsourcing public services to a private company saves the public money but at the price of underpaying fellow workers. Should we support that? Thats not so easy to say.

Outsourcing public services to private companies is often thought to lower prices because there is competition in the private sector that tends to lower prices by forcing companies to be more efficient. But that is just one more thing everybody says without thinking about it.

Consider the case of public schools. There have been some examples of private, for-profit schools doing better than a public system. These have been cases where the public school system had become completely non-functional and almost anything was better than what the city had. But we have not seen a large number of for-profit private schools. The reason for that is simple: it is very difficult to make money on providing good education. Some companies that have tried it went bankrupt. Others are limping along.

If there is one gas station in your neighborhood, there may well be a competing gas station on the opposite corner. Gas stations cost money but competition is a reasonable way of proceeding. But if your neighborhood has an elementary school, would you consider it a good investment to build and staff another elementary school right across the street? We haven't seen that very often and for good reason. It's a terrible business model. Getting some real competition going in public schooling is not so easy. Having a government service transferred to a private company does not automatically produce competition.

Making the post office a quasi private corporation has not helped its bottom line. It still needs annual cash infusions from the government. Paying private contractors to clear the snow after a storm seems reasonable. Having the city stationary printed up by private print shops rather than by any city owned and run printer seems also reasonable.

Allowing cities and towns to get some services from private companies is not objectionable. But it is a mistake to assume, without further investigation, that private companies will always do better than government in providing services for citizens.

Friday, January 15, 2010

Yemen, an example of failed US foreign policy

Yemen, an example of failed US foreign policy

Until Christmas eve, Yemen was not in the news. It was no more on the radar of our government than many other countries. It was just one more troubled place in the Mid-East.

Then, on Christmas Day, Umar Farouk Abdulmutallab, a 23 year old Nigerian, tried to blow up himself and a Northwest Airlines plane as it was approaching Detroit from Amsterdam. Umar failed. Upon his arrest he told interrogators that he had spent several months with Al Quaeda operatives in Yemen who had trained him for this mission and had supplied the explosive material. (The government of Yemen denies that he got explosives in Yemen but no one seems to believe them).

That put Yemen on the map big time. Gen. Petraeus came to visit to announce an increase in US aid. The US embassy, and that of France, and some other European countries were closed for a day or two to highlight the threat of Al Quaeda in Yemen. Someone--it is not clear whether it was the Yemeni government or the US-- bombed some Al Qaeda members and claimed to have killed some of their leaders.

Yemen located at the Southern tip of the Arab peninsula is about twice the the size of Wyoming with a population of 24 million persons. Half of them are 15 years or younger; Yemenis have a life expectancy of 61 years. The average family has 6 children. The unemployment rate is 35 %.

Like most Mid-Eastern countries, oil is a major source of government income. But the oil is expected to run out in less than ten years. In the meantime sizable reserves of natural gas have been discovered. (The first tanker with liquefied natural gas arrived in Boston last week) More ominously, Yemen already very arid in portions of the country, expects to run out of water in the near future.

Until 1990, Yemen consisted of two countries: North and South Yemen; the latter was in the Soviet orbit. The two unified into the Republic of Yemen in 1990 but fought a brief civil war in 1994. Reunified after that, Yemen is battling a military uprising in the north of the country and there is fighting with independence movements in the south. Not unlike in Afghanistan, the control exercised by the central government is very limited outside the capital Sana'a. Much of the small country is run by various tribal chiefs. Some of them are hospitable to Al Quaeda and its Islamist message.

The US government has been giving some aid to Yemen over the years. Most of it was military aid. A significant proportion of the remainder came in the form of advice on how to run a democracy in Yemen. The US government was telling the Yemenis how to run their government. From our point of view that may have been money well spent. It is difficult to believe that it made us a lot of friends in Yemen.

Consider this analogy: in 2000 the Bushies stole the election with all kinds of voting shenanigans in Florida, aided and abetted by the US Supreme Court. Similar irregularities are said to have occurred in 2004. If Canada or Britain sent an aid mission to Washington to teach us how to hold clean elections, it would not gain Canada or Britain a lot of friends here. I suspect our advice had the same effect in Yemen.

Our aid comes and goes. Before 1990, USAID had various projects in Yemen and a certain number of young Yemenis were sent to the US to study. During the first Gulf War, Yemen refused to join the coalition against Iraq. We punished Yemen by withdrawing Peace Corps volunteers, ending military assistance and most other aid. Countries that do not support our foreign policy can expect no aid from us or no relations with us. After 2001 Yemen received more aid, mostly military, in connection with the “war on terror.” Now that Al Quaeda is active there, we go and double aid to the country and urge them to fight Al Quaeda actively.

Our relations to Yemen are transparently self-interested. Here is a country with 23 million people, many of them unemployed, many others scratching together a very poor living. But we are not interested in the fate of the Yemeni people. We are not asking what we can do for the people in Yemen to improve their agriculture, to improve their water supplies, to extend lives and provide work. We are only asking what Yemen can do for us.

We treat the Yemenis pretty much as we treat the rest of the world, as means to our own ends. To the extent that they can increase our security we give them arms. We also “teach” them how to govern themselves. For the rest, we make it as clear as we can without putting it into words, that we do not care two hoots what happens to them.

There are several things wrong with that: 1. It is patently immoral. 2. It does not make friends for us. 3. It does not make us any safer.

It is not surprising that people around the globe do not like us a lot.

Friday, January 8, 2010

Interest group politics, justice and democracy

Interest group politics, justice and Democracy

With Congress in session again the pressure is on to complete the health care overhaul bill. As we come into the home stretch, the lobbyists will be out in full force once more. Here is what some of the largest lobbyists spent before Christmas 2009: the big drug manufacturers – $6.2 million dollars; the American Medical Association – $4 million; different insurance companies spent $1 or $2 million each. The total is unclear, but it apparently set a record for health care lobbying. Some estimates speak of lobbyists spending $1.4 million per day. Just think of how much health care that sort of money could buy.

The outcome is predictable: there are some winners and some losers. On the whole, the people who spend money lobbying are the winners and the rest of us who don't have money to lobby are bound to be the losers. Private insurance companies will continue to make money off all of us; the big pharmaceutical companies will continue to get bigger and fatter; the poor, the working people, and the middle class will continue to pay too much for often not adequate care.

The whole disgraceful process shows up the mortal peril of our democracy. The prime motivation of voters and elected officials in our democracy is self-interest. Everyone is in there to grab a piece of the pie. We vote our pocketbook; our representatives like their jobs and want to be reelected. So they vote for whatever will keep them in office. The first question anybody asks about proposed legislation is: what's in it for me?

You may well ask: what is wrong with that? What else should I be voting except my pocketbook? Why should representatives not try to please the people who voted for them?

It will be useful to consult the authors of our Constitution to find out what they thought about the question of voting one's pocketbook or one's self interest in remaining in office.

The current US Constitution (without any of its Amendment which were added later) was signed in Philadelphia in 1787. It needed to be adopted in state assemblies before it could become the official Constitution of the United States. The local debates about adoption were extremely lively. In New York State, John Jay, Alexander Hamilton and James Madison published a series of articles explaining different aspects of the proposed constitution and urging its adoption. These articles were later collected in book form under the title The Federalist.

In one of these articles, James Madison discusses what he calls “factions.” “By faction I understand a number of citizens... who are united and actuated by some common impulse of . . . interest, [opposed to] to the rights of other citizens or to the permanent and aggregate interest of the community.” “Faction” was Madison's name for what we call an interest group-- a group of people who are motivated by their self interest. Lobbyists represent factions or interest groups. A democracy whose decisions are all motivated by private interest groups is one where, in the words of James Madison, “governments are too unstable and the public good is disregarded... and measures are too often decided not according to the rules of justice and the rights of the minor party but by the superior force of interest . . . “ Where private interest rules, the public good is not promoted neither is justice. The nation's political life consists of power struggles between private interest groups who only care for their own interest and therefore do not ask themselves whether the measures they promote are good for everybody. Questions of justice are disregarded.

Madison praises the proposed constitution because he thinks it can avoid that problem of factions. He has no doubt that democracy fails when it is no more than different groups trying to get as much as they can for themselves. Democracy's goal and justification is liberty – not just for the rich and the people who can afford expensive lobbyists but for every one. But for all to be free, legislators must consider what is good for all, and not just for what is good for some folks who are already better off than many others. Liberty for every one is achieved only by representatives who care about the well-being of all. Good representatives care for what is best for all citizens and not just what is best for the clients of lobbyists. Good representatives honor justice and justice demands that everyone's interests be considered in legislation not only the interests of the rich and powerful.

The democracy we have today is not the democracy intended for us by the authors of the Constitution. The jockeying about portions of the current health reform legislation is a grim reminder that our democracy has nothing to do with what is good for everybody, with justice or fairness. Congressional deliberations have degenerated into a free-for- all where the law goes to the highest bidder. No one cares about what is good for all or about justice.

The saddest part is that a Congress that cannot even produce a bill to improve the health of everyone's body cannot be expected to improve the failing health of our democracy. The generation of Founders made a revolution to establish our republic. It is beginning to look as if we are coming close to needing another revolution. In 1790, Americans were willing to rise up for justice and liberty. Are we willing to fight for restoring real democracy?