The Speech Bernanke Should Have Given

We, the American people, can no longer afford to pay the bill for the lifestyle of the rich and powerful.

Federal Reserve Chairman Ben Bernanke missed a critical opportunity to tell the truth with the world listening at the annual Jackson Hole, Wyoming economic conference. Here is the speech he should have given:

We have reached a level of political irresponsibility over the past 35 years, and specifically over the past decade, where we can now quite realistically see the possible collapse of the U.S.-centric world order as the U.S. is allowed to decay from within. If you, the Washington policy-making elite, do not want this to happen, then you must change course in a more fundamental way—in domestic terms--than Washington has done since Lincoln made ending slavery the moral foundation of the Civil War and—in international terms—than Washington has done since Roosevelt defeated isolationism and took us into WWII.

Domestically, you must personally sacrifice your class interests as the representatives of the rich and powerful by reorienting U.S. financial and tax policies to put the interests of the low and middle classes first. This will entail policies that will severely punish non-productive investment strategies, that will strictly regulate with harshly applied criminal penalties both the banking and mortgage industries, that will re-create a highly progressive tax structure, that will heavily tax carbon use, that will make the ownership of expensive vacation homes prohibitively costly, and that will transfer excess wealth rapidly into the hands of the poor. Such a revolutionary set of reforms will obviously be feasible only in an environment in which real political power is transferred from the rich to the average voter, and will thus entail such political reforms as public financing of elections and legislative steps to encourage rather than discourage third parties.

Internationally, Washington policy-makers must accept that their primary job is to manage the U.S. on behalf of the whole population, i.e., to ensure quality education, plentiful jobs doing productive work, a healthy civil society, political inclusiveness, civil rights, universal health care. Their primary job cannot be the pursuit of global empire. The empire must go. The U.S. must eliminate most of the U.S. military budget, cutting back from some 40% of total global military expenditures to perhaps 10% of total global military expenditures, a budgetary shift that will have the enormous benefit of forcing the U.S. to emphasize moral leadership, rather than leadership through force. The global U.S. military base structure will disappear, and wars of choice will no longer be launched by the U.S. against the wishes of the majority of mankind.

The bottom line is simple: either you, the rich and powerful, must agree to go on a diet and live life in the U.S. as part of rather than as parasites on American society or America as we know it will disappear. We, the American people, can no longer afford to pay the bill for your lifestyle.

But of course I am dreaming, because Bernanke would have been called “a troublemaker” and “not a team player.” Then Bernanke would have been fired.

How a Superpower Earns Respect

Once again Israeli rightwingers manipulated Washington into doing something that harms U.S. national security. Eventually, this bill will come due.

How does a superpower earn friends and influence people? It’s just like at home – Mom and Dad really do not get much respect or love from the kids by owning the biggest house. They get it by earning it, through the little things, like attention and consideration and fairness. (If this sounds like preaching, all you dear readers on Main Street, well, it is, but don’t be offended: I’m not talking to you; I’m talking to Washington, where the above homilies are unappreciated.)

Washington earned little respect with its fearsome display of arms over the last decade. It did get a little bit of momentary, grudging obedience, but mostly from folks who really did not wish to pick a fight in the first place, and even that is all short-term. We do not yet have any idea how many people around the world are just waiting to pay the U.S. back for its string of recent invasions and occupations and embargoes. When we find out, everyone in Washington will be astonished, outraged, and innocent.

Respect is something altogether different: harder to earn than obedience but much more lasting because it generates voluntary cooperation and, more, persuades people to think of one as a model to be followed.

Alright! Enough with the endless carping! Complaining is easy, so for superpower leaders who want to earn the world’s respect, who want to be a model the world will willingly follow (if you were good parents, you’d know…), it is all about the little things.

On August 27, a little thing was reported: Washington threatened to cut Palestinian aid if the Palestinians asked the U.N. for statehood. Note that Washington did not threaten to cut aid to the colonized, abused, and ethnically cleansed Palestinians for terrorism or fighting for national liberation or joining the Communist Bloc, or supporting al Quaida. No, the sole global superpower is threatening economic coercion of Palestinians, whose right to a homeland has been ignored by the world for 60 years, for adhering to international standards and going to the U.N. for help to resolve a conflict that the impoverished and semi-starved population of the Israeli colony cannot possibly obtain on their own (in the face of relentless U.S. hostility). The superpower is punishing a population that has been isolated and prevented from participating in the closest institution we have to world government for wanting to talk.

The lessons here are pretty clear (though perhaps not on the banks of the Potomac):

• Do not follow international law;
• Do not demand the right to talk;
• Do not assume that the democratic process is a public right (it is, rather, by invitation only).

In short, if Palestinians want to be treated with respect, they are going to have to behave disrespectfully. They are going to have to throw stones.

Now, where do you think this leaves all the rest of the world’s one billion Muslims (not to mention, say, one billion Chinese)? Do they respect the U.S. more today as a result of this lesson in democracy?

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Situations Where the Superpower Could Use a Little Respect for Democracy

Nigeria - rising Muslim terrorist campaign 

if you thought Iraq was bad, imagine the U.S. intervening in Nigeria - on the equator, oil exporter, 155,000,000 people with a median age of 19; 389 ethnic groups; twice the size of Iraq

Lessons From Washington's Confrontation With Islam: The Sucker Play

When you don't know your enemy, you make yourself an irresistible target for the sucker play: "Lesson One" in How to Manipulate a Superpower. To reverse the U.S. decline, Washington national security thinkers need to learn this lesson.

The powerful like to make rules that favor themselves. During the heyday of the Empire, the British, whose well-drilled armies in bright red coats liked highly formalized frontal confrontations, had a “rule:” if you hid behind trees or otherwise engaged in military maneuvers not included in the British manual of war, you were a terrorist. That was the actual word they used to describe the American colonial freedom fighters. The British by then had long forgotten how their ancestors had fought from behind trees, in the end successfully, to repel an earlier empire, which reached their shores with Julius’ legions. The weak and the strong each favor the type of fighting that gives them an advantage. And so, today, some call the soldier dropping a bomb on a village he can barely see a brave fighter but the man on the ground putting a bomb in a hole under the street to stop invaders a “terrorist.”

Both sides try to make the moral issues seem clear. If the fighter in the jet were flying over his own country and killing only invaders, and if the fighter on the ground set bombs to kill only invaders (avoiding harm to local residents), then moral judgments would in fact be much clearer. But the bottom line remains: there is no moral requirement for the weak to play by the rules of the strong.

In fact, for the weak to do so would simply be suicide, and it is pure hypocrisy for the strong to insist that they should and are morally compromised if they do not.

The weak can of course perfectly well see all this and will surely persist in searching for tactics to balance the power of the strong. Ironically, that very power hands to the weak an enormously effective tactic: the sucker play. Be it Native Americans tricking unstoppable buffalo herds into running off a cliff or Chechens trapping Russians on the streets of Grozniy or Hezbollah waiting on hillsides to ambush Israeli tank columns driving up narrow mountain roads or bin Laden tricking a superpower into wasting its blood and treasure in some mountain land or desert, being suckered is the ever-present threat to the powerful.

It is bad enough when one falls into a trap set by the adversary one is confronting; it is even more dangerous when the trap is set by a third party, who—as the Chinese have long put it—can then sit on a hill watching two tigers fight. Unfortunately, bin Laden was never brought to trial, so we may never know the degree to which he consciously planned the Iraqi trap into which Washington fell to the enormous advantage of al Qua’ida. A weakened and chastened U.S. has yet to count its losses.

One of the primary lessons that Americans should but almost certainly will not learn from the history of the confrontation between political Islam and the West is the need to understand the political forces active in societies we confront. Education is the best defense. A Taliban sheep herder defending his village is not the same as a Salafi crusader leading a global revolution; pushing them into each other’s arms only aids the crusader. Someone opposed to our behavior does not automatically oppose our lifestyle.

These points are, I trust, blindingly obvious to anyone who would bother to read this article, but if they are so obvious, then here is the question:

Why has the U.S. not launched a campaign to broaden understanding of Muslim societies?

Why are we not funding an explosion of Islamic study institutes and paying premiums for Arabic speakers with degrees in Muslim cultural and political studies (rather than paying premiums to Blackwater mercenaries doing jobs that should, if done at all, either be done by locals or U.S. civil servants)? The funds are clearly available or we would not choose the most expensive imaginable mode of warfare. Were there a shortage of taxpayer contributions, we could fund competitive contracts rather than scandalously huge sole source contracts. Alternatively, we could pay civil servants with an interest in serving the nation’s interests a modest wage instead of paying private corporations with an interest in making a profit. Alternatively, we could hire the poor locals whom our wars have put on the unemployment roles (making them angry at us) to do the jobs (making them grateful to us). But all these are short-term solutions that fail to answer the underlying question of whether or not we have correctly identified our opponent. All the generous taxpayer contributions in the world will not solve the problem, if our policy is based on ignorance of our enemy and is itself the source of the hostility we face in the world. All the weapons in the world will not bring victory if we cannot identify the enemy. But without understanding the societies from which attackers emerge, the societies which we attack, we will never know. We will blunder from one mistake to another, always baffled by the hostility that seems to “come out of the blue.”

When I see a flood of investment in education about the Muslim world and salaries for those so educated, then I will begin to believe that we have learned this lesson of the Soviet invasion of Afghanistan and the U.S. invasions of both Iraq and Afghanistan: either know thine enemy or set thyself up for the sucker play.

Can the U.S. Reverse Its Decline?

If an historic shift—the decline of the U.S.—is unfolding before our eyes, then the double scandal of the invasions of Iraq and Afghanistan followed by the scandal of the recession will be seen as key pieces of evidence. But…just as those events constituted failures of leadership rather than external accidents, good leadership could avoid the decline they point to.

It is very easy to offer the double military debacle of the U.S. in Iraq and Afghanistan as evidence of the decline of the U.S. Indeed, it is evidence, and strong evidence at that. But that of course does not prove that the U.S. decline is, so far, more than a “bad decade” that could be overcome by an educated and determined population led by a responsible national leadership aware of the mistakes of its predecessors. Stephen Walt neatly spells out this all-important caveat:

The good news, however, is the defeat in Iraq and Afghanistan -- and make no mistake, that is what it is -- tells us relatively little about America's overall power position or its ability to shape events that matter elsewhere in the world. Remember that the United States lost the Vietnam War too, but getting out facilitated the 1970s rapprochement with China and ultimately strengthened our overall position in Asia.  Fourteen years later, the USSR had collapsed and the United States had won the Cold War. Nor should anyone draw dubious lessons about U.S. resolve; to the contrary, both of these wars show that the United States is actually willing to fight for a long time under difficult conditions. Thus, the mere fact that we failed in Iraq and Afghanistan does not by itself herald further U.S. decline, provided we make better decisions going forward.

What lessons should we be learning from the Iraqi and Afghan wars?

• Don’t deify your enemies.
• If the enemy is a gang, war against states is the wrong strategic response.
• If the problem is social, a military solution will make things worse.
• We can’t do everything.
• Even if we can do everything, we can’t do everything without sacrifice.
• Foreign policy and domestic policy are linked, and a strong society—workers gainfully employed, people living within their means—forms the basis for an effective foreign policy.
• Breaking our own laws, ignoring our own principles, and undermining our constitution do not strengthen our position.
• Our ignorance of the rest of the world and of the actual behavior of our government and corporations overseas makes it very easy for enemies to set traps and sucker us into voluntarily stepping into them.
• The military card is most effective when available but never played.
• Never trust American leaders: they harm Americans far more than our foreign enemies do.
• Most enemies of the U.S. are more like hornets after you throw a rock at their nest: their hostility did not come out of the blue.
• Learn some history.

Evidence that either voters or leaders in the U.S. have learned any of these lessons is, unfortunately, hard to find.
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Whitewashing U.S. Behavior

Robert Danin of the Council on Foreign Relations recently called for improving our "message" to Muslims. Focusing on the idea that our problem lies in our message rather than our behavior exemplifies the failure to learn the fundamental lessons of 9/11. Empire-building, supporting Israeli rightwing expansionists, and--yes--taking the oil are what they don't like.

The Delusion of Current Events

With victory after victory, the American super-rich are destroying American democracy while their military-industrial allies impose the American Empire upon the world. Saddam is dead; bin Laden is dead; Washington is dropping bombs with impunity; Goldman Sachs is bigger than ever. And yet, America, looking weaker and sillier every day as its government implodes like Marie “let them eat cake” Antoinette, is neither honored nor obeyed. So what is happening: do events speak for themselves, or is something else going on?

The temptation to dwell on events when writing history is almost irresistible. Events are after all the building blocks of history, are they not? Well, perhaps, if you consider white caps to be the building blocks of ocean storms. But if you see storms as the culmination of the interactions of underlying forces—currents, winds, submarine topography, temperature shifts, then you should see history as well as the story of underlying forces—greed, the pursuit of justice, economic competition, cultural urges, security fears, ethnic antagonism, competition over scarce resources.

Consider the history of the 21^st century so far. The main events have been:

1. 9/11;
2. the U.S. decision to respond with military force rather than via the system of justice;
3. the U.S. invasion of Iraq;
4. the poisoning of the Gulf of Mexico;
5. the recession;
6. the “end” of the recession;
7. the overthrow of Mubarak (just a wild guess that it will prove to be the harbinger of a serious Arab socio-political modernization process);

But do these events constitute the key things that happened during this period? Consider the following long-term processes (not one of which can really be called an “event)”

1. the global rise in oil and food prices that set the modernization process of poor countries back by perhaps a decade;
2. the loss of a crucial decade in the battle to overcome (or just survive) global warming;
3. the rising scale of environmental disasters in an increasingly permissive and shortsighted regulatory context;
4. the weakening of the U.S. via the roughly $20 Trillion hit taken by the U.S. economy as the result of its invasion of Iraq ($5T per Stiglitz and Bilmes, The Three Trillion Dollar War) and $20T from the resultant recession (based on the near $1T official bailout plus follow-up hidden Government support to Big Finance; omitting the actual cost of lost productivity or unemployment checks handed out);
5. the discrediting of the U.S. as moral leader of the global movement toward democracy;
6. the relative decline of American power and rise in the power of Russia, China, and Iran;
7. the exposure of the Wall St. model as both socially and financially harmful;
8. the victory (!) of Big Finance in reestablishing itself, despite the recession it caused, in control of both the U.S. political and economic processes;
9. the endless recession on Main St., where the tsunami of unemployment and foreclosures continues;
10. the ability of radical Islam to resist the American Empire, or, to put it differently, the ability of Muslim societies to retain a measure of independence from the U.S.;
11.  the Muslim shift from a focus on attacking the West to peacefully reforming Muslim socio-political systems;
12.  the transformation of the U.S. from the global champion of democracy and reformist “capitalism with a heart” into an elitist plutocracy where the super-rich are intentionally destroying the middle class to replace democracy and the post-Depression egalitarian trend with a two-class society composed of a mass of impoverished, dependent, docile, and depoliticized workers exploited to further enrich the super-rich;
13. the exposure of the weakness (via wars by the U.S. and Israel in Iraq, Afghanistan, Somalia, Gaza, and Lebanon) of modern, high-tech warfare as a means of stopping social movements and constructing…anything.

Judging from events, the history of the 21^st century so far has been the story of American punishment of Muslim independence combined with the advancement of the American Empire. Al Qua’ida was smashed, the Taliban were kicked out of power, Saddam was deposed, Iran was marginalized and economically strangled, Gazans were imprisoned, and southern Lebanon (briefly) depopulated. Simultaneously, the American Empire marched where it wished, expanding military bases with blazing speed and constructing a global financial empire even faster. True, some troops are moving around, but few bases seem to be returning to local hands. Also true, Lehman collapsed and AIG was, for a time, virtually nationalized, but Goldman expanded, and the old financial structure that brought us the recession (proximate cause) within the context of focusing on conducting war and making it invisible to the U.S. public (fundamental cause) was strengthened rather than being disciplined, much less overthrown.

And yet, after all the successes of the American Empire project, the U.S. seems far less secure and less domestically sound than it was a decade ago, while those countries offering an alternative approach to global governance (Russia, China, Iran) each find their non-military strategy has significantly strengthened its hand. Iran, barely surviving a generation ago, now has not only secure borders (in the context of the regional U.S. military withdrawal that appears to be occurring) but a real sphere of influence. China just keeps advancing economically, playing its cards close to its chest and casting bemused glances at the wild-eyed, clumsy Westerners who keep picking up rocks only to drop them on their own feet. Russia is gathering itself, carefully signing nice, legal, non-threatening petroleum contracts in every direction, in fundamental contrast to expensive American military moves that seem to leave the U.S. more and more out of the global hydrocarbon loop. Moreover, it remains unclear exactly what might be meant by any statement that the U.S. “won” the war in Iraq, while every indication is that the U.S. is losing the war in Afghanistan. And all the while, domestically, the condition of American infrastructure and the socio-economic situation of the American worker continue to decline like a Hollywood version of Das Kapital. (For a brilliant summary of the decline of U.S. governance over the past half century, see Noam Chomsky’s “America in Decline.”)

In short, events and reality appear to be telling precisely contradictory stories! Looking at events does not just give a superficial picture of reality; it gives a picture that utterly contradicts reality. The military successes of the American Empire project add up to a less secure and less powerful U.S. The financial successes of the super-rich add up to an increasingly weak and unstable American society whose future we may have already seen—in the riots a few years ago in the suburban ghettos of Paris, in Greece more recently, and this past week in London.

The Economy Is About Jobs, Not Stock Prices

Paul Krugman, cutting as usual to the chase, provides this bottom line little set of statistics on the real state of the economy (where ECONOMY = JOBS):

In June 2007, around 63 percent of adults were employed. In June 2009, the official end of the recession, that number was down to 59.4. As of June 2011, two years into the alleged recovery, the number was: 58.2. [New York Times, 8/4/2011.]

Krugman pointed this out a few days ago; it is worth recalling in light of the gyrations of the stock market this week. It does not matter what the stock market does. Ignore it. What matters is whether or not the average person has a job or is unemployed, frustrated, stressed, angry, unproductive...

So if politicians talk about ANYTHING ELSE, they are probably hiding something (like their inability to solve real problems). Bob Reich explains this very clearly.

And here's the video on how to generate those jobs [Real TV].

Too Big to Exist

When corporate or government institutions become too big and too socially destructive to exist, we need a graceful method of putting them on a diet and reforming their lifestyle.

The American genius for creating magnificently productive mega-institutions has a potentially fatal downside: we have, as a society, no idea how to downsize them when they "go rogue," i.e., become socially destructive. On balance, today, several of America's major mega-institutions--the Imperial Presidency, Big Oil, Big Pharma, and Big Finance--either are or are fast becoming socially destructive. They are "too big to exist;" we need to figure out how to downsize them gracefully, reorienting them toward socially useful behavior.

Perhaps the first step toward this new way of thinking that needs to replace the tarnished old "bigger is better" mantra is to understand the evidence supporting the contention that these mega-institutions are so bloated that American and, indeed, global society can no longer afford them. (I call these social units "institutions" because each is truly a unified organization composed of, perhaps, separate governmental or private units, but operating according to a clear if unstated and frequently illegal set of monopolistic rules designed to maximize profit and power at public expense and, in the case of the Imperial Presidency, at the expense of the rest of the Government as well.) Consider the following examples of mega-institution misbehavior:

1. The Imperial Presidency, i.e., the rising ability of the White House and all its military-industrial support mechanism to overshadow Congress and Constitution on foreign policy, now employs something in the neighborhood of a quarter of a million mercenaries overseas, constituting an armed force capable of making independent war on most countries--completely outside of Congressional control and often beyond the reach of U.S. judicial authorities [see Jean MacKenzie, Jeremy Scahill, Glen Ford]. Since Augustus overthrew the Roman Republic with his palace guards and established the Roman Empire, we have known the profound threat to democracy posed by a mercenary army under the command of the chief executive.
2. Big Pharma, constituting the whole U.S. health care industry, has degenerated so far that, to boost profits, it now essentially writes off as a "business loss" all of the nationa's elderly with the almost universal cognitive problems associated with aging. At their most vulnerable, they are thrown into the arms of untrained relatives utterly unprepared for 24/7 nursing.
3. Big Oil, alb eit receiv ing billions annually in welfare payments from U.S. taxpayers, can destroy ever-growing chunks of the earth through careless cost-cutting measures and escape responsibility. For the rest of our lives, we will be watching BP's poison creep with Gulf Stream currents up the North American east coast and over toward England, while everyone complains about $4 a gallon gas, a price only a fraction of the real cost.
4. As for Big Finance, the cost of its irresponsibility is now glaringly obvious to everyone. At the very least, Wall St. should keep accurate books, and regulators should scrutinize them.

The traditional way of toppling rogue mega-institutions is of course well known: the "barbarians" did it to Imperial Rome, Lincoln did it to the Southern slave system, Gorbachev did it to the Soviet state. But as these mega-institutions take on global scale, the cost of violent overthrow rises sharply. We should be able to do better.

Key to the smooth downsizing of rogue mega-institutions is twofold: 1) the breakthrough understanding of the bottom line insight that a cherished social structure has outlived its usefulness as currently designed combined with 2) the identification of specific traits requiring elimination. Specific reforms (Step 2) without acceptance of the goal of institutional downsizing, and redirection into a socially beneficial mode misses the point. That was the mistake of the Wall Street bailout, which successfully saved the bad old exploitative system rather than taking the opportunity to dismantle it by, for example, rebuilding the wall between the stock market and personal savings accounts. Similarly, eliminating mercenary forces while leaving the political supremacy over Congress of the Imperial Presidency untouched will only have a temporary impact. Surgical removal of a specific cancerous tumor must be done in the context of lifestyle changes related to nutrition, avoiding pesticides, and exercise.

Rogue mega-institutions must be recognized as enemies of society and redesigned to return to their proper purpose of servinhg society. The Presidency's power should be balanced with that of Congress; stock market investments should b e used to stimulate growth, not gamble with people's mortgages and savings accounts; the health care system should exist to provide a universal right, not to make a profit; the cost of gas should b e set by government to reflect its true value, incluyding the cost of pollution clean-up and the cost of wars fought to get the oil. And no industry that takes welfare from the taxpayer should turn its leaders into billionaires immune from prosecution.

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READINGS:
To its credit, Washington is at least thinking about this issue. See comments by FDIC's Sheila Bair.

Republican Games and the Trashing of the U.S. Economy

Former Secretary of Labor Robert Reich has a critical perspective on the linkage between the Republican political games over the debt ceiling and the state of the real economy (i.e., your job, your income, your mortgage, the profit of your business, the appearance of your main street). Curiously, the gamblers all Republicans love (known as "Wall Street") lost big as soon as Obama caved in to the Tea Party extremists. Watch today's DOW Jones figures. The recession did not wake up very many people in the U.S. Will the double dip, now showing on your favorite main street, finally teach us our lesson?

Welfare for the Rich. One reason for the U.S. economic mess is that the rich are cheating everyone else. Check out how much billionaire hedge fund managers pay in taxes. Just as we give welfare to Big Oil, we also give it to Big Finance. Did you really think they got that rich just by working hard? If my income had been taxed at the rate paid by hedge fund managers, I'd be rich now too.

Employment. In April, unemployment fell in most U.S. cities. In May unemployment rose in 210 U.S. cities; in June, it rose in 345 cities. Meanwhile, July job growth almost matched population growth. (U.S. population growth requires at least 125,000 new jobs per month to stay even.) Pundits saw the near tie as "progress." One pundit reportedly called the U.S. economy, the world's largest still (I think; though China is catching up), "not dead." Well obviously. If it were "dead," the U.S. government would no longer be paying out retirement checks to retired Federal workers (using all that cash so kindly loaned to us by...the Chinese).


Euroschlerosis. With whole European countries sounding more and more like the Lehmans and AIGs of Recession I, the double-dip seems more and more likely. Keep in mind that there is only one global financial system (unless you count North Korea and Myanmar as having their own). In fact, as every U.S. worker and homeowner knows, Recession I never ended; it just keeps transforming itself in interesting ways that just leave the average person poorer and poorer. (Remember, U.S. wages have now been stagnant for more than a decade.)

Bait and Switch for Dumb Voters. John Atcheson explains how Republican leaders have tricked the very uneducated American public:

Bait and switch.  Divide and Conquer.
So, after starting with a surplus in 2000, Republicans used two wars, two rounds of tax cuts, and a giant giveaway to big Pharma, to get the country racking up debt like a drunken sailor. 
Along comes the Bush recession, and the debt accelerates, and the Republicans declare the debt to be an “emergency” and right on schedule immediately attack popular programs like Medicare, Medicaid, Social Security, Student loans –and virtually anything that doesn’t help the uber rich or the corporations suddenly must be cut if we are to stay solvent.

OK, I will offer a partial apology to the American voter. I admit it is very hard to persuade oneself how insistent supposedly patriotic Republican politicians are on wrecking the society's circumstances in order to enrich themselves. But really, after the $3 trillion war against Iraq, the trashing of the Gulf of Mexico, the endless trillions of above-board and under-the-table Wall St. bailout (evidently totally somewhere around $12 trillion), the recession, and the lack of government reform of our financial system, it is about time you started focusing. The U.S. is probably the world's richest nation in terms of resources, but we are throwing it away at a rate that will in fact put us into another depression. And the last time we had a depression, it came with camps of the unemployed, fascist police attacks on the poor, and a brush with communist revolution. You really don't want to go there.

Combatting the Imperial Presidency

Tom Hayden has an important piece about Congressional demands for an honest U.S. withdrawal of forces from Iraq. Whatever the U.S. invasion of Iraq may mean, Americans need to remember at least one core lesson: it is a classic example of the failure of the Imperial Presidency. The war was all White House: no public debate, no loyal opposition (which caved), and certainly no honest presentation of justification; in sum, a non-demcratic war. When war, and this was the second most expensive war in U.S. history according to Stiglitz, is planned, declared, and run by imperial rather than democratic means, democracy no longer has much meaning. It is wonderfully reassuring that a decade later, nearly 100 Congressmen finally realize that Congress should have been part of the decision-making process. So, of course, should you, dear citizen.

Question: Is the Imperial Presidency one of the institutions whose orderly failure needs to be designed?

Out-of-Control Global Institutions

Big Oil, Big Finance, and Big Atom exemplify global-scale institutions that are out-of-control, focused on self-enrichment at society's expense rather than on making the contribution to society that justifies their existence. Society needs to take charge.

It sounds great to say that modern society is defined by its ability to link everything—trade, finance, international defense, energy nets, but the surge over the past generation in our ability to link all the traditional local or national components into global monopolies threatens our survival: we are learning how to link far faster than we are learning how to manage the monstrous institutions thus created.

One analogy would be dominoes…just knock over one. The Asian financial crisis that became a global crisis a decade ago and the on-going recession are good examples.

Another analogy is this: it’s wonderful when you link up with your friends and have a pool party, but what if you are all dangling your feet in the water when lightening strikes? Everyone gets fried. Sometimes, disconnected means protected.

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Big Oil, Big Finance, and Big Atom cannot regulate themselves: society must do it.

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Among the prime examples of networked institutions on a global scale are Big Oil, Big Finance, and Big Atom (the nuclear energy industry). All three provide benefits to society, but all are increasingly organized not to accomplish that but to maximize profits for CEOs and investors. All three also share another characteristic: they cannot regulate themselves; society must do it.

Linking mandates recognition of a broader responsibility. But that recognition is increasingly difficult for reasons that are only slowly become apparent. One reason is that technology is facilitating, indeed making virtually inevitable, reactions that are faster and faster…too fast to cope with, as Paulson and company discovered to their horror when the financial ground kept shifting under their feet as they tried to cope with the rising tide of financial institution failure. It was not just that the institutions were too big and their way of business too irresponsible but that they were all linked (both by common perceptions on the part of investors who figured that if one was weak then they all were and by investments in each other). Reactions to failure anywhere in these huge global institutions now occur faster than management or governments can react if not faster than an individual can even think.

A second reason why recognition of the need for taking greater responsibility with global institutions is hard lies in time frame. These institutions are gaining such longevity that problems may build up for a period not just longer than the term of an official but for a period longer than a person’s whole career. Decisions made during one’s career may have horrendous consequences that will only become obvious during the career of one’s successor, very possibly after one’s death. The seeds of the recession were planted by Reagan when he popularized deregulation. A deadly example is the terrifying tendency to allow nuclear power plants—aside from nuclear bombs, the most dangerous devises ever devised--designed to be shut down after 25 years to be kept in service for an extra decade or two even while being allowed literally to rust away. Since the people who make those decisions will quite likely no longer be around if a meltdown results, they have trouble caring and, more, have trouble even focusing on the issue. But this is no academic hair-splitting: a nuclear plant in Illinois came within millimeters of disaster from exactly that: a rusting pipe.

A third obstacle to recognizing the degree of responsibility mandated by the global size of our institutions is that as the institutions get bigger, so does the “responsible” bureaucracy. The man who decides to permit a nuclear power plant to remain in business is probably not the same man who decides to ignore some rule that requires regular inspection and replacement of rusty pipes. Indeed, there may not actually be any single individual who even is aware of the necessary details to see the connections that breed disaster. Is the CEO of a nuclear plant informed of every rusty pipe and the action taken? Was the CEO of every out-of-control Wall Street gambling firm aware of the consequences of every new financial product his mathematicians devised? Who has the legal authority to arrest the CEO of BP when he is British but poisons U.S. coastlines?

We need to understand the danger of these institutions on an emotional level and then identify at a theoretical level as many as possible of the obstacles preventing us from analyzing their threat to our security. Only then will we be able to design methods of effectively caging the beasts we are creating. Whether or not we, as a society, will then actually choose to cage the beasts is of course another issue altogether. Everyone always wants to farm the floodplain until the “thousand-year flood,” caused precisely by the levees that enable farming the floodplain, occur. Everyone wants to prevent forest fires until the build-up of dry undergrowth leads to a conflagration. Everyone wants to benefit from a bubble until it bursts. Let’s face it: we need to grow up, but sadly there is little sign of that happening. We are kids playing with bigger and bigger matches.

Further reading:

For work already done to restructure the U.S. financial system away from gambling and back toward stimulating the economy, see the short article  “How to Liberate America From Wall Street Rule” and the New Economy Working Group’s full report.

Protecting the World From Nuclear Disaster

Imagine a religious state that aspires to have nuclear arms, vigorously exports extremist religious ideology, supports its religious crusade with violence or at least looks the other way when its religious partners use violence internationally, and is vigorously contesting leadership of the Mideast by employing not just political and economic means but also military means. (Readers may wish to see how many Mideast states meet the above criteria.) My question is this:

Should the U.S. be providing privileged* nuclear assistance to such a state?

*By “privileged” I mean nuclear assistance (aid, technology, knowledge, or defense guarantees) not available to all other states in the region.

When developing your answer, consider whether or not such “privileged” nuclear assistance damps down regional nuclear rivalry or provokes it. Consider whether such nuclear assistance might be replaced by some sort of regional guarantees against any possession or use of weapons of mass destruction.

the possibility of initiating formal negotiations, potentially without demanding that Riyadh accept key nonproliferation pledges embraced by one of its neighbors, the United Arab Emirates, in its own 2009 trade arrangement with Washington [Global Security Newswire, 7/28/11.]

Rep. Ileana Ros-Lehtinen of Florida, chairman of the House Foreign Affairs Committee, said Friday she was "astonished" the administration would even consider the move. She called Saudi Arabia an unstable country in an unstable region. [CBS News, 7/29/11.]