Pursuing Financial Criminals

Judicial movement against some of the institutions that created the financial crisis are intensifying, although so far there is little indication that individuals in the financial corporations, much less the Government, will be held responsible. Despite these limitations, this process is a bellweather of the health of our democracy and merits close attention. With luck, we will all eventually have a clearer indication of the degree to which the appearance of fraud reflects reality even if the degree of corporate-government collusion remains concealed by the fog of politics.

1. The SEC sued Goldman Sachs for fraudulent betting against its own customers in 2010. Goldman settled a few months later, paying a half billion dollar fine.
2. The National Credit Union Administration (NCUA) sued Goldman Sachs for “misrepresentation” in August 2011. The NCUA is the Federal credit union regulator. This is its fourth suit flowing from financial schemes that contributed to the recession.
3. Goldman Sachs and two other firms agreed in August 2011 to cease foreclosure fraud and compensate victims.
4. A class action suit was filed against Goldman Sachs in August 2011.
5. The Federal Housing Finance Agency, which regulates Fannie Mae, is bringing suit against 17 banks and mortgage firms, including Goldman Sachs, Bank of America, JP Morgan Chase, and Deutsche Bank, and Countrywide Financial.

It is also unclear how many of the victims of the financial scheming will be compensated.

Exports: A Winner Over the Years

Amid all the gloom and doom about the U.S. economy, exports would seem to be a bright spot:

Source: tradingeconomics.com


 If you go back to the original chart and extend it back a couple decades, you will see that the growth trend is fairly steady throughout. The U.S. needs its trade partners; I wonder what might happen to the domestic economy if Washington put its emphasis on stimulating exports rather than fighting wars?

The Appearance of Elite Collusion Against Democracy

Apparent fraud brought us the financial crash of 2008 and resultant, on-going tsunami of (permanent?) unemployment: apparent fraud throughout the whole system of elite rule, which was characterized by government agencies concealing information to prevent open democratic debate, rosy scenarios, conflicts of interest, and failure to hold anyone responsible for his actions. Will those leaders stay under this cloud of apparent guilt for the rest of their lives, staining the name of democracy, or will they have their day in court?

The shocking and sobering expose of corporate-government financial collusion to enrich the rich by stealing from all the rest of us offered by Gretchen Morgenson and Joshua Rosner in Reckless Endangerment concludes with the following assessment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010:

It did not insist that large and unmanageable institutions be cut down to size to alleviate their threats to taxpayers in the future. Nor did it increase the accountability of those running institutions that will need government assistance in the future.

Therefore, despite this presumed “reform” of the corrupt U.S. financial system, “will,” they ask, “a debacle like the credit crisis of 2008 ever happen again?” Their answer: “Most certainly, because Congress decided against fixing the problem of too-big-to-fail institutions when it had its chance.” [304-305]

Congress failed the American people. That is the outside peel of the infinitely-layered onion of elite corruption.

As for why Congress failed, peeling back the second layer of the onion makes that question is easy to answer: the foxes still guard the henhouse. As the authors make painfully clear, many of the key individuals in charge of bending and breaking the rules, of looking the other way and of carefully planning and implementing fraud—those there at the creation of economic ruin for millions of Americans—remain either in power officially or active behind the scenes. No real prospect of bringing these men to justice is visible on the horizon.

Ripping one more layer off this rotten political onion, the problem goes well beyond the handful of corrupt, short-sighted, and arrogant politicians, Wall Street executives, and mortgage company managers named in Reckless Endangerment. As the authors make clear, the real rot was systemic: the collusion not just of individuals but of the institutions at the core of the system, including Wall Street, mortgage companies, rating agencies, the privileged semi-governmental Fannie Mae, Congress, the White House, both the Democratic and Republican branches of the monopolistic/elitist political party that runs the whole show, and most shockingly even the actual regulatory agencies designed to prevent such corrupt and apparently criminal governance.

From all sides, the leaders stood shoulder-to-shoulder bulldozing aside every courageous, far-sighted, and patriotic civil servant who warned of the coming disaster. Whatever other lesson one takes away from the financial collapse of 2008, we should all remember this one: it was no surprise. It resulted from the willful denial of truth and a literally incredible inability on the part of everyone who was profiting to remember the warnings of the very recent past (the original Depression, the S&L scandal of the late 1980s, the Long-Term Capital Management scandal, the 2001 Enron scandal, the 2001 crash of the CDO [collateralized debt obligation] market, the 2002 WorldCom scandal) in the interest of maximizing personal profit. And who can blame the thieves? After all, we let them keep what they stole, and it seems that no one wants to know how many layers of the onion are rotten.

It is hard to imagine how faith in democracy in America can be restored unless those members of the elite under the cloud of a prima facie case of criminal behavior can have their day in court to make the case to the American people that they are in fact not guilty. If they by some miracle do not deserve to be jailed, they have the right to clear their names.

Far more important, the American people deserve closure on what must be one of the most egregious betrayals of the American people by a rapacious gang of the ruling elite in American history…or perhaps not. Perhaps if the Geithners, the Raines, the Greenspans, the Blankfeins, the Bensingers, the Weills, the Lewises, the Paulsons, the Gramms, the Leaches, the Blileyes, the Franks, the Johnsons, the Clintons had their day in court, they would explain how they all had our best interests at heart.
________________________________

The Appearance of Fraud

Republican member of the House of Representatives Darrell Issa has been trying to protect Goldman Sachs from being investigated while pouring his wealth into Goldman accounts. If he thinks Goldman is a valuable and upright American institution, then why is he afraid of an investigation that could exonerate Goldman and restore its tattered reputation?

American Decline?

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.

The core assumption of the above statement, which introduced The Speech Bernanke Should Have Given, is that the U.S. is in decline. Clearly, no military competitor is even on the horizon, despite the grumbling about China’s launching of a two-decade old ex-Soviet aircraft carrier. The U.S. economy also remains enormous, though the total GNP of 1.3 billion Chinese is now approaching the GNP of 300,000,000 Americans and the two countries are dangerously linked by American reliance on Chinese loans. So, is the U.S. truly in decline?

American decline is more subtle. A traditional, WWII-style frontal clash between the U.S. military and that of any conceivable enemy would surely result in a quick U.S. victory, but such a situation is utterly unlikely. Meanwhile, the enemies the U.S. has faced on the battlefield seem always just beyond American reach. The U.S. has not been able to conquer either the insurgents of Afghanistan or Iraq, failures that suggest a significant decline in the ability of the U.S. to wield its weapons effectively. What matters is not the number of guns and the size of bombs but the degree to which one’s weapons enable one to achieve one’s goals. It is difficult to identify a single national security goal that the U.S. has achieved by force in the last decade: the terrorist campaign against Iraqi civilians that did not even exist when the U.S. invaded not only continues but is intensifying; Taliban influence not only continues but is on the rise in Afghanistan; Hamas seems increasingly secure in Gaza, while Palestine as a whole has seized the initiative in its struggle for freedom from Israeli occupation; Hezbollah is the majority party in the Lebanese government; anti-Western Islamic militants are increasingly influential in Somalia. The U.S. today is brilliantly qualified to win WWII; it is dismally unqualified to resolve issues such as the worldwide Muslim grievances about the way they have been treated by the West. Obama’s response to the Arab Spring, albeit far more realistic than Neo-Con militarism, nevertheless continued to demonstrate a lack of comprehension in Washington of Muslim grievances. To say that the U.S. has impressive weapons is irrelevant; the point is the degree to which the U.S. has the appropriate tools for solving the problems it faces. Unfortunately for Americans, the tools being employed by Washington are increasingly irrelevant to the most serious international challenges facing the U.S. The first way in which the U.S. is in decline is in its declining ability to design the appropriate tools for international conflict resolution.

Force is an extreme expedient; most problems are resolved through less expensive methods, and the best method is to be so trusted and admired that others aspire to follow one’s lead. Unfortunately for the U.S., its behavior over the past decade has eroded its reputation as a moral leader. Iran defies the U.S. with impunity, in great measure because its argument that the U.S.-centric world order should be organized more fairly is beyond dispute. Russia and China seem increasingly to be moving in directions that are not so much in defiance of the U.S. as based on the assumption they do not really need to pay attention to the U.S. Russia, ignoring U.S. military noise, calmly signs contracts building up its hydrocarbon empire. China appears to be operating on a completely different time-scale, not resisting U.S. military moves but, like Russia, ignoring them, while it develops its own economy, gets on its feet militarily, and prepares for a future world in which the U.S. will have either collapsed or mired itself in economic dependence on China’s continuing willingness to support American over-consumption. U.S. allies like Brazil and Turkey, rather than kowtowing to Washington, increasingly see Washington’s behavior as part of the problem and unilaterally assert the right to take leadership roles—not to defeat the U.S. but to fill the gap created by Washington’s incompetence. The little antagonists of the U.S. are neither cowed nor defeated; rather, they seem to learn and adapt faster than the U.S., running circles around the giant. Even those who do exactly what Washington calls upon the world to do (e.g., become democratic) do so on their own, more in spite of Washington than at Washington’s command: what do the millions of activists in the Arab Spring owe to a U.S. that followed or opposed but never led or even kept pace with their movement? Moral leadership gets one influence for free. The second way in which the U.S. is declining is in its evaporating moral leadership.

Military might and moral leadership are tools of foreign policy. Both, over the long term, are linked to the domestic circumstances of a society. A society that is obviously happy, self-confident, just, and productive is the foundation for a state’s military might and simultaneously a model for emulation. Ironically, the conditions that enable a state to maintain a powerful military make that powerful military less important. The world will rush to follow a great society. But the endless political buffoonery in Washington, be it presidents landing jets personally on aircraft carriers or Congressmen tying themselves in knots over debt ceilings, raises eyebrows worldwide and brings wide smiles to the faces of America’s enemies. Far more seriously, all can see the signs of collapse in one facet after another of that marvelous jewel of the imagination, the American Dream: the middle class model of the 1950s with a single breadwinner able to finance a nice suburban life style for his family was replaced in the 1980s by the same lifestyle financed through the fulltime work of two parents (who thus could not but ignore their kids, leaving them to be babysat by drugs) and now in 2011 has become a family with at least one breadwinner unemployed and the friendly neighborhood bank foreclosing and putting them on the street. As for the core of any society’s success in the modern world—the educational system, where every decent U.S. high school student in the 1960s studied a foreign language and took four years of history (pathetically superficial though it may have been), today neither standard is observed; meanwhile, if the universities still teach science at all, the classes are composed mostly of foreign students planning to take their new knowledge back to their own countries, where expertise is far more precious than in a U.S. in denial about the most fundamental issues of modern science (e.g., evolution, global warming, environmental pollution). Meanwhile, highway bridges of the world’s greatest highway system collapse, old dams threaten catastrophic flooding, and nuclear power plants are maintained in service for decades past their planned  service life without being properly maintained. The wild scare talk of politicians about a terrorist bomb notwithstanding, the collapse of the U.S. as world leader is more likely to result from the evaporation of a U.S. city as the result of a nuclear meltdown from a rusty pipe in the cooling system. The third pathway to decline in the U.S. is the degradation of the U.S. physical infrastructure.

An even more insidious problem is the declining faith, for good reason, of the American people in their own institutions. Sneering at Big Government is endemic, though no persuasive argument is ever made indicating what institution could be trusted to replace government. In fact, Big Government does deserve a failing grade – but mostly because it is too small. Regulatory agencies responsible for oversight over Wall Street, the food industry, and corporate pollution of the environment have all fallen grossly short of fulfilling their duties in recent decades. And who respects Big Pharma, Big Finance, or Big Oil? The fourth pathway to U.S. decline is the justified popular loss of faith in American institutions.

But the good news for Americans and all who hope for the reemergence of a morally sound, sympathetic, and realistic American leadership of the world lies at the core of this sad story: the problem with U.S. behavior is self-inflicted and fully within the capability of Americans to overcome. It is precisely because of American military superiority that it should virtually never resort to violence any more extreme than peacekeeping or international police work. Once American society succeeds in recognizing this truth, the door will be open for Americans to elect a government capable of identifying the real challenges facing this country and the rest of the world (for the most serious problems today are almost exclusively common ones) and focusing on devising effective long-term problem-resolution strategies. The War on Terror, at its best, was no more than burning down the house to put out a fire in the bedroom: short-term conflict resolution at its most mindless. Such emergency crisis response sacrificing the long term in the interest of short-term survival is in no way called for: the U.S. has the resources and the time to take the long view and do things right. Such a long-term approach would have several aspects, all obvious, none currently being implemented: most fundamentally, the focusing of national energy and resources on domestic housecleaning, in brief:

                                                 “Empire – No; Jobs – Yes.”                     

Specifically, the refocusing of national energies on the state of domestic society would entail:

• Using the crisis level of unemployment as an opportunity to rebuild U.S. infrastructure, fixing the dams and bridges and sewage systems and rusting nuclear power plants while employing those looking for work;

• Launching a national campaign to improve the quality of public education at all levels, A) bringing public science and math education up to world standards so the next generation will have some hope of being able to compete with the tens of thousands of scientists and engineers graduating from Chinese, Japanese, and Indian educational systems and B) funding the revolutionary improvement in social studies, world history, and language studies (particularly regarding the Arab world and China) that will be required to produce a generation of Americans capable of understanding the international political challenges of the 21^st century and capable of exercising oversight over the their elected officials;

• Political reforms to facilitate honest elections open to reform candidates, the recall of corrupt politicians, the strengthening of government regulatory agencies, and the minimization of corporate bribery of Congressmen.

The U.S. is in decline for a multitude of reasons, but not because of a declining population or a shortage of resources or an overwhelmingly powerful enemy or bad luck. The U.S. is defeating itself. The decline will end the day Americans join hands and decide they no longer want to decline.

Readings:

Joseph Stiglitz and Linda Bilmes, The Three Trillion Dollar War;

Gretchen Morgenson and Joshua Rosner, Reckless Endangerment;

Andrew Ross Sorkin, Too Big To Fail.

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].