Archive for September, 2009

Sentient World: War Games on the Grandest Scale

Posted in Global Order, Welcome to The Machine on September 30, 2009 by CjH

By Mark Baard, The Register

Perhaps your real life is so rich you don’t have time for another.

Even so, the US Department of Defense (DOD) may already be creating a copy of you in an alternate reality to see how long you can go without food or water, or how you will respond to televised propaganda.

The DOD is developing a parallel to Planet Earth, with billions of individual “nodes” to reflect every man, woman, and child this side of the dividing line between reality and AR.

Called the Sentient World Simulation (SWS), it will be a “synthetic mirror of the real world with automated continuous calibration with respect to current real-world information”, according to a concept paper for the project.

“SWS provides an environment for testing Psychological Operations (PSYOP),” the paper reads, so that military leaders can “develop and test multiple courses of action to anticipate and shape behaviors of adversaries, neutrals, and partners”.

SWS also replicates financial institutions, utilities, media outlets, and street corner shops. By applying theories of economics and human psychology, its developers believe they can predict how individuals and mobs will respond to various stressors.

Yank a country’s water supply. Stage a military coup. SWS will tell you what happens next.

“The idea is to generate alternative futures with outcomes based on interactions between multiple sides,” said Purdue University professor Alok Chaturvedi, co-author of the SWS concept paper.

Chaturvedi directs Purdue’s laboratories for Synthetic Environment for Analysis and Simulations, or SEAS – the platform underlying SWS. Chaturvedi also makes a commercial version of SEAS available through his company, Simulex, Inc.

SEAS users can visualise the nodes and scenarios in text boxes and graphs, or as icons set against geographical maps.

Corporations can use SEAS to test the market for new products, said Chaturvedi. Simulex lists the pharmaceutical giant Eli Lilly and defense contractor Lockheed Martin among its private sector clients.

The US government appears to be Simulex’s number one customer, however. And Chaturvedi has received millions of dollars in grants from the military and the National Science Foundation to develop SEAS.

Chaturvedi is now pitching SWS to DARPA and discussing it with officials at the US Department of Homeland Security, where he said the idea has been well received, despite the thorny privacy issues for US citizens.

In fact, Homeland Security and the Defense Department are already using SEAS to simulate crises on the US mainland.

The Joint Innovation and Experimentation Directorate of the US Joint Forces Command (JFCOM-J9) in April began working with Homeland Security and multinational forces over “Noble Resolve 07”, a homeland defense experiment.

In August, the agencies will shift their crises scenarios from the East Coast to the Pacific theatre.

JFCOM-J9 completed another test of SEAS last year. Called Urban Resolve, the experiment projected warfare scenarios for Baghdad in 2015, eight years from now.

JFCOM-9 is now capable of running real-time simulations for up to 62 nations, including Iraq, Afghanistan, and China. The simulations gobble up breaking news, census data, economic indicators, and climactic events in the real world, along with proprietary information such as military intelligence.

Military and intel officials can introduce fictitious agents into the simulations (such as a spike in unemployment, for example) to gauge their destabilising effects on a population.

Officials can also “inject an earthquake or a tsunami and observe their impacts (on a society)”, Chaturvedi added.

Jim Blank, modelling and simulation division chief at JFCOM-J9, declined to discuss the specific routines military commanders are running in the Iraq and Afghanistan computer models. He did say SEAS might help officers determine where to position snipers in a city square, or to envision scenarios that might emerge from widespread civil unrest.

SEAS helps commanders consider the multitude of variables and outcomes possible in urban warfare, said Blank.

“Future wars will be asymetric in nature. They will be more non-kinetic, with the center of gravity being a population.”

The Iraq and Afghanistan computer models are the most highly developed and complex of the 62 available to JFCOM-J9. Each has about five million individual nodes representing things such as hospitals, mosques, pipelines, and people.

The other SEAS models are far less detailed, encompassing only a few thousand nodes altogether, Blank said.

Feeding a whole-Earth simulation will be a colossal challenge.

“(SWS) is a hungry beast,” Blank said. “A lot of data will be required to make this thing even credible.”

Alok Chaturvedi wants SWS to match every person on the planet, one-to-one.

Right now, the 62 simulated nations in SEAS depict humans as composites, at a 100-to-1 ratio.

//

One organisation has achieved a one-to-one level of granularity for its simulations, according to Chaturvedi: the US Army, which is using SEAS to identify potential recruits.

Chaturvedi insists his goal for SWS is to have a depersonalised likeness for each individual, rather than an immediately identifiable duplicate. If your town census records your birthdate, job title, and whether you own a dog, SWS will generate what Chaturvedi calls a “like someone” with the same stats, but not the same name.

Of course, government agencies and corporations can add to SWS whatever personally-identifiable information they choose from their own databases, and for their own purposes.

And with consumers already giving up their personal information regularly to websites such as MySpace and Twitter, it is not a stretch to imagine SWS doing the same thing.

“There may be hooks through which individuals may voluntarily contribute information to SWS,” Chaturvedi said.

SEAS bases its AI “thinking” on the theories of cognitive psychologists and the work of Princeton University professor Daniel Kahneman, one of the fathers of behavioural economics.

Chaturvedi, as do many AR developers, also cites the work of positive psychology guru Martin Seligman (known, too, for his concept of “learned hopelessness”) as an influence on SEAS human behaviour models. The Simulex website says, if a bit vaguely, SEAS similarly incorporates predictive models based upon production, marketing, finance and other fields.

But SWS may never be smart enough to anticipate every possibility, or predict how people will react under stress, said Philip Lieberman, professor of cognitive and linguistic studies at Brown University.

“Experts make ‘correct’ decisions under time pressure and extreme stress that are not necessarily optimum but work,” said Lieberman, who nevertheless said the simulations might be useful for anticipating some scenarios.

JFCOM’s Blank agreed that SWS, which is using computers and code to do cultural anthropology, does not include any “hard science at this point”.

“Ultimately,” said Blank, “the guy to make decision is the commander.”

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Victory on preventive detention law: in context

Posted in Global Order, Welcome to The Machine on September 25, 2009 by CjH

By Glen Greenwald, Salon.com

When Barack Obama gave his “civil liberties” speech at the National Archives in May, he advocated a new scheme of preventive detention for detainees whom he claimed “cannot be prosecuted yet who pose a clear danger to the American people,” and he unambiguously vowed to develop a new statutory regime, enacted by Congress, to vest him with the power of what he called “prolonged detention”:

I know that creating such a system poses unique challenges. . . . But I want to be very clear that our goal is to construct a legitimate legal framework for Guantanamo detainees — not to avoid one.  In our constitutional system, prolonged detention should not be the decision of any one man. If and when we determine that the United States must hold individuals to keep them from carrying out an act of war, we will do so within a system that involves judicial and congressional oversight. And so going forward, my Administration will work with Congress to develop an appropriate legal regime so that our efforts are consistent with our values and our Constitution.  As our efforts to close Guantanamo move forward, I know that the politics in Congress will be difficult. . . . [I]f we refuse to deal with these issues today, then I guarantee you that they will be an albatross around our efforts to combat terrorism in the future.

Obama has now changed his mind about seeking a new law, and instead will continue to detain Terrorism suspects without charges under the current system (the one used by Bush/Cheney as well):

The Obama administration has decided not to seek new legislation from Congress authorizing the indefinite detention of about 50 terrorism suspects being held without charges at at Guantánamo Bay, Cuba, officials said Wednesday.

Instead, the administration will continue to hold the detainees without bringing them to trial based on the power it says it has under the Congressional resolution passed after the attacks of Sept. 11, 2001, authorizing the president to use force against forces of Al Qaeda and the Taliban.

In concluding that it does not need specific permission from Congress to hold detainees without charges, the Obama administration is adopting one of the arguments advanced by the Bush administration in years of debates about detention policies.

Regardless of what motivated this, and no matter how bad the current detention scheme is, this development is very positive, and should be considered a victory for those who spent the last four months loudly protesting Obama’s proposal.  Here’s why:

A new preventive detention law would have permanently institutionalized that power, almost certainly applying not only to the “war on Terror” but all future conflicts.  It would have endowed preventive detention with the legitimizing force of explicit statutory authority, which it currently lacks.  It would have caused preventive detention to ascend to the cherished status of official bipartisan consensus — and thus, for all practical purposes, been placed off limits from meaningful debate — as not only the Bush administration and the GOP Congress, but also Obama and the Democratic Congress, would have formally embraced it.  It would have created new and far more permissive standards for when an individual could be detained without charges and without trials.  And it would have forced Constitutional challenges to begin from scratch, ensuring that current detainees would suffer years and years more imprisonment with no due process.

Beyond that, as a purely practical matter, nothing good — and plenty of bad — could come from having Congress write a new detention law.  As bad as the Obama administration is on detention issues, the Congress is far worse.  Any time the words “Terrorism” or “Al Qaeda” are uttered, they leap to the most extreme and authoritarian measures.  Congress is intended to be a check on presidential powers, but each time Terrorism is the issue, the ironic opposite occurs:  when the Obama administration and Congress are at odds, it is Congress demanding greater powers of executive detention (as happened when Congress blocked Obama from transferring Guantanamo detainees to the U.S.).  Any process that lets Lindsey Graham, Joe Lieberman and Dianne Feinstein anywhere near presidential detention powers is one that is to be avoided at all costs.  Whatever else is true, anyone who believes in the Far Left doctrines known as the Constitution, due process and what Thomas Jefferson called “the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution” (i.e., jury trials) should consider it a very good thing that the Congress is not going to write a new law authorizing presidential preventive detentions.  However bad things are now, that would have made everything much worse.

All that said, in a practical sense, this is still an extremely incremental — one might even say cosmetic — development.  After all, the Obama administration is continuing to assert the power to detain people without charges or trial based on the Bush/Cheney theory (accepted by several courts) that they already have implied statutory authority (under the 2001 Authorization to Use Military Force) to do so and therefore don’t need a new law.  It’s true that the Obama administration, to its credit, is no longer relying on the theory that the President has “inherent authority” to detain Terrorism suspects without charges, but that makes no practical difference since they claim the same exact power based on the AUMF.  And, according to the New York Times, Obama’s decision not to seek a new detention law “applies only to those already held at Guantánamo . . .  it remain[s] an open question whether the administration would seek legislation or establish a new system for indefinite detention of suspected terrorists captured in the future.”

So all one can really say about all of this is that while no improvements have been made, something that would have been extremely bad has been averted, at least for now.  And while the administration continues to assert the power of indefinite detention even without a new law, at least detainees now have the right of habeas corpus review as established by the 2008 Boumediene Supreme Court decision, and thus far, 30 out of 38 detainees have won their habeas hearings and have had courts ordered them released (although 20 of the “winners” continue to remain imprisoned because we can’t place them anywhere).  Whatever else might be true, in our political culture, especially when it comes to Terrorism and civil liberties, blocking a new and terrible development — even as it keeps very bad things largely in place — is an important victory.

This leads to a more general point:  when it comes to uprooting (“changing”) the Bush/Cheney approach to Terrorism and civil liberties — the issue which generated as much opposition to the last presidency as anything else — the Obama administration has proven rather conclusively that tiny and cosmetic adjustments are the most it is willing to do.  They love announcing new policies that cast the appearance of change but which have no effect whatsoever on presidential powers.  With great fanfare, they announced the closing of CIA black sites — at a time when none was operating.  They trumpeted the President’s order that no interrogation tactics outside of the Army Field Manual could be used — at a time when approval for such tactics had been withdrawn.  They repudiated the most extreme elements of the Bush/Addington/Yoo “inherent power” theories — while maintaining alternative justifications to enable the same exact policies to proceed exactly as is.  They flamboyantly touted the closing of Guantanamo — while aggressively defending the right to abduct people from around the world and then imprison them with no due process at Bagram.  Their “changes” exist solely in theory — which isn’t to say that they are all irrelevant, but it is to say that they change nothing in practice:  i.e., in reality.

That’s why I called yesterday’s announced changes to the state secrets policy a “farce” (here’s a Washington Times article today reporting on reactions, including mine).  Yes, the changes they announced sound better in theory than what existed previously.  It’s nice that the DOJ claims it will voluntarily impose a higher burden on itself before asserting the privilege, will require the approval of the Attorney General, will avoid asserting the privilege only to avoid embarrassment over government wrongdoing, etc.  But none of that would have altered the Obama administration’s controversial, Bush-replicating assertions of the privilege.  Not only the Attorney General, but the President himself, explicitly endorsed the specific assertions of the privilege that triggered the controversies in the first place:  to block, in advance, lawsuits brought by victims of Bush’s torture, rendition and illegal eavesdropping programs.  This “new policy” would plainly allow the continuation of that conduct because the decision-makers now — the DOJ — are the same ones who asserted the privilege in the first place.  So how, in practice, would this change anything?

Most important of all, the central abuse is rooted in the ability of the Executive Branch to assert the secrecy privilege without any binding limitations imposed by Congress and enforced by courts.  We’re not supposed to have a system of government where we rely on the good faith of the Executive Branch to monitor itself.  Without a law in place that limits the President’s ability to have entire lawsuits dismissed on secrecy grounds, abuse is inevitable.  The last administration proved that, and so has the current one.  The institutional bias of the Justice Department is that it sees the world from the perspective of the Executive Branch and wants to win cases on its behalf, and the state secrets privilege is far too potent and tempting a weapon to leave in their hands in unfettered form, hoping upon hope that they will exercise it responsibly. The abuses were coming from the DOJ in the first place; how can the solution possibly be to trust that the DOJ will police itself responsibly in the future? Why shouldn’t these abuses be curbed by an act of Congress and enforceable by courts?  Yet again, the policy the Obama administration announced — clearly designed to undermine the perceived need for a law to limit the privilege — has pretty words in it, but it enacts no real changes.

* * * * *

In an excellent new article in The New York Review of Books this week, Gary Wills examines the underlying systemic and cultural reasons why, in the areas of civil liberties and national security, “the Obama administration quickly came to resemble Bush’s.”  Wills makes the point I’ve been emphasizing for some time:  as long as we remain a nation in a permanent state of war, devoted to imperial ends, maintaining our National Security State ensures that the core assaults on civil liberties will never end; at best, we can tinker with them on the margins with the types of pretty words that the Obama administration adores, but it will persist and grow on its own accord:

But the momentum of accumulating powers in the executive is not easily reversed, checked, or even slowed. It was not created by the Bush administration. The whole history of America since World War II caused an inertial transfer of power toward the executive branch. The monopoly on use of nuclear weaponry, the cult of the commander in chief, the worldwide network of military bases to maintain nuclear alert and supremacy, the secret intelligence agencies, the entire national security state, the classification and clearance systems, the expansion of state secrets, the withholding of evidence and information, the permanent emergency that has melded World War II with the cold war and the cold war with the “war on terror”—all these make a vast and intricate structure that may not yield to effort at dismantling it. Sixty-eight straight years of war emergency powers (1941–2009) have made the abnormal normal, and constitutional diminishment the settled order. . . .

Some were dismayed to see how quickly the Obama people grabbed at the powers, the secrecy, the unaccountability that had led Bush into such opprobrium. . . . .

Now a new president quickly becomes aware of the vast empire that is largely invisible to the citizenry. The United States maintains an estimated one thousand military bases in other countries. . . .

That is just one of the hundreds of holdings in the empire created by the National Security State. A president is greatly pressured to keep all the empire’s secrets. He feels he must avoid embarrassing the hordes of agents, military personnel, and diplomatic instruments whose loyalty he must command. Keeping up morale in this vast, shady enterprise is something impressed on him by all manner of commitments. He becomes the prisoner of his own power. As President Truman could not not use the bomb, a modern president cannot not use the huge powers at his disposal. It has all been given him as the legacy of Bomb Power, the thing that makes him not only Commander in Chief but Leader of the Free World. He is a self-entangling giant.

Wills’ whole essay is highly worth reading.  None of it excuses “how quickly the Obama people grabbed at the powers, the secrecy, the unaccountability that had led Bush into such opprobrium.”  But it does explain it and put it into context.  Even if Obama were committed to undoing these policies — just assume hypothetically that this were true — the nature of America’s imperial and militarized political culture would make that, as Wills says, “a hard, perhaps impossible, task.”  The President is powerful, but there are many other factions that wield great power as well — the permanent Washington political class, both public and private — and they are firmly entrenched against any type of “change” in these areas as one can imagine, as it’s from those policies that their power and purpose (and profits) are derived

That’s why I keep quoting the 1790 warning of James Madison about what happens — inevitably — to a country when it chooses to be a permanent war-fighting state devoted to maintaining imperial power:

Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied : and all the means of seducing the minds, are added to those of subduing the force, of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals, engendered by both. No nation could preserve its freedom in the midst of continual warfare.

Shouldn’t we think about what that means?  All of these subsidiary, discrete battles are shaped by this larger truth.  We’re a country that has been continuously at war for decades, insists it is currently at war now, and vows that it will wage war for years if not decades to come (Obama:  we’ll be waging this war “a year from now, five years from now, and — in all probability — ten years from now”).  Exactly as Madison said (and as Wills this week emphasized), as long as we’re choosing to be that kind of a nation, then the crux of the Bush/Cheney approach will remain in place.  We can sand-paper away some of the harshest edges (“we’re no longer going to drown people in order to extract confessions”); prettify some of what we’re doing (“we’re going to detain people with no charges based on implied statutory power rather than theories of inherent power”); and avoid making things worse (“we won’t seek a new preventive detention law because we don’t need one since we already can do that”).  But no matter who we elect, the pervasive secrecy, essentially authoritarian character of the Executive, and rapid erosion of core liberties will continue as long as we remain committed to what Wills calls “the empire created by the National Security State.”

Everyone Seems to Be Agreeing with Bin Laden These Days

Posted in Global Order, Welcome to The Machine on September 21, 2009 by CjH

By Rrobert Fisk, The Independent/UK

Obama and Osama are at last participating in the same narrative. For the US president’s critics – indeed, for many critics of the West’s military occupation of Afghanistan – are beginning to speak in the same language as Obama’s (and their) greatest enemy.

There is a growing suspicion in America that Obama has been socked into the heart of the Afghan darkness by ex-Bushie Robert Gates – once more the Secretary of Defense – and by journalist-adored General David Petraeus whose military “surges” appear to be as successful as the Battle of the Bulge in stemming the insurgent tide in Afghanistan as well as in Iraq.

No wonder Osama bin Laden decided to address “the American people” this week. “You are waging a hopeless and losing war,” he said in his 9/11 eighth anniversary audiotape. “The time has come to liberate yourselves from fear and the ideological terrorism of neoconservatives and the Israeli lobby.” There was no more talk of Obama as a “house Negro” although it was his “weakness”, bin Laden contended, that prevented him from closing down the wars in Iraq and Afghanistan. In any event, Muslim fighters would wear down the US-led coalition in Afghanistan “like we exhausted the Soviet Union for 10 years until it collapsed”. Funny, that. It’s exactly what bin Laden told me personally in Afghanistan – four years before 9/11 and the start of America’s 2001 adventure south of the Amu Darya river.

Almost on cue this week came those in North America who agree with Osama – albeit they would never associate themselves with the Evil One, let alone dare question Israel’s cheerleading for the Iraqi war. “I do not believe we can build a democratic state in Afghanistan,” announces Dianne Feinstein, the California Democrat who chairs the senate intelligence committee. “I believe it will remain a tribal entity.” And Nancy Pelosi, the House Speaker, does not believe “there is a great deal of support for sending more troops to Afghanistan”.

Colin Kenny, chair of Canada’s senate committee on national security and defense, said this week that “what we hoped to accomplish in Afghanistan has proved to be impossible. We are hurtling towards a Vietnam ending”.

Close your eyes and pretend those last words came from the al-Qa’ida cave. Not difficult to believe, is it? Only Obama, it seems, fails to get the message. Afghanistan remains for him the “war of necessity”. Send yet more troops, his generals plead. And we are supposed to follow the logic of this nonsense. The Taliban lost in 2001. Then they started winning again. Then we had to preserve Afghan democracy. Then our soldiers had to protect – and die – for a second round of democratic elections. Then they protected – and died – for fraudulent elections. Afghanistan is not Vietnam, Obama assures us. And then the good old German army calls up an air strike – and zaps yet more Afghan civilians.

It is instructive to turn at this moment to the Canadian army, which has in Afghanistan fewer troops than the Brits but who have suffered just as ferociously; their 130th soldier was killed near Kandahar this week. Every three months, the Canadian authorities publish a scorecard on their military “progress” in Afghanistan – a document that is infinitely more honest and detailed than anything put out by the Pentagon or the Ministry of Defense – which proves beyond peradventure (as Enoch Powell would have said) that this is Mission Impossible or, as Toronto’s National Post put it in an admirable headline three days’ ago, “Operation Sleepwalk”. The latest report, revealed this week, proves that Kandahar province is becoming more violent, less stable and less secure – and attacks across the country more frequent – than at any time since the fall of the Taliban in 2001. There was an “exceptionally high” frequency of attacks this spring compared with 2008.

There was a 108 per cent increase in roadside bombs. Afghans are reporting that they are less satisfied with education and employment levels, primarily because of poor or non-existent security. Canada is now concentrating only on the security of Kandahar city, abandoning any real attempt to control the province.

Canada’s army will be leaving Afghanistan in 2011, but so far only five of the 50 schools in its school-building project have been completed. Just 28 more are “under construction”. But of Kandahar province’s existing 364 schools, 180 have been forced to close. Of progress in “democratic governance” in Kandahar, the Canadian report states that the capacity of the Afghan government is “chronically weak and undermined by widespread corruption”. Of “reconciliation” – whatever that means these days – “the onset of the summer fighting season and the concentration of politicians and activists for the August elections discouraged expectations of noteworthy initiatives…”.

Even the primary aim of polio eradication – Ottawa’s most favored civilian project in Afghanistan – has defeated the Canadian International Development Agency, although this admission is cloaked in truly Blair-like (or Brown-like) mendacity. As the Toronto Star revealed in a serious bit of investigative journalism this week, the aim to “eradicate” polio with the help of UN and World Health Organization money has been quietly changed to the “prevention of transmission” of polio. Instead of measuring the number of children “immunized” against polio, the target was altered to refer only to the number of children “vaccinated”. But of course, children have to be vaccinated several times before they are actually immune.

And what do America’s Republican hawks – the subject of bin Laden’s latest sermon – now say about the Afghan catastrophe? “More troops will not guarantee success in Afghanistan,” failed Republican contender and ex-Vietnam vet John McCain told us this week. “But a failure to send them will be a guarantee of failure.” How Osama must have chuckled as this preposterous announcement echoed around al-Qa’ida’s dark cave.

Filmmakers vs. Capitalists

Posted in Music, Arts, Culture, Subversion on September 17, 2009 by CjH

Move Over Congress, Here Comes Achbar, Moore and the Yes Men

Pam Martens, CounterPunch

We’re about to find out if the filmmakers can succeed where Congressional hearings and mainstream media have failed.  Will the film documentaries examining insatiable corporate greed and Wall Street malfeasance provide the American people with the necessary foundation of understanding and activist tools to seriously tackle the problem head on?

The embryo of a breakthrough idea is emerging amidst the smell of popcorn and Raisinets in theatres around the globe: the mega corporate structure is no longer facilitating product innovation as much as it is spawning audacious crime innovation. So big and bulky it can’t get out of its own way, let alone innovate, the bloated behemoth resorts to crime for profits.  Unless we think there is a future for our nation in patenting, securitizing and exporting felonious acts, we need to change course and fast.

Three films are standouts as a combined curriculum for leading Americans out of the darkness.  Together, they provide a compelling argument that the seeds of today’s financial calamity were planted in the U.S. Supreme Court’s decision in 1886 to effectively grant corporations the same protections as humans.

Each film uses its own unique stories of corporate atrocities but delivers the same underlying message: corporate personhood, heeding only the clarion call of profits at any cost, has developed the endemic traits of a psychopath, corrupting everything it touches from its own managers, courts, or governments.  As these corporate tentacles of corruption now reach into every conceivable part of our existence, the corporate personhood structure is effectively snuffing out human personhood, one foreclosed family at a time, one Bhopal disaster at a time, one corrupt judge jailing children for profit at a time.  If there is a Dickensian feel to all of this, it’s because deregulation of corporations is accelerating the devolving human nature of our society.

Ideally, the films should be viewed in this order: First, “The Corporation,” a 145 minute film by Mark Achbar, Jennifer Abbott, and Joel Bakan that premiered at Sundance in January 2004 and has racked up 26 international awards. A two-disc DVD now includes an additional eight hours of deleted scenes, Q and A’s, and clips sorted by person’s name or topic.

Next, Michael Moore’s “Capitalism: A Love Story” which will be released to mass audiences in the U.S. on October 2 after September premieres in Venice and Toronto.  (I researched Moore’s film from released clips, web archived interviews and an extensive amount of European press.)

And, third, the uproarious corporate prankster movie which will begin its U.S. theatre release on October 7, “The Yes Men Fix the World.” This film presents a hilarious and ingenious how-to program on inflicting public shame on corporations within the confines of their own corporate confabs.

“The Corporation” begins by tracing the birth of the corporation and its rise to “personhood” status.  Prior to the Civil War, corporations were restrained by having their charters issued by states for specific purposes and terms.  If corporations engaged in illegal acts, their charters could be revoked.  But following the passage of the 14th Amendment, which provided that no state could “deprive any person of life, liberty, or property, without due process of law” the corporations aggressively sought to gain personhood status for themselves.  The film notes that while 600,000 people died in the Civil War to give rights to people, from 1890 to 1910 the U.S. Supreme Court heard 307 cases under the 14th Amendment: 288 came from corporations; 19 by African Americans.  (The pivotal case the corporations use to cite their legal personhood is the 1886 Santa Clara County v. Southern Pacific.)

The Yes Men have honed in on this same corporate personhood problem.  On November 12, 2008 the Yes Men (known as Andy Bichlbaum and Mike Bonanno) participated in a hoax that saw 1.2 million copies of an extremely high quality, but fake, New York Times being distributed in New York City and other major metropolitan areas.  The newsprint edition was backed up by an equally high quality web site.  Above the fold headlines declared “Iraq War Ends” and “Nation Sets Its Sights on Building Sane Economy.”  A spoof article outlines how John McCain is heading up a program to help corporations finish their quest to become fully human persons by achieving that one distinguishing characteristic: a conscience.  “You’d have to be very cynical to think that corporations, when they won protection as ‘persons’ under the ‘Freed Slave’ Amendment, were thinking only of their own wealth…It’s clear that corporations just admire humans and what we have. We should be good hosts and help them however we can. Right now, that means making them responsible and responsive.”

All three films, wittingly or unwittingly, focus the audience on the psychopathic tendencies of the modern day corporation.  Moore’s film delves into a host of malfeasances including some markedly grotesque examples.  One, previously detailed in the February 2, 2008 CounterPunch article “Global Finance and the Insanity Defense,” is the corporation’s purchase of large life insurance policies on their workers without their knowledge.  Called dead peasants’ insurance, janitor’s insurance or Corporate Owned Life Insurance (COLI), here’s what we reported in February 2008:

“Some of the largest corporations in America have been boosting their income statements by including cash buildup in the policies as well as receiving the death benefit tax free.

In 2003, the General Accountability Office (GAO) released a study with the startling findings that companies were taking out multiple policies on the same individual and that 3,209 banks and thrifts had current cash values in these policies totaling $56.3 Billion.

But instead of a congressional revolt against this revolting practice, it remained in place for at least 16 years after Congress first learned about it.  Then along comes the worker-friendly sounding Pension Protection Act of 2006 submitted by our Congress and signed by the President. Buried deep within this massive document was the grandfathering of the millions of previously issued policies with a little tinkering at the edges of tax and reporting issues on newly issued policies.”

Moore’s movie has not yet hit U.S. theatres and the Wall Street Journal and New York Times have already published pieces that discredit the filmmaker.  Matthew Kaminski, a member of the Wall Street Journal’s editorial board, says “Mr. Moore can’t be judged as a documentary film maker, except dismissively. He confuses issues on purpose. He repeatedly ignores the other side of the story. He never asks why, for example, a company might take out an insurance policy on a key employee.”    Here, Kaminski is guilty of his own charge, ignoring the other side of the story: billions of dollars of life insurance was taken out on non-key employees, without their knowledge.  In many cases the insurance remained in force after the employee left the firm, extinguishing any possible claim to an insurable interest as required under the law.

The New York Times, which together with Judith Miller relentlessly waved the pompoms in the leadup to the Iraq war, notes the following in a piece on Moore’s film by Michael Cieply, citing a study from the Center for Social Media: “The report found that documentarians, while they generally aspire to act honorably, often operate under ad hoc ethical codes. The craft tends to see itself as being bound less by the need to be accurate and fair than by a desire for social justice, to level the playing field between those who are perceived to be powerful and those who are not.”  The Times ran another piece by Bruce Headlam which devoted four words (“privatized juvenile detention centers”) out of a 2100 word article to Moore’s expose in the film on the jailing of children for profit.  Following is the background on what locals in Pennsylvania are calling the Kids for Cash scandal, a growing and fluid public corruption case. You decide if four words get the job done.
Our society has apparently begun to mimic the psychopathic corporate personhood role model.  Two judges (Mark Ciavarella Jr. and Michael Conahan), a lawyer (Robert Powell), and a builder (Robert K. Mericle) of privatized juvenile jails in Luzerne County, Pennsylvania have been charged by Federal prosecutors in a scheme to essentially sell kids, as if they were commodities, to fill up the for-profit jails.

Here’s how the scam went down according to criminal charges and civil suits:  first,  one of the judges cut off funding to the county’s own juvenile detention center; next he gave a green light to the builder and co-owner lawyer to build the first jail (a second one was later constructed); a 20 year, $58 million lease was signed by the county;  then his pal judge who headed the juvenile court facilitated a form being shoved under parents’ noses just before entering his courtroom waiving the child’s right to counsel.  Typically, within a few moments of the child entering the courtroom for “crimes” as small as slapping another child, making fun of school personnel on a website, or stealing change from unlocked cars, children were handcuffed, shackled and sent off to the privatized juvenile jail leaving parents stunned, crying and even fainting in the courtroom.  In many cases, children were incarcerated for months.

Very likely, many of these children will never again feel safe in our society; a precious part of their childhood has been viciously removed for profit.  The judges received over $2.5 million from Powell and Mericle in reward for their efforts.

You can bet that the editorial pages of the Wall Street Journal will see no connection between the above episode and Wall Street’s transgressions.  So let me make the connection.  Attorney Powell needed the same comforts as Wall Street titans: a mansion, a private plane, and a 56’ yacht named “Reel Justice.”  The builder, Robert K. Mericle, has been permitted to essentially reduce his charges by placing $2.1 million in a fund for children.  According to the Times-Shamrock newspapers of Northeastern Pennsylvania, “In his plea agreement, Mericle agreed to donate $2.1 million to local programs promoting the health and welfare of children. Mericle has already placed the funds in an escrow account with his attorney, William Winning of the Philadelphia firm Cozen O’Connor, according to the agreement.”  This sounds very similar to Wall Street’s perpetual habit of committing massive crimes against the public and then settling for millions with the SEC.

And then there’s the matter of the two judges, who prosecutors say have been showing signs of hiding assets and may be a flight risk.  The judges are free on bail and not confined to their homes.  That’s more generous than Bernie Madoff’s home detention while he awaited sentencing.  What message does that send to these children and their families?

Also similar to the Madoff matter, for years people in Luzerne County tried everything short of shouting from the rooftops to expose the fact that these judges were up to no good but the investigation of these high powered people went nowhere: the list of people speaking out included the former county controller, Steve Flood, who eventually suffered a stroke and lost his ability to speak; the Juvenile Law Center which has now brought a civil suit on behalf of the children; a former Judge, Ann Lokuta, who says she was politically targeted for challenging the corruption; and parents of the children.

When Michael Moore says “I refuse to live in a country like this, and I’m not leaving,” he extols us to look deeply within ourselves.  How did we, some of the most hard working and creative people on the planet (as surely evidenced by Andy Bichlbaum and Mike Bonanno) allow our democracy to be transformed into a massive corporate crime scene?   (Moore wraps yellow crime scene tape around Wall Street in the film to underscore the point.)

Here’s my creative thought to start taking back our country: instead of giving gifts this holiday season that are made by corporations who have pillaged our democracy, give sets of the above three films.  For extra good measure, include Andrew and Leslie Cockburn’s film “American Casino,” the most insightful look yet at the foreclosure and housing crisis.

General Dynamics, the Pentagon, and Psychological Warfare

Posted in Global Order, Welcome to The Machine on September 17, 2009 by CjH

By Lewis Page, The Register

The secretive US Special Operations Command (SOCOM) has awarded arms globocorp General Dynamics a $10m contract to set up a network of psychological-warfare “influence websites” supporting the Global War On Terror. France and Britain are specifically included as “targeted regions”.

SOCOM is principally famous for its large contingents of elite, secret operatives from all four US armed services (Navy SEALs, Green Berets, Delta Force, Team-6/DevGru, “the Activity” etc etc). What’s less well-known about the organisation is that it also includes the US forces’ active psychological-warfare apparatus. According (pdf) to the 4th Airborne Psychological Operations Group – the only full-time psywar unit in the US Army, and part of SOCOM:

PSYOP is the dissemination of truthful information to foreign audiences in support of US policy… these activities are not forms of force, but are force multipliers that use nonviolent means in often violent environments… they rely on logic, fear, desire or other mental factors… The ultimate objective of US military psychological operations is to convince enemy, neutral, and friendly nations and forces to take action favorable to the United States…Their purpose can range from gaining support for US operations to preparing the battlefield for combat.

Now SOCOM’s Joint Military Information Support Command, which “orchestrates a 24/7 multi-media campaign formatted to the cultures and languages of relevant audiences” in “what has become a tough, entrenched war of ideas” has deployed what it calls the Trans-Regional Web Initiative (TRWI). Specs on the programme were issued last year (pdf) and earlier this month General Dynamics was awarded $10,116,177 to run the Initiative for the first year.

The Initiative contract goes into detail:

Special Operations Command requires the capability to posture for rapid, on-order global dissemination of web-based influence products and tools in support of strategic and long-term U.S. Government goals…[Contractors will] develop, design, construct, operate, and maintain a series of synchronized influence websites supporting [Global War On Terror] requirements … Government estimates a minimum of two and no more than twelve websites.

The SOCOM psywar sites will be run much in the same fashion as any normal web-media portal. There will be “indigenous content stringers and editors” within “targeted regions” providing 24-hour “original features, news, sports, entertainment, economics, politics, cultural reports, business, and similar items of interest to targeted readers”.

All the standard bread-and-butter methods will be employed:

Government will require the use of XHTML, PHP, Java scripting, and flash development… Free email service for users of TRWI websites, as determined feasible by SOCOM, in order to integrate them as active participants of the site… Contractor is required to incorporate into TRWI websites the use of web logs (blogs), streaming Video/Audio, moderated chat rooms, downloads of wall papers (inclusive of calendars) when directed by SOCOM… contractor will, at a minimum, develop Internet-based marketing procedures such as use of Google AdWords and Search Engine Optimization to prioritize search result listing of the applicable websites.

The difference will be that rather than a normal media boss, the Initiative websites will be controlled by managers reporting to SOCOM based in US regional command HQs around the world – managers holding US Top Secret/Secure Compartmented Information clearances, with “extensive public diplomacy, journalism, and mediarelations skills”. Rather than ads or venture capital, the cash will come from SOCOM’s psyops war chest.

Then there are hints of unconventional web tactics, different from your normal media:

The Government will require the contractor to provide “ghosted” websites that are protected by username and password and ready to go active upon approval by SOCOM.

So who are the “targeted readers” who are to be steered into supporting US policy, in particular the War On Terror?

A hint is given by the list of required foreign target languages, which includes obvious ones like Arabic, Urdu, Farsi, Russian, Malay etc – but also French, and “English (British dialect and spelling)”.

There’s also a suggestion that operations similar to the Initiative may already be running, supporting the “24/7 multi-media campaign” spoken of last year (pdf) by SOCOM’s commander.

The Government will provide the contractor with Government Furnished Information (GFI) from any existing, USSOCOM-operated influence website strategies.

It would appear that any UK media site or channel which appears to be functioning without any visible means of support appropriate to its expenses may in fact be a tentacle of US Special Ops psywar command. (Or the Iranian equivalent, perhaps.)

We’ve obviously checked with our upper management regarding the identity of our backers, but it seems we don’t have any need to know who they are.

The World Seed Conference

Posted in Health, Food, Energy and Ecology on September 16, 2009 by CjH

Good For Farmers?

By Robin Willoughby, Share the World’s Resources

Last week marked a little-known and under-reported symposium held in Rome under the auspices of the UN Food and Agriculture Organisation – the World Seed Conference. Although the subject may appear obscure, the conference theme and the issues discussed, including plant variety protection and seed improvement techniques, could not be more important to millions of farmers in the developing world.

Between the heavy acronyms and technical terms used by the UN figures, government officials and industry representatives, the conference illustrated two clear themes; firstly, the desire of Northern-based business to continue a process of enclosure of key farming inputs such as seeds by way of technology. Secondly, a push by these same companies (supported by the US and EU countries) for an extension and tightening of intellectual property rights on plant genetic resources into the national law of poorer countries.
Under the guise of innovation and progress, breeding companies suggest that seed varieties developed in laboratories in the North and then sold to poorer farmers in the South can raise yields in crops, increase nutritional values, reduce pesticide and fossil fuels use as well as conserve biodiversity. In the words of one participant at the conference, his company utilised ‘the art and science of changing the genetics of plants for the benefit of humankind.’

Advocates from industry argue that to safeguard their investment in these manipulated ‘seed innovations’ governments should use a form of legal construction (intellectual property rights) to prevent farmers from re-using and changing seeds that are a ‘product’ of agribusiness. Industry lobbyists also suggest that such monopoly rights should extend to developed plants varieties that business cannot easily control by technology – for example due to natural reproduction.

However, the patenting of seeds, extension of plant variety protection and rollout of a global regime of intellectual property rights for agricultural inputs could have serious consequences for small-scale farmers in the developing world.

Techno-Fixes and Monopoly Control

Firstly, the intellectual property regime that many participants in the Conference wish to tighten and extend to poorer countries (what one participant called ‘the development of a new industry competitiveness on foreign markets’), legally prevents farmers from sharing and saving seeds for later harvests or for future generations.

Under a key intellectual property treaty first signed in the 1960s and last amended in 1991, called UPOV, and the later WTO TRIPS, governments agreed to prevent farmers from saving or sharing seeds with only a few limited exceptions. In countries that have accepted these intellectual property regimes, small-scale farmers have moved increasingly towards the use of imported seeds, suffering from a number of adverse effects including increased debt levels, displacement and worsening food security. Making the situation worse, under intellectual property laws, some governments refuse to subsidise or even prohibit the use of seeds that do not make an ‘official list’ – most often those that were previously shared and exchanged between communities.

Secondly, a strengthening of the UPOV regime, or a further rollout of TRIPS or the TRIPS-plus agreement would also represent a large net power transfer from poorer farmers to richer corporations based in industrialised countries, especially in the US and the EU. Intellectual property rights already tighten the grip of a small number of businesses across the entire agricultural system, from basic inputs through marketing and distribution. According to analysts at the ETC Group, 10 companies currently control more than two thirds of global seed sales. Of this total, just three industry giants – Monsanto, Dupont and Syngenta – command 47 percent of the market. Research organisation GRAIN estimates that tightening and extending IP laws through UPOV could result in poor farmers paying US$7 billion a year to these ‘seed giants.’

Thirdly, the type of seeds that are promoted and sold to poor farmers by the global seed companies (and protected by IP rights) are often ‘hybrid’ in form, meaning that they have been bred in a lab from two parent lines. Because of their complex molecular structure, such seeds will not reproduce cleanly in the next planting season, resulting in a system of agricultural inputs that farmers must purchase on a seasonal basis. This business innovation has resulted in the commodification of a number of plant lines that previously reproduced naturally, tying poor farmers to companies in the North – a dangerous situation in the light of fluctuating commodity prices and potential monopoly pricing by dominant actors.

Importantly, such ‘hybrids’ also require a high level of synthetic inputs such as fertilisers to achieve high yields. Perhaps unsurprisingly these artificial inputs are often purchased from the same clique of agribusiness companies that also sell the seeds in the first place. Despite the perceived success of hybrid seeds in raising crop yields in experiments such as the Green Revolution in Asia, experts express severe doubts over the environmental sustainability of such seeds. By using large numbers of synthetic inputs, crop yields have increased in some countries but to the detriment of soil quality, biodiversity and future livelihood from the land.

Contrary to the claims of the seed business, analysts also suggest that plant variety protection and a strong IP regime encourages investment in only a few commercially valuable crop species, such as wheat and soya bean, and ‘ornamentals’ such as flowers. Companies will invest heavily in research for ‘designer’ crops that could gain high market value in richer countries. Evidence shows that a high percentage of the plant variety protection applications put forward by developing countries remain for export goods such as ‘cut flowers’ and other luxury items for export. Although these commodities have export market value and can gain foreign exchange, little indication exists of their value in alleviating food insecurity or promoting biodiversity.

An Alternative Paradigm

In order to protect biodiversity, adapt to climate change and promote food security, policy-makers must allow farmers to freely save, use, exchange and sell farm-saved seeds in developing countries. Unfortunately, the current direction of international policy, as evidenced by the calls of many participants at the World Seed Conference and other fora such as the World Trade Organisation, appears to be a push towards techno-fixes in agriculture and the enclosure of common resources by legal means.

Rather than centrally controlled technological innovation by corporations in the North, local agrifood systems and community-led agricultural research and conservation encourages farmers to utilise on-farm innovation, choose the most appropriate crops for harvest and support biodiversity. Sharing and saving seeds allows farmers with knowledge of local conditions to breed seeds ‘in situ’ (on the farm) and develop plant varieties to evolve to the changing climate conditions. Food system analysts and civil society groups also note that small-scale, locally based food systems could be the most effective method in lifting millions out of hunger and poverty.

Fortunately, there are alternatives to technologically controlled agriculture and an ever-increasing intellectual property stranglehold that could increase corporate concentration in agricultural markets, displace poor farmers and worsen biodiversity. On the international stage, progressive treaties promoted by resource-rich but economically-poor countries such as the Convention on Biological Diversity and the International Treaty on Plant Genetic Resources for Food and Agriculture attempt to protect farmers’ rights, encourage genuine biodiversity and share the benefits of commercialising agricultural inputs and plants.

On the ground, examples such as the Navdanya project in India illustrate the benefits of both storing and sharing seeds as well as the benefits in food security and genetic diversity by allowing open-access to plant genetic resources. Organisations in the global farmers’ movement La Via Campesina also point the way to an alternative agricultural paradigm based on cooperation and reciprocity. In the UK, the Millennium Seed Bank Project at Kew Gardens further illustrates the importance and possibility of the collection, research and development of seeds for the public good. Countries such as Venezuela are also establishing cross-border collaboration and sharing of knowledge on the breeding of plants based on cooperation and for mutual benefit.

However, these examples represent only a few isolated instances that ‘go against the grain’ of an international policy paradigm that promotes market-concentration and the potential monopolisation of plant genetic resources. With converging trends of a worsening food crisis, climate change shocks and rising population levels, policymakers in developed and developing countries should now look to alternative examples to illustrate that another way is possible to achieve global food security and sustainable biodiversity.

A starting point for a new paradigm in agricultural development should be to devise a set of international rules that prevents the enclosure of common resources for profit, helps poor farmers, and promotes cooperation, sharing and the free-exchange of seeds.

Government Spending is the Solution–Not the Problem

Posted in Political Economy on September 15, 2009 by CjH

All Debt is Not Created Equally

By Marshall Auerback, CounterPunch

Hundreds of thousands of people marched to the U.S. Capitol on Sunday, carrying signs with slogans such as “Obamacare makes me sick” as they protested the president’s health care plan and our so-called “out-of-control spending”. The marchers were chanting “enough, enough” and “We the People.” Others, channeling their inner Joe Wilson, screamed “You lie, you lie!” while waving U.S. flags and the now omnipresent images of Obama as Hitler, Obama as the Joker, along with the usual placards decrying the “march to socialism”.

And the reaction against the expansion of the state is by no means restricted to America.  According to the London Sunday Times, voters are overwhelmingly in favor of cutting public spending rather than tax rises to close the budget “black hole”. Sixty per cent want to shrink the size of the state to curb the £175 billion deficit amid mounting government disarray over the public finances. Naturally, there is also growing support for this line of thinking in the financial community, despite having successfully received tens of trillions of dollars, even for deeply insolvent financial institutions.  The large banks and brokers lobbied for special treatment and got it; they manipulated government legislation for their own ends.

To the extent that government spending is being used to prop up these economic zombies, we sympathize with the prevailing orthodoxy.  However, we believe that the principle opposition to increased government spending is predicated on the simplistic notion that the same government that has driven social security and Medicare to bankruptcy and national ruin is about to do the same with health care. Ultimately, objections to fiscal activism always come back to what we have been saying for a long time:  namely, the need to get past the deficit myths and wrongheaded notions of “national solvency” so that we can move forward in other areas.  In the words of economist Bill Mitchell of the University of Newcastle, Australia:

“Within a modern monetary economy, as a matter of national accounting, the sovereign government deficit (surplus) equals the non-government surplus (deficit)…In aggregate, there can be no net savings of financial assets of the non-government sector without cumulative government deficit spending.  The sovereign government via net spending (deficits) is the only entity that can provide the non-government sector with financial assets (net savings) and thereby simultaneously accommodate any net desire to save and hence eliminate unemployment.” (http://bilbo.economicoutlook.net/blog/?p=4870 – our emphasis)

A seemingly growing populist drive toward a return to fiscal orthodoxy follows a stream of similar pronouncements from Wall Street, the Fed, the European Central Bank, the OECD, all of whom are legitimizing a campaign against further public spending and mobilizing support for “exit strategies” as they confidently pronounce the end of the recession

Implicit is the view that somewhere along the line ongoing government involvement in the “free market” reaches a tipping point where fiscal “intrusions” no longer act as a stabilizing force, but serve to impede the natural tendency of the market to equilibrate to recovery. The major hypothesis is that anytime the government is involved in the economy, eventually things go bad.  But markets do not self-regulate in ways that avoid major financial upheavals and activist government is required as a counterbalancing force.

Unfortunately, President Obama himself has inadvertently legitimized this line of thinking himself, committing himself to the goal of “fiscal sustainability” (whatever that means) as a medium term policy objective.  He said as much last Wednesday again during his speech on health care.  Having failed to understand what got us into the crisis, and equally having failed to appreciate the extent to which government spending actually prevented an economic catastrophe along the lines of the Great Depression, our policy makers who are championing this move toward neo-liberal fiscal orthodoxy are almost certain to drive us into the next recession if they take these demands to shrink government too aggressively.

Deficit hawks fail to understand that not all debt is created equally. As James Galbraith, L. Randall Wray and Warren Mosler have argued, there is no legitimate analogy to be drawn about the budgets of the government, which issues the currency, and the budgets of the non-government sector (households, firms etc) which uses that currency. The former does not have a financial constraint and can spend freely whereas the latter has to “finance” all spending either through earning income, drawing down savings or liquidating assets.

Although the global debt problem is very serious, the focus on growing government deficits and the need to rein in fiscal expenditures is profoundly misplaced, particularly in the U.S., where (relative to Europe and Japan), the government debt low relative to the size of the economy.  Additionally, as a matter of national accounting, deleveraging in the private sector cannot happen without an increase in the government’s deficit (the government’s deficit equals by identity the non-government’s surplus.  Consequently, if the US private sector is to rebuild its balance sheet by spending less than its income, the government will have to spend more than its tax revenue; the only other possibility is that the rest of the world begins to dis-save massively—letting the US run a current account surplus—but that is highly implausible). In addition, if the government deficit does not grow fast enough to meet the saving needs of the private domestic sector, national income will decline, and, given the size of the private sector’s debt problem, a full-blown debt-deflation process will emerge

Yet today we are still overwhelmed with a chorus of criticism against fiscal activism:  we hear constantly that governments are an impediment to the operation of a genuinely “free market” which alone can generate sustained growth and prosperity.  The reality is very different on a number of levels.  Based on current account and fiscal balance results through Q2, it appears the private sector as a whole is running a net saving position rivaled only once before in the 1973-5 deep recession. At 8% of GDP, the private sector net saving position is probably very near its peak given the rebound in equity prices, stabilizing home prices, and a labor market limping its way back from the abyss. What most commentators fail to acknowledge (Paul Krugman being a conspicuous exception), is that without the automatic stabilizers of fiscal policy, and the turn in the trade balance, the attempt by businesses and households to spend less than they earn would have otherwise been thwarted by a depression sized drop in private income.

Even though private individual and firms face external constraints as they accumulate debt, “household budget” analogies do not hold true for government, as Galbraith, Wray and Mosler argue:

“[I]f we take households or firms as a whole, the situation is different. The private sector’s ability to spend more than its income depends on the willingness of another sector to spend less than its income. For one sector to run a deficit, another must run a surplus (saving). In principle, there is no reason why one sector cannot run perpetual deficits, so long as at least one other sector wants to run surpluses.

In the real world, we observe that the federal government tends to run persistent deficits. This is matched by a persistent tendency of the nongovernment sector, which includes the foreign sector, to save. Its “net saving” is equal (by identity) to the government’s deficits, and its net accumulation of financial assets (or “net financial wealth”) equals, exactly, the government’s total net issue of debt—from the inception of the nation. Debt issued between private parties cancels out, but that between the government and the private sector remains, with the private sector’s net financial wealth consisting of the government’s net debt.” (http://www.levy.org/pubs/hili_98a.pdf )

The reality is – and it is a tyranny of accounting, not a theoretical impediment, since the financial balances of the three sectors must sum to zero – the only way to return to a fiscal surplus, or even a fiscal balance, without taking the private sector back into a deficit spending position, is if the trade balance can be heroically improved. The failure to recognize this relationship is the major oversight of neo-liberal analysis.

Beyond the benign neglect of the dollar depreciation, it is hard to see much in the way of policy measures to achieve either import replacement or export extension in the years ahead. If the fiscal balance is to return to surplus by 2013 – a more aggressive reversal than the CBO depicted in its August Outlook, but consistent with the political tone of returning to fiscal orthodoxy – one can trace out the implications for the private sector financial balance given various assumptions about the trajectory of the trade balance. To get both the fiscal and private sector financial balances to converge at a net saving position of 2% of GDP, the trade balance will have to migrate to a 4% of GDP surplus – something we have never seen before in the US during the post WWII period.

That leaves the emergence of a foreign middle class, and the shift toward domestic demand led growth abroad as the key elements that could support a better US trade trajectory, which are largely elements outside the control of US policy makers. All of this likely means the path of US fiscal deficit as a share of GDP is probably a better route to full employment and prosperity than the misguided sentiment to cut government expenditures precipitously in a return to financial orthodoxy.

In aggregate, there can be no net savings of financial assets of the non-government sector without cumulative government deficit spending. The sovereign government via net spending (deficits) is the only entity that can provide the non-government sector with net financial assets (net savings) and thereby simultaneously accommodate any net desire to save and hence eliminate unemployment.

By the same token, the US is no more a “free market” today than the Soviet Union was during the heyday of its empire. The United States is now a species of State Capitalism. The top federal government executives are a partnership of top political and corporate managers who operate a war economy to enlarge their power as their main continuing goal. Less Adam Smith, more Mussolini style corporatism. Today’s unemployment levels that are the hallmark of deep depression are now visible as additional millions “leave” the labor force and are not counted as unemployed by the Federal government even though they are actually jobless. Hence, an 9.7% “unemployment” rate as counted by the Federal government actually refers to a number almost twice as high if we incorporate underemployed and those who classify themselves as independent consultants but who are loathe to describe themselves as genuinely unemployed.  Meanwhile, the infrastructure of American society shows decay that can no longer be concealed despite the practiced showmanship of leading public officials.

By the same token, the emphasis on “sound fiscal management”, which allegedly created the platform for vigorous, low inflationary growth, generating jobs and higher incomes is false. Similarly, it is clear that the current reliance on monetary policy (accompanied by the budget deficit phobia) will always fail to deliver full employment and relies on the impoverishment of the disadvantaged for its ability to achieve low inflation.

In the “market fundamentalist” era, prior to the current economic crisis, governments began to rely on monetary policy for counter-stabilization. According to the logic, this rendered fiscal policy a passive player. Under the misguided inflation targeting regimes that emerged in the early 1990s, central banks adjusted short-term interest rates to control inflation and therefore saw the unemployment rate as a policy tool rather than a legitimate target in its own right. Given the erroneous belief that expansionary fiscal policy was inflationary and its use would compromise the primacy of monetary policy, governments began to pursue surpluses and put in place frameworks to punish deficits and penalize workers who obtained high wage settlements, on the grounds that this was inherently inflationary (as an aside, it is interesting that this logic is never extended to CEO executive compensation or Wall Street bonuses).

The results have been clear. They indicate that this way of managing the economy cannot possibly be a sustainable long-term strategy. The emphasis we have placed on “financial responsibility” on the government side has actually introduced a deflationary bias that has slowed output and employment growth (keeping unemployment at unnecessarily high levels) and has forced the non-government sector into relying on increasing debt to sustain consumption.  The complaints about “private sector debt fuelled” consumption miss the mark:  the debt accumulation is a direct consequence of our failure to use fiscal policy in a manner which supports aggregate incomes and job growth.  Targeting wages and the use of a buffer stock of unemployed labor have been the preferred methods of controlling inflation, but minimizing economic output below full potential.

This was not, however, the model which gave the US its greatest period of prosperity.  In fact, until the mid-1970s, the U.S. consistently paid the highest industrial wages in the world. According to the late Seymour Melman (a professor of industrial engineering at Columbia University), this fact actually helped the U.S. maintain its economic supremacy.

Melman’s concept that explained this unconventional wisdom he called “alternative cost”. The basic idea is this: faced with high labor costs, firm managers will be more willing to mechanize, that is, use more machinery, and more sophisticated machinery, instead of using labor. By using more, better machinery, they increase labor productivity, which leads to higher wages, and they also stay at the cutting edge of technology. Melman compared factories in England and the U.S. after World War II, and found that the English, who paid lower wages, were using more primitive equipment than the Americans.   More recently, his theory has been echoed in Suzanne Berger’s new book, How We Compete, in which she argues that employing cheap labor is not the most effective way of responding to global competition.  The activities that succeed over time are those that involve conditions – such as long-term working relationships with customers and suppliers and specialized skills – which companies whose main asset is cheap labor cannot match.  A company policy of forcing down wages is not a recipe for long-term economic success.

Economic growth has never been strong enough to fully employ the willing workforce and inequalities are rising throughout the Western world not falling. Further, the disparities between wealth and poor countries have widened.  By curbing the role of government and fiscal policy, we risk reverting to an approach which not only established the pre-conditions for the current crisis including the massive build-up of non-government debt and persistently high labor underutilization, but will almost certainly ensure a return to intense recessionary pressures (at a time when we are still experiencing double digit unemployment).  To be clear: I am not advocating unlimited government deficits or spending. Rather, the size of the deficit (surplus) should be market determined by the desired net saving of the non-government sector. This may not coincide with full employment and so it is the responsibility of the government to ensure that its taxation/spending are at the right level to ensure that this equality occurs at full employment.

Accordingly, if the goals are full employment AND price stability then the task is to make sure that government spending is exactly at the level that is neither inflationary, nor deflationary but sufficient to create full employment.  This is the true “Goldilocks” scenario, much beloved by Wall Street.  It can be better achieved through fiscal policy, rather than the preferred approach of the majority, which suggests that the same outcome is engineered via a monetary manipulation of short term rates by the central bank.  Fiscal policy is relatively direct – that is, the dollars go into aggregate demand – immediately they are spent. The standard view that government budget deficits lead to future tax burdens is problematic it assumes a financial constraint which in reality is non-existent.  The idea that unless policies are adjusted now (that is, governments start running surpluses or that we experience a “deflationary recession”) is a recipe for social turmoil and revolution.  The sooner our policy makers understand that, the more likely we avoid repeating the mistakes that got us into this mess in the first place.