agog

McMafia, Misha Glenny, 2008

This well researched look at global criminal empires highlights the darker side of the Chicago School’s Shock Doctrine. When the Chicago boys set out to massively transfer the worlds wealth into the hands of a few oligarchs, they simultaneously undermined state apparatus of regulation and control and brought about the most massive increase in organized crime in human history. The increase was not only in scale but in violence and capability as former secret police and world class martial arts athletes found themselves in need of new employment. The pinnacle of this worldwide movement was reached under Yeltsin who moved control of vast reserves of oil and natural gas to his handful of oligarchs. Realizing they needed protection that the state could no longer provide, the oligarchs turned to private organized criminal elements, who for 10% of the profits, were very effective at protecting the fortunes of the new Billionaires. Overnight, criminal organization found themselves rolling in wealth undreamed of by earlier criminal elements. Enter the Billionaire godfathers. Clearly this great wealth could not be left lying around the highly unstable financial institutions of the shocked states and Reagan and Thatcher come to their rescue deregulating the world’s financial institutions allowing movement and laundering of mind boggling Billions through places as diverse as Switzerland, Dubai, Tel Aviv, and tiny South Pacific Islands. Now needing to be able to travel anywhere in the world, Russian mobsters rushed to become Israeli citizens so they could get widely accepted Israeli passports. Even non Jewish Russians joined the rush to get a passport. So gratful were the Russian mob bosses to Israel, they jointly agreed not to engage in criminal behavior inside Israel as long as Israel continued to launder their Billions.

We start our tour in the Balkans where the mobs were cooperating fully through multiple wars and ethnic strife, even smuggling goods and people directly through the front lines of the wars. Moving to the Crimean Sea, he notes that the breakup of the Soviet Union and loss of control is now endangering the Sturgeon as Moscow’s new Billionaires gorge on caviar. A tiny sliver of Moldova, Transnistria split into an independent criminally dominated country. The Russian fourteenth army and its vast arsenal were located in this area and chose to stay in the new state providing arms and force to ensure the independence of the new state. Putin has called Transnistria the black hole and it is one of the biggest arms sources in the world. Most people have left the tiny country which boasts a world class soccer team than performs at home before 4,000 fans.

Dubai

In India we discover that Bombay (Mumbai) is the organized crime capital which has assumed control over Bollywood. The mob bosses used to live in Dubai where they can be protected from the police and rival gangs, but a recent crackdown has sent them to Pakistan where the ISS Pakistani intelligence provides them shelter and training. From Pakistan they are free to launch attacks into India.

In Japan we learn the integral roll of the yakuza in Japanese society. They were centrally involved with the Zaibatsu and the big banks in the 80s real estate bubble but received primarily blamed when the bubble burst. The yakuza’s biggest problem today is aging and the inability to recruit young Japanese men to join them. They are forced to subcontract much of their dirty work to the Chinese tongs or Korean gangsters.
China is feared throughout Asia. Its primary current contribution to global crime is their ability to copy and reproduce virtually anything up to and including ersatz Mercedes automobiles.

Medellin Columbia

South Africa leads organized crime in the continent. In Latin America Columbia is still a big supplier of cocaine to the world, shipping via Mexico into North America, and via Brazil into Europe. Brazil is particularly attractive because of its trained chemists and local access to virtually any chemical needed in production.
The US war on drugs has done more to perpetuate the global market for narcotics than any program in history. The only thing holding back growth of heroin and cocaine whose prices are dropping is the ready availability of synthetic drugs like ecstasy and methamphetamine (the drug of choice in Asia). Instead of regulating and taxing narcotics, governments are spending vast revenue in the hopeless effort to reduce of eliminate it. Any seizure or arrest leads to the immediate filling of the vacuum by new criminals and new shipments of the drug.
The trend toward globalization and domination by multinational corporations has blurred the distinctions between the legal and illegal. Is it any more legal for corporations to move money offshore to avoid taxation than for mobs to launder their money? Does the scramble to protect property rights give the rights to multinational corporations to patent plants and herbal cures that have been known to places like China and India for thousands of years? Does a patent give the right to a corporation to deny medication to those who can’t afford it?

Somehow the author is able to interview many of these underworld leaders and he seldom misses the local brothels.

Common Wealth, Economics for a Crowded Planet, Jeffrey D. Sachs, 2008

End of Poverty Jeffrey Sachs

We last met Jeffrey Sachs in Shock Doctrine and the PBS series Commanding Heights where he gained notoriety for advising nations throughout Latin America, Eastern Europe, and the former Soviet Union in the largest transfers of wealth to private and often foreign hands in human history. From these introductions, we would naturally associate Sachs with the Chicago School and neo-liberal movements. So it is refreshing to see Sachs here as Director of the Earth Institute at Columbia University (alma-mater of Kissinger and Greenspan) advocating massive and coordinated government programs to tackle the monumental problems of global warming, environmental damage and species extinction, population control education food supply health care, poverty, clean fresh water supply, sustainable energy supply.

He is very aware of the wrong footed long term foreign policy of the United States, referencing Legacy of Ashes and adopting the term Blowback from Chalmers Johnson. He references Jared Diamond and like Diamond, Sachs is an optimist, and like Diamond, the litany of massive problems addressed is enough to depress anyone. Where does all this optimism come from?

Sachs is very smart, becoming the youngest Professor in Harvard history but the surprise in this book is how well and clearly he organizes and writes. He makes an excellent case that big changes can be made with modest (relative to the U.S. defense budget) investment, using existing technologies and proven techniques of implementation. Imagine what would happen if serious investments were made in new technologies.

Some examples and highlights. Two human activities that provide little income to the participants but have a devastating impact on the environment are deforestation and fishing (particularly bottom net fishing). If those involved were paid modest sums not to cut trees or fish, the improvements in the environment would have economic value in huge multiples of the amount spent.

Preindustrial CO2 levels in the atmosphere were 280 ppm and are 380 ppm today. The international community have set a goal of stabilizing CO2 at no higher than 560 ppm. Two changes alone; sequestering CO2 emissions from power and industrial plants, and converting the world’s auto fleet to hybrid-plug-in technology would stabilize CO2 at 488 ppm by 2050.

In addition to extensive water world wide pollution, global climate change is having a dramatic impact on water through melting glaciers and ice caps and changing rain patterns. Ground water is being rapidly depleted and water problems will lead to conflicts since water requirements of many nations originate in other nations, for example, Bangladesh which gets most of its water from India.

We know how to control population growth with governmental educational and health support systems. Education, health, and ending poverty will bring population stability to all countries of the world. Poverty and population growth lead to conflicts, wars, and genocide. Spending money to end poverty, improve health and education will improve national security for the U.S. that defense expenditures cannot. Defense moneys need to be diverted to these positive activities. Sachs highlights the relationships between large percentages of young men in poor countries with high unemployment and food shortages and violence. He specifically points to Afghanistan and Darfur as places with exceptionally high percentages of young men where military solutions are impossible without addressing the fundamental problem of poverty.

He doesn’t address one troubling trend, in China, where the cultural preference for boy babies is leading to an entire generation where boys vastly outnumber girls. I guess he hopes that China’s continued economic growth will somehow absorb this problem without leading to unusual violence.

Sachs explicitly rejects the Invisible Hand of Chicago School fantasy. On the contrary, Sachs delineates the six kind of essential governmental intervention:

The first is help for the destitute …so that the poor can stay alive, meet basic needs, and step onto the ladder of development… The second is the public provision of key infrastructure (roads, ports, and airports, power, telecommunications, and broadband connectivity, all of which are required by the private sector in order to flourish) as well as other public goods such as infectious disease control and environmental management… The third is the provision of a sound business environment, including monetary stability, protection of property rights, contract enforcement, and openness to international trade. The fourth is the provision of social insurance, to ensure that all parts of the population can maintain their economic security and well-being in the face of inevitable economic dislocations. The fifth is the promotion and dissemination of modern science and technology…. The sixth is proper stewardship of the natural environment.

Millennium Project

Sachs was director of the UN Millennium Project under Kofi Annan. In this program, 78 villages across Africa were selected to demonstrate that coordinated efforts in education, health care, agriculture, and infrastructure can lift villages out of poverty and into sustainable economic growth. Each village of approximately 5,000 population were allocated aid totaling $120 per person of which external donors provided $60, the host government provided $30, $10 in kind (labor) from villagers, and $20 from other partners such as NGOs. The success of these carefully coordinated and monitored programs show how effective and inexpensive it is to attack the problems of poverty. Sachs appeals to the US to divert even a small portion of its defense budget, say, from nuclear arms development, into a global poverty program. Military solutions clearly don’t work to provide security, so why not solve the world wide poverty problem and see what the impact would be on security? Currently, the US spends 2 days of military budget per year equivalent on health and poverty programs. Sachs estimates the worldwide required worldwide annual budget to implement Millennium Projects everywhere at $245 Billion or 0.7 % of total developed world income. The U.S. currently spends more than twice this total amount on defense alone.

Electrical Consumption

Sachs attacks neo-liberal spread falsehoods that Western Europe, Japan, and the Asian Tigers were able to achieve their remarkable economic growth without foreign aid. Starting with the WWII Marshall Plan, all currently successful economies were put on the road to sustainability through massive foreign aid. And the money spent has been returned many fold through the resulting successes. It worked well in the past, the Millennium Projects has demonstrated that coordinated efforts will work in the poorest villages on earth, so why aren’t the developed nations rushing to offer assistance?

Sachs demonstrates that social welfare economies such as those in Scandinavia, have been even more successful economically, with higher standards of living, higher growth, and higher R&D investment than free-market economies like the United States. They accomplish all this and still are able to provide a social network of protection, universal health care, retirement security, excellent education, and high employment with the government acting as employer of last result hiring people to serve as care givers, child care providers, and other essential social tasks that are not provided under free-market economies. To the critics that point out that Scandinavia has a largely homogeneous population so people are caring for their own kind, Sachs reminds us that these same countries are also the largest providers of foreign poverty aid in the world. Their populations seem to have no trouble caring for people of very different cultures and ethnicity worldwide. In other words, the argument that social welfare somehow interferes with economic performance and growth is simply wrong.

Muhammad Yunis Receives Nobel Prize

Finally Sachs gives some modern philanthropists and NGOs their due. He points out that the Rockefeller Foundation was largely responsible for the Green Revolution that increased agricultural food production in India starting in the 1960s. He praises Muhammad Yunis for inventing micro finance and founding the Grameen Bank to give very small loans to women without a credit history so they can start small scale businesses. This community based lending has proven amazingly able to life people and communities out of poverty and into sustainable growth. The idea is not spreading throughout the world. He gives praise to the Gates Foundation and to the donations from Warren Buffet which allows the foundation to invest in the development of products for health care, telecommunications, and other areas needed by poor places where the free market would not be interested. He asks what if the 950 world billionaires pooled their $3.5 Trillion like Gates and Buffet? At 5% yield, that sum would produce $1.75 Billion annually, enough to make a huge dent in world poverty. Dream on. He even manages to find a good word for a few pharmaceutical companies, like Merck, that have been persuaded to stratify their markets so they can offer the newest drugs at cost to the poorest places on earth while maintaining their prices to the developed world. This has now evolved to the point where fragile but growing places like Brazil can be offered prices somewhere between cost and high developed prices. He uses this as evidence that even greedy corporate managers can be induced to do the right thing for the poor. The jury is still out on that one, but give Sachs credit for being the eternal optimist.

Melinda and Bill Gates
Buffet and the Gates

Oil on the Brain, Lisa Margonelli, 2007
Margonelli takes a three year journey to try to understand the complex and critical resource oil. Her ventures take her places few journalist have been, probably as much due to her lack of obvious agenda as much as her persistence and persuasiveness. She did not set out to establish that oil reserves are vastly exaggerated, that exploration technologies are unlikely to uncover vast new reserves, that oil companies are in a vast conspiracy to drive up prices and realize record products. She honestly set out to learn as much about the oil industry as she could learn, wherever that might take her.

The result is a slow start at her local independent gas station on Twin Peaks San Francisco which stays in business largely due to impulse purchases from its mini mart. She rides a fuel delivery truck working out of an independent distribution point in San Jose which buys its product from different sources delivered to it via pipeline. She learns that gas is a uniform product that is differentiated with branded additives put in as the last moment. Even color is added to identify non taxed fuel to be used off road such as by farmers.

BP Carson

She visits BP’s refinery in Carson, near Long Beach, now surrounded by suburbia. She tries to understand why no new refineries have been built for 50 years despite existing refineries continuous full capacity operation. She gets a glimpse of the enormous scale and complexity and continuous evolution of the refinery process as ever more product is squeezed out of crude oil, and of the great variety of crude oil from sweet light to almost tar that must be reduced to a common set of products. She also experiences, first hand, the dangers of the refinery when a partial power failure occurs (an accident at a BP plant in Texas killed a number of workers). She discovers that any interruption of operation has an instant impact on prices, the most notable example being the shutdown in production caused by hurricane Katrina in the gulf states.

She meets one of the last Texas wildcatters who dies while the book is in process and discovers that the new natural gas explorers are accountants, extremely averse to risk and who use MBAs to squeeze productivity by reduced job security, minimum benefits, and reduced wages and salaries just like all other modern American corporate enterprises.

SPR

She talks her way into the Strategic Petroleum Reserve (SPR) that she likens to Fort Knox in the days of America’s gold standard, an object of endless fascination, imagination, and speculation. She idly wonders why a movie like Goldfinger doesn’t exist for the SPR. The reality is that any Presidential move to add or take away oil from the SPR has an immediate and exaggerated impact on the NYMEX spot market price. But the SPR actually represents a very small cushion of a few months supply at most and if called on in a real emergency cannot deliver oil to the markets very fast due to the limits of its pipelines. In reality, the refineries use the SPR as a hedge so they can limit their crude oil inventories. They regularly “borrow” oil from the SPR if their own inventory is exhausted and “pay back” oil when they can afford to out of inventories. In other words, the SPR is a publically funded store to be used by the refineries as they see fit.

She visits NYMEX and talks to industry experts about pricing. OPEC began in the 1970s as a cartel of oil producing nations who would set quotas of production in an attempt to control supply and hence keep oil prices high. It never worked very well and individual members would cheat whenever it suited their own short term needs The main impact of OPEC seems to have been to greatly exaggerate oil reserves so the member states would have a high basis for their quota. These non existent reserves are the subject of Oil Twilight which doubts the middle east has the vast reserves most analysts assume. Now, with non OPEC states such as Russia becoming an increasing portion of world supply and with the emergence of NYMEX as a worldwide price setter, OPEC no longer has much control over prices, if they ever did. Instead, today, the worldwide increases in demand for oil, led by China and India, combined with the inability of oil producing states to dramatically increase production, has led to a permanently tight market for oil and ever increasing prices. NYMEX is a very sensitive gauge of world oil affairs, overreacting to every little outbreak of violence or instability in an oil producing state whether in Africa (Nigeria), Venezuela, or the middle east. The New York analysts she interviewed believe this is a permanent state and that prices will no longer fall like they once did. Only a dramatic lowering of demand could ever cause prices to fall such as the increased mileage of American cars for a few years after Carter’s oil crisis in 1979. As to the record oil company profits, she points out that Congress investigates the industry for collusion and gouging every time prices go up but never find evidence of wrong doing. Making a profit, after all, is capitalisms highest goal and achievement. She doesn’t take this discussion very far and never really gets into the subject of record profits.

As an aside, I have never understood why a resource so critical to the economy as a whole is not treated in this country as a regulated utility that provides total transparency and requires regulatory approval in order to raise prices. Whatever happens behind the closed doors, the record profits are there for all to see and the main benefactors seem to be the oil executives. There is virtually no evidence beyond superficial (and cheap) PR exercises that the oil companies are putting these record profits to a use that might actually benefit the world as a whole. They certainly have a negative impact on every other aspect of the economy. Both Nixon and Carter attempted price controls of gas at the pump but each time, the oil companies retaliated by limiting supply, creating long lines and furious public backlash against the Presidents, not against the oil companies. There is some evidence that huge pension-funds backed speculators are currently manipulating the oil futures market to drive the price of crude oil ever higher. Some predict that a bubble is forming that when it bursts could devastate several pension funds. If true, these oil gamblers are devastating economies around the world in search of selfish short term profits, and recklessly risking the critical retirement funds of its members. Are we looking at Enron redo?

She then travels to oil producing regions of the world starting with Venezuela which is an old timer, having started production in the 1920s. She notes that the Dutch disease, coined by the Dutch in the 1960s to describe the loss of manufacturing and exports to any nation with major natural resource exports has been known to Venezuela for a long time. This is also known as oil’s curse. She highlights another critical factor in all oil producing states, the changing relationship between the government and its citizens as oil revenue replaces taxes as the major source of government funding. Whether the government is “democratic”, a monarchy, or a military dictatorship, the presence of oil comes to dominate the relationship between the rulers and the ruled. This dominance is obvious and central to both. The state is relieved on needing to set and collect taxes from the public as the public is freed from paying those taxes. The public comes to expect some benefit from the oil revenues and the government usually complies by supplying very cheap gas for cars (19 cents a gallon in Venezuela). Beyond cheap gas, services for the public seems to break down, probably because the human infrastructure needed to effectively deliver such services never develops. Oil producing state governments are all corrupt. The only competent sector of the economy is the oil producing sector with its trained engineers, managers, and accountants. Chavez is testing the bounds of this competency by firing 25,000 oil personnel following the failed coup attempt in 2002. Can Venezuela sustain its productivity without the services of its trained oil oligarchy?

She next travels to Chad, a military dictatorship thinly disguised as a democratically elected government. Chad was very poor and very backward before Exxon and the World Bank invested $3.7 billion to develop an oil field and pipeline to the coast across Cameroon. The president/dictator claims to have signed the oil contract without reading it. While in Nigeria the state realizes 80% of oil revenues, Chad receives 28%. Knowing that the government was corrupt, Exxon and the World bank tried to create a third player, a “college” of educated citizens who would receive half the government oil revenue and could decide to spend it on schools, roads, hospitals, or any other public works. Once in place, the “college” was simply undermined by the president, who replaced the original members of the college with his cronies. Chad is now rated the most corrupt regime in the world. Chad’s citizens have gotten nothing from oil.

She visits Iran with rare to permission to visit some Persian Gulf oil platforms damaged or destroyed by the U.S. Navy during the Iraq-Iran war where the U.S. supplied arms to Iraq. She enumerates the long list of grievances Iran holds and remembers against the U.S. starting with the imposition of the “Shah”. This is a good reminder why Iranians don’t much like or trust the U.S. and why they are so intent on acquiring a nuclear weapon, after witnessing the invasion on non-nuclear Iraq while nuclear North Korea went untouched. She was struck by the geography of the Gulf and the number of disputes between the states over the British drawn borders (sound familiar? The British were still committing the same mistakes in the Partition of India). She was particularly struck by the narrow Strait of Hormuz through with 40% of the worlds oil passes. She points out that Iran can easily control this narrow strait military if they so desired. The U.S. navy’s constant presence in the gulf is probably an attempt to prevent such an occurrence.

Gulf Oil

She next and finally travels to oil producing Nigeria, where the delta has been the site of much pollution, violence, and suffering. The corrupt government of Nigeria is located elsewhere and normally buys off the rebel leaders when they cause too much havoc. Then things quiet down until a new charismatic rebel leader arises. She is struck by the education and articulateness of the unemployed Nigerians she meets, but for all their articulateness, they don’t make much sense and nothing ever seems to change. For their part, the oil companies wish the world would look to the Nigerian government rather than blame the oil companies for all the problems in the country. Regardless of who is to blame, Nigeria remains the source of much volatility in the price of oil.

Almost buried in the account of these travels, but confirmed, is the terrible role played by the IMF and World Bank explicated in some detail in The Shock Doctrine. The IMF particularly, insisted that governments cut back or eliminate social programs as a condition of their loans. Klein explains the Chicago School neocon rational for these requirements that would exacerbate the crisis and lead to privatization of state resources, hopefully into the hands of foreign owners. What we are seeing is a new form of capitalist imperialism, but the perpetrators have virtually no understanding of the enormous costs and consequences of their greedy and selfish actions.

Finally, Margonelli travels to China, the fastest growing new market for oil. She is astounded by the 100 year long term visions of Beijing’s leaders who continually talk of leapfrogging changes. They have enacted one of the strictest mileage requirements in the world and appear to be serious about alternate energy sources such as hydrogen fuel cells, hybrids, and all electrical vehicles. Unlike the west, China has very different requirements for performance of cars (acceleration, top speed, and driving range) so that golf cart like vehicles or even electric bicycles are very acceptable options. Unfortunately, an increasingly autonomous regional focus may undermine the advantages of long range central planning for pollution and greenhouse gas emissions and adaptation of alternate energy. For instance, gas guzzling large cars are banned in the big cities but Guangdong chooses to ignore the rule feeling that a successful entrepreneur should be free to show off his success however he wishes (sound familiar?).

Path Between the Seas, The Creation of the Panama Canal, David McCullough, 1977

French Excavator

Epic tale of the efforts of the French and Americans to create the long desired passage between the Atlantic and Pacific oceans. President Grant sent survey teams to find the best route in 1870 but nothing further was done by the U.S. to attempt to build a canal. Instead, the French, following their engineering and financial success at Suez, raised private money under the leadership of Ferdinand de Lessep, hero of Suez, who insisted a sea level canal be built in Panama. The French effort was under-funded and plagued with problems, not least of which was disease. Further efforts to raise money failed and the company was thrown into bankruptcy. Scandals at the highest level were uncovered with newspaper payoffs and political bribes but only Charles Lessep, son of Ferdinand, and one other minor player were ever sent to jail. The effort ended in 1889.

Teddy Roosevelt became President in 1902 and immediately set out to build the canal. He left it to Congress to decide the best route, although Nicaragua was assumed to be favored. Enter Philip Bunau Varilla, a French engineer of the earlier French effort and influence peddler William Cromwell who set out to convince Congress that Panama was the better route and that the U.S. should buy the French assets including rail and digging excavators at $109 Million. When it appeared they would lose, the French lowered the price to $40 Million and TR became interested, thinking this purchase would speed the completion of a canal. Two volcanic eruptions, one on Martinique and one in Nicaragua convinced Congress to vote for Panama.

Secretary of State John Hay (former private secretary to Lincoln (star with Henry Adams of Gore Vidal’s Empire ) immediately negotiated a new canal treaty with Columbia but after months of delay, the Colombian Legislature rejected the treaty in spite of the offered $10 Million immediate payment. Bunau Varilla, with Hay and TR working behind the scenes engineered a coupe in Panama with American naval support (gun boat diplomacy) so that Columbia could not land troops to regain control. TR asked his Attorney General to construct a legal defense for his actions, but Attorney General Knox replied:

Oh, Mr. President, do not let so great an achievement suffer from any taint of legality.

When TR trying out a defense during a cabinet meeting demanded “Have I defended myself?” Elihu Root responded:

You certainly have, Mr. President. You have shown that you were accused of seduction, and you have conclusively proved that you were guilty of rape.

TR at the Controls

Bunau Varilla was named special envoy to negotiate a canal treaty and Bunau Varilla wrote a draft totally favorable to the U.S. Hay recognized Panama as an independent country, signed the canal treaty and Congress ratified the treaty immediately. Panama hesitated to sign until Hay threatened to pull the navy back. The $10 Million went to JP Morgan to hold for Panama who invested most of it in New York real estate. The French got their $40 Million. McCollough reminds us that American Imperialism was largely the result of purchases (Louisiana, Alaska, Philippines) and was never considered to be imperialist as a consequence.

Heroes of Panama were William Gorgas who understood the role of mosquitoes as carriers of Yellow Fever and Malaria and who headed the health and sanitation efforts that came close to eradication these two killers. He had previously done the same in Cuba. John Stevens had built the Great Northern railway, discovering the Marias pass and the Stevens pass, giving the Great Northern the lowest elevation trans continental route. Stevens immediately saw that the keys to Panama were eradication of disease and building railroads capable of hauling the excavation debris away from the cuts. He spent a couple years building housing, hospitals, harbors, and railroads before any major excavation could start. He resigned at this point.

Colonel George Goethels of West Point was then appointed as the virtual dictator of Panama. TR knew that the military man would complete his mission and not resign.

Digging the Culebra Cut

The choice between a sea level and lock and lake canal was not made until 1907. The canal was designed then to accommodate the Titanic, the largest ship of the time. The locks were 1000 feet by 102 feet. The size of the canal was to dictate the maximum size of ships for decades including aircraft carriers of the navy. Only the Queen Mary and Queen Elizabeth were too large for the canal. Modern oil tankers are far too large. The lock and lake design meant damming two rivers on the Atlantic and Pacific sides.

The dams had the side effect that electric power could be made available for everything in the canal zone and in the entire country. The canal pioneered electrical trains, locks, and much else. The Culebra Cut, a nine mile stretch at the highest elevation, was the biggest challenge given the massiveness of the cut and the continuous land slides. Even after the canal opened, slides would close the canal for months at a time.

The canal became a major tourist attraction while it was being built with hundreds of thousands of visitors. The canal opened simultaneously with the outbreak of WWI in 1914 and ceremonies were canceled. The first crossing was by one of canal’s own freight ships and was hardly noticed.

Club House

The physical and social structure of the canal zone comes in for detailed scrutiny with some suggesting the canal was actually a socialist system. It is probably more correct to look at the canal zone as a very large military base before the days of outsourcing with its rigid hierarchical structure and completely self contained infrastructure, even though most residents and workers were civilian and not military. In any event the canal zone was a model of efficiency virtually without corruption, nepotism, or fraud, a remarkable achievement. In this way, the canal zone stands as a shining beacon of American know how in sharp contrast to today’s Baghdad Green Zone where waste, nepotism, cronyism, fraud, and incompetence are the only way of life.

The Bin Ladens, Steve Coll. 2008

This book seems to be almost a companion volume to the author’s previous Ghost Wars. That book was the account of the struggle over Afghanistan by the Soviet Union, United States, Pakistan, and Saudi Arabia without any consideration to the possible interests of Afghanis. Now we have a partial history of the Yemeni Bin Laden family whose patriarch Mohamed Bin Laden learned his way into construction at the same time that Abdulaziz Ibn Saud was consolidating his control and unifying what would become the kingdom of Saudi Arabia. The Bin Laden family kept relationships with the royal house of Saud by being useful to them. Mohamed established relationships with Addulaziz and his two sons and successors King Saud and King Faisal.

Salem Bin Laden 1975

When Faisal and Saud asked Mohamed to mediate a dispute between them, Mohamed fained illness, explaining to his associates that the brothers Saud and Faisal would never hurt one another but anyone getting in the middle might well die. The Bin Ladens understood their place in order of things in a genealogically determined society. Mohamed’s sons and successors Salem and Bakr stayed close to king Fahd and were described by Coll as Concierges to the royal family. This is a polite way to put their role. Royal procurer is more apt. Still, the roles have paid off giving the Bin Ladens a steady stream of increasingly large construction contracts and they are among the wealthiest non royal families in Saudi Arabia.

This book gives a useful look at the tight family relationships of Arabs and the dictates of Islam as to multiple marriages (4 wives allowed - divorce is easy) inheritance (all sons get a share with daughters receiving a half share). For the Bedouin living on the edge of existence these rules allowed strong patriarchs to survive. In oil rich Saudi Arabia, it leads to an explosion of descendants (Mohamed had more than 50) and a population explosion.

The book is largely devoted to Mohamed’s oldest son Salem who became head of the Bin Laden family in 1967 when Mohamed died in a plane crash. Salem was educated in and comfortable with the west, a lover of aviation and of western women, and a popular party giver to the royal family. Extremely audacious, Salem is seen by the royal family as a kind of lovable, loyal court jester. In one instance, Salem bets King Fahd that he can propose to and marry his four western girl friends in one big get together in London. Salem loses the bet but later marries his British girl friend. He also dies in a plane crash in 1988. After Salem’s death, his British widow married a half brother of Salem to remain part of the Bin Laden family.

Mosque at Mecca and Prophet’s Mosque at Medina

The Bin Ladens, both Mohamed and his sons, got contracts for restoration work on the holy shrines in Mecca, Medina, and the Dome of the Rock Mosque in Jerusalem. From the beginning, revenue from the Hajj, the pilgrimage to the holy sites which is the lifelong dream of every Muslim, provided a significant source of revenue to the Kingdom. As the number of pilgrims exploded to more than 2 million annually, facilities had to be greatly enlarged and expanded. The Bin Ladens even installed the worlds largest York air conditioning in the mosques for the comfort of the pilgrims. Because infidels are not allowed near the holy sites, the machinery was located several miles away so maintenance workers could access the equipment. Of the Hajj Coll writes:

The pilgrims all arrived at the same time of year and all went to the same places, Medina and Mecca, and more or less simultaneously. They arrived, too, in a heightened state of spiritual awareness, if not longing or near-rapture. On this heavily preconceived yet richly emotional journey, millions of Muslims discovered and judged modern Saudi Arabia. It was a process about as reliable as the one by which Saudis discovered America through vacations in Disney World and west Los Angeles. But it was no less true of powerful, in either case, for being incomplete.
Well-educated, globally conscious Hajj pilgrims from poorer Muslim countries such as Egypt or India sometimes resented Saudi Arabia for two reasons; its garish, wasteful nouveau wealth, and its intolerant religious orthodoxy.

So where is Osama in this tale? It seems not much is known - knowable about him. Most of the information we have which finds its origins in American “Intelligence” is wrong. Osama is a younger son of Mohamed and a poor 15 year old Syrian girl Mohamed married probably to land a construction contract. He divorced her again within 3 years. Unlike his educated (both in Europe and America and the best schools in the middle east) brothers, Osama is a mediocre student with a Jeddah (Saudi Arabia) high school education. While in high school, he is targeted by the Muslim Brotherhood, probably because he is a member of the wealthy Bin Laden family. He never studies engineering but becomes a radicalized Muslim. When the brothers try to involve him in construction contracts in the holy cities, Osama proves to be a bad manager, and while quiet and polite, when he does talk, he seems to create friction and problems with his extreme religious views.

The family sends him off to Peshawar Pakistan to funnel charity donations to the Afghan cause during the Soviet occupation. Salem often acts as currier carrying bags of money for Osama to distribute. Osama wants to join the action and asks Salem for arms. Salem looks but is unclear what he finds for Osama. In Osama’s only significant military engagement on the Afghan border, 100 of his fighters are killed. While a military disaster, Osama films the whole thing and turns the result into a propaganda film with himself as star.

After the Soviet withdrawal, Osama returns to Saudi Arabia offending everyone in sight. He suggests to the royal family that they should allow Osama to raise an army to chase Sadam Hussain out of Kuwait rather than allow infidel Americans onto Saudi soil. The royal family tells the Bin Laden family to shut Osama up but they cannot so the Sauds pulled Osama’s passport and deport him. He chooses Sudan, one of the few countries willing to accept him. Bakr, now head of the Bin Laden family, sorts out inheritance issues in the family and Osama chooses $15 million in cash and small continued holdings in Bin Laden businesses.

Osama invests and loses most of this money in bad business deals in Sudan. Osama takes credit for blowing up two American embassies in Africa and the US pressures Sudan to exile Osama yet again. They do, and Osama returns to Afghanistan where he promises $10-20 million annually to the Taliban to give him asylum. It is unclear if he ever gave the Taliban financial support but he did build Mullah Omar a new family compound.

The idea for the plane bombing in the US probably originated with Khalid Sheikh Mohammed uncle of Ramzi Yousef, the man who bombed the World Trade Center in 1993. Osama revised the plan to scale it back from 10 planes and to cast himself as the star.

Strangely, there is no mention of Osama’s health issues in this book. After 9/11, the American public was media fed the image of this tall guy running from cave to cave with a dialysis machine strapped to his back. Could Coll find no verifiable evidence of a health problem or did he simply think it wasn’t worth mentioning? Is this more evidence of invented intelligence like Osama’s wealth? Coll should have said something.

Both Mohamed and Salem Bin Laden died in plane crashes. Osama is unlikely to follow suit. American intelligence, after greatly exaggerating Osama’s Wealth ($300 million reported in the press up to $500 million) now set out to find the new sources of his money. This is a bit silly since the African embassy bombings are estimated to have cost only $10,000 and the 9/11 airline bombing to have cost only $100,000. Rich Saudis including Kings are known to drop several millions in a single night of gambling. The focus of this effort fell, of course, on the rest of the Bin Laden family. No connections or money flows have been discovered. The Bin Ladens continue to thrive in the construction business, being awarded a $1.6 billion contract for prisons in 2006. Osama has apparently not damaged the family reputation with the house of Saud.

This book, like Ghost Wars was hastily edited and is full of nonsense sentences and misspellings. Still, it gives a glimpse of Saudi Arabia, the house of Saud, and the role of the Bin Laden family within the kingdom. It is disappointing when it comes to Osama. Beyond debunking some of the false information about Osama, it sheds little light on this enigmatic, fanatical figure. We don’t understand him any better now than before.

Nemesis, The Last Days of the American Republic, Chalmers Johnson 2006

Asking whether the U.S. will go the way of Rome or of Britain who “voluntarily” divested itself of its empire, Johnson completes his doomsday trilogy (The Sorrows of Empire and Blowback). This volume, while published earlier, makes an excellent companion piece to Naomi Klein’s Shock Doctrine. Where Klein explicates the Chicago school-Adam Smith-Neocon creed explaining the intellectual basis and beliefs behind our bewildering current mess, Johnson provides the indisputable facts and figures of our current situation in condensed 280 very, very depressing pages.

Fort Baghdad Embassy

On Iraq, Johnson explains that the covert (i.e. real) reasons for the war were to secure permanent military bases in the Middle East and to secure a reliable source of oil. He says that the U.S. military will try to hold four military bases permanently in Iraq no matter what (perhaps in defiance of a new President?) including the green zone and airports where the U.S. has built hardened, permanent facilities and the world’s largest embassy on 104 acres built at a cost approaching $1 Billion. The green zone has its own power, water, and all utilities. Ironically the headquarters for the elected government of supposedly sovereign Iraq is located inside a U.S. fort! The other critical bases the U.S. military will hold onto are located next to the oil fields of course. He concurs with Klein that allowing the looting and destruction of priceless cultural artifacts and archaeological sites in Iraq was a deliberate act by the neocon Bush administration.

To tamp down violence in Iraq, at least until Bush is out of office, the military has resorted to bribing the different factions. FrontLine recently reported that Muqtada al-Sadr was given $300 million for assurances of a cease fire from his Shia Mahdi Army. That would have built a few schools and houses in New Orleans.

He notes that while Bush made the CIA the fall guys for the failure of intelligence leading to war with Iraq and largely dismantled the CIA intelligence gathering function, covert operations at the CIA are stronger than ever. He says that the intelligence role of the CIA has always been to tell the President what he wanted to hear, not to provide independent actual intelligence. He also points out that every President since Truman (i.e. since the founding of the CIA) has used the agency for covert operations. Add to the CIA covert operations, the black ops portion of the Defense Department budget and you have a huge well funded establishment beyond the scrutiny of the public or of Congress.

In Blowback, Johnson explained why various terrorist acts such as the African Embassy bombings, the Cole attack, and even 9/11 were in retaliation for U.S. activities the American people know nothing about because the U.S. acts are kept secret. The Freedom of Information Act (FOIA) was passed in 1966. In 1974, in response of Nixon’s use of the CIA and FBI to spy on Americans, the FOIA was strengthened. Much of the information we have today about the secret activities of our government comes from the courts upholding FOIA requests. Even with extensive redacting (blacking out portions of the documents) much information can be gained from secret documents. The Bush administration first had a policy of complying as slowly as possible to FOIA requests and then instituted a prohibitive price of $372,999 for each search.

Until Bush, Presidential records were released to the public 12 years after the President leaves office. Bush changed this in 2001, just as key Reagan era documents were set to be released, perhaps to protect his father who escaped the Iran Contra mess largely unscathed. Now Presidential records will only be released when authorized by both the current sitting President and the former President, if still living.

Johnson gives a laundry list of countries (very long) where the CIA has interfered with, assassinated, or propped up authoritarian governments believed to be anti-Soviet. He details the CIA role in the 1973 overthrow of the democratically elected Allende of Chile and military takeover by the torturing dictator Pinochet. He also details the role of the CIA in funneling money and advanced weapons via Pakistan to the Muhajadin fighting the Soviets in Afghanistan.

CIA 737 leaves Majorca Spain - Protestors in Shannon Ireland
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The most entertaining (if this is the right word) portion of the book was his discussion of the activities of amateur plane spotters, whose hobby since WWII has been spotting and recording the activities of military and private aircraft around the world. The internet now provides an almost complete and accurate record of the landings of all private planes anywhere. When Sweden broke the story of a special rendition (arresting two Egyptian refugees and handing them over the CIA at a private airport to be flown to Egypt), this database was used to identify the plane used in the rendition and to trace the travels of this same plane throughout the world over time. The plane was owned by a fictitious company with fictitious owners but with a P.O. box near Langley. Once outed, the plane’s ownership and identification numbers were changed, but the plane could be instantly identified from its manufacturers identification number and the tracking continued. The entire fleet of CIA planes was identified in this way and with them a complete picture of renditions; which countries cooperated in the arrests; where the prisons were located; the magnitude of the effort. The CIA seems to have been totally oblivious to this amateur network and its worldwide resources. The network estimates the number of people grabbed as more than 3,000. The victims simply disappeared either to be killed or tortured for information. The outstanding work of this amateur network at outing CIA’s fleet and tracking renditions sounds like the material for a movie. The administration and CIA strongly believes they have stopped terrorist attacks in Europe and the U.S. with this program. That this activity violates the rights of many innocent individuals and violates the laws of virtually every nation involved doesn’t matter in the least. Hearing the term for the first time one wag said special rendition sounds like something Pavarotti would do before a small audience.

Johnson decries the growing insensitivity of Americans and its media to innocent civilians being slaughtered by our military in bombings and ground assaults. No one counts the number. They are seldom reported and incidents are known by the Administration, the military, and our own media as collateral damage. Its as if we are to believe these death are unavoidable accidents instead of the direct result of U.S. military action. In the unlikely event the military ever accidentally destroyed a nuclear armed missile launched from the middle east, the weapons could fall anywhere in the region including Europe. The military still refers to the catastrophic potential results of such an incident as collateral damage.

Johnson really hits his stride when discussing the ever growing number of military bases occupied by U.S. forces throughout the world. The new trend is for smaller bases located closer to potential hot spots such as two islands off the coast of Venezuela where we are positioned to instantly take out democratically elected Chavez. He uses Japan with which he is most familiar to discuss the effects on the occupied country of these bases; the raping, the pollution, the damage, the noise of an insensitive military. He says the public and the military have no understanding of the ill feelings caused by all these bases (800 plus the actual count is unknown even by the military) and the damage to our reputation in the world. Japan is spending $7 Billion of its own money to help the U.S. build a new base on Guam to remove at least some occupiers from Japan.

He then turns to star wars, the ultimate military spending boondoggle. He explains that even a small military incident in space could pollute the orbits with so much junk that all satellites would be forever unusable with crippling impact to the economies of the world. The Air Force is currently running a “recruiting” ad on television showing just such an incident in space. He talks about the air force monopoly over GPS which is now indispensable both for military and civilian use. The air force currently reserves the right to shut down a region of GPS at their own discretion. The Europeans are so concerned about the air force monopoly on this critical resource, that they have funded Galileo a competing higher tech system which was to have gone online this year. When Bush threatened the Europeans to stop this deployment, the threat backfired and funds and new countries rushed to join the Galileo network. Recent setbacks may delay the start of Galileo until 2014 however. We only hope Galileo doesn’t go the way of Motorola’s Iridium satellite telephone system that was delayed so often it was obsolete by the time it was introduced.

The Imagined North Korean Threat

And the American Response (Why is Putin worried?)
ABL GMD Test

After WWII the military and military industrial complex greatly exaggerated the cold war Soviet threat so they could continue to expand defense budgets. After the collapse of the Soviet Union, the government toyed with the idea of making China the new evil empire. Neocon interests in trade and investment with China defeated this idea and instead they invented a new threat using poor North Korea. Much of the justification for the anti ballistic missile program lies with the idea that North Korea or another rogue state could acquire and use nuclear armed ICBMs. The military is fully aware that all their proposed programs are useless against the latest Russian build ICBM but might have a chance at a Korean ICBM (actually two antique Russian scud missiles strapped together. The last one the Koreans tested barely cleared Japan.) So the military is cynically spending billions to build weapons systems they know won’t work to address threats that don’t exist. The most ridiculous of these weapons and the most costly is the megawatt laser to be mounted in a 747. Even if the laser worked (it doesn’t) The 747 has to fly so close to its intended target that it can easily be shot down by simple existing ground to air missiles costing next to nothing. What matters is not the practicality of the weapon but the money required to build it.

The reason this all works is that the military and military industrial complex is spread throughout the entire country. In each congressional district with facilities and plants, the industry simply buys a congressman who, in return for election support and a guaranteed lifetime job when they leave Congress, will vote for any appropriation proposed. A quid pro quo agreement means that I vote for your district’s appropriations if you vote for mine. To suppress public outrage, Congress hides more and more appropriations in special earmarks and outright black ops budget items. The public is kept in line through fear (terrorism, nuclear armed rogue states, etc.) and Johnson refers to Bush as “Fear-Monger-in-Chief“. The system is thoroughly ingrained and, under Bush, totally out of control. We are guaranteed to bankrupt our system if the trend continues. As it is, the deficit limits must continually be raised. China and Japan are the two biggest holders of this massive budget debt. The system is totally corrupt and will lead to the downfall of the entire government if it continues. In summary:

The iron triangle of the Air Force, Congress, and the military industrial complex, sanctified by high tech jobs it offers to American workers, is driving our country toward bankruptcy. For some it is tempting to continue the lucrative practice of buying arcane space technologies that do not work - missile defenses, for example, simply because it keeps people employed. Meanwhile our democracy is undercut by members of Congress who use the lavish “campaign contributions” they receive - bribes by any other name - to buy elections. The only public service these bought-and-paid-for Congressmen attend to is providing a legal veneer for munition makers’ unquestioned access to the tax revenues of the government.

Johnson talks briefly about Keynesianism, where a government is justified in instituting spending and employment programs to level the business cycle. His theories were put to large scale successful tests by FDR in the great depression with works programs in the parks and the building of roads and dams. Keynes believed that military spending and employment could also be justified in times of recession and depression. The problem with a Keynesian justification of our current boondoggle military spending is that the military spending is totally insensitive to the business cycle - it only ever goes up through boom and bust.

The King Makers

The President’s constitutional job is to carry out the laws passed by Congress. When Clinton tried to veto single line items in a legislative bill, the Supreme Court ruled this was unconstitutional. The President must either sign or veto a bill in its entirety. Bush instituted a new approach called a signing statement wherein the President reserves the right not to enforce provisions of a bill with which he disagrees. In a Bush stacked Supreme Court, who after all appointed his majesty in the first place, the signing statements have not been challenged. Bush used a signing statement to gut John McCain’s 2005 anti torture provision. Bush disagrees with it and refused to enforce it, end of discussion. With this simple devise, Bush has totally undermined the separation of powers and has rendered Congress virtually powerless.

Another terrible precedent of the Bush era is the extensive use of the low level fall guy. Torture at Abu Ghraib came to light with the leaking of photographs to the press. The ACLU was able to get ahold of key documents establishing responsibility for torture at the prison through FOIA lawsuits. Today we have a picture of the all the leading White House officials sitting around a conference table in the White House discussing torture. Who was prosecuted? The top official held accountable was Brigadier General Janis Karpinski, a woman and reserve officer who was briefly in charge of all U.S. prisons in Iraq. She received a reprimand and was demoted to colonel even though she clearly was not an instigator of the torture program. Johnson asks what does this do to a military command structure? As a soldier do you blindly carry out the commands of your superior officers even if you think they are illegal? Why weren’t officers and officials at the highest level held accountable if the commands were illegal? Does a soldier need to consult a lawyer before obeying orders in the future?

To be fair, Bush has used higher level fall guys as well; Scooter Libby, John Ashcroft, Donald Rumsfeld, and Alberto Gonzales are prominent examples.

What a depressing picture. A Congress bought and paid for by the weapons makers. A President with a total disregard for the American Constitution. A Supreme Court who appoints a monarch and stands ready to do his bidding. The only bright spot Johnson can see is that there is unlikely to be a military coup for two reasons; The generals have very good lives with absolute security and luxury as it is and second, the soldiers may now refuse to follow orders if those orders are seen to be illegal such as overthrowing the government. OK, I know, but this will have to stand for optimism in an otherwise totally depressing account.

Collapse, How Societies Choose to Fail or Succeed, Jared Diamond, 2005

Three Gorges Dam China

Diamond is a Professor at UCLA specializing in evolutionary biology and bio-geography. This book looks at man’s effects on the environment today and in the past. He is interested in decisions that cause some societies to collapse and others to sustain themselves successfully for thousands of years. The book’s blurbs and Diamond himself try to give reason to hope, but the facts and figures of the situation in the modern world are pretty depressing reading, particularly the discussion of modern China. But Australia is pretty depressing reading as well. And I skipped altogether reading the chapters on Rwanda and Haiti.

Haze over China

His central thesis seems to be that some people in the past have made enlightened decisions, some by highly centralized governments like Japan, and some by highly decentralized systems like New Guinea. He also finds optimism in some corporations who find economic reasons to act responsibly in the environment to avoid the massive cleanup costs of destructive mistakes. He sites a Chevron subsidiary (since spun off) that is such a model of environmental stewardship in New Guinea that their project is, in effect, the countries largest and most successful wildlife preserve. Of Chevron’s and Shell’s project in Nigeria, Diamond says merely that the project is older and the government of Nigeria is corrupt.

Shell Nigeria Oil Spill

His discussion of the Bitterroot Valley south of Missoula in Montana was extensive. It seems that Montana, which has fallen to one of the lowest income states in America is now best suited for fat cat vacation homes such as those of Charles Schwab’s 2600 acre Bitterroot Stock Farm, 125 home sites with 6,000 sq ft million dollar homes of in a gated community. The only contact with the local population is when the fat cats show up at a local bar to enjoy the Montana Western fauna. Ted Turner’s buffaloes are elsewhere in the state. Is this a success or a failure? Preserve the environment for the wealthy?

Bitterroot Shack

Gated Mansion in Bitterroot Valley

His reasons for optimism at the end are a little strange; e.g. we could have been hit by a huge meteor over which we have absolutely no control, instead of the current man made disaster. If man did it, surely man can undo it. Really? It seems that man’s impact and control over the environment is why we are in this mess to begin with.

FDR, Jean Edward Smith, 2007

This largely overlooked biography of Franklin Delano Roosevelt (FDR) is a wonderful reminder that a social shock, i.e. the Great Depression, can be used by enlightened leadership to promote the public good at least as effectively as the Chicago School neocons have used shock since the 1960s to promote a concentration of ownership and wealth with general misery for the masses. We needed a reminder in this dark day of the Chicago School neocons run amuck, that positive changes are possible when faced with a major shock but that these changes need constant diligence so the greedy neocons don’t slip us back into the dark days of Hoover and the Great Depression.

The media of FDR’s era was at least as conservative as today with moguls like William Randolph Hearst (Citizen Kane), Henry Luce (Time Life), and Adolph Ochs (New York Times). FDR had an instinctive sense of where the country was and where it need to go. He managed the media brilliantly and led public opinion, taking care never to get too far out front, even into a necessary war, as opposed to pandering to public opinion like modern politicians, who are as likely to exploit and stampede public opinion with wedge issues they themselves have no personal interest in or opinions on. This is not cynicism, it is modern political reality in an age where ethics and decency have been lost in the interests of wealth and power.

FDR was born of the Roosevelt name (Hudson River side) with inherited Delano wealth. His maternal grandfather Warren Delano made two fortunes in the China trade, the second based on opium before the U.S. Civil War where it was used as the primary pain killer. FDR was to make good use of this opium fortune to support his lifelong political career.

FDR Sara and ER

Privately schooled until he was 14, largely by his strong willed mother Sara, FDR attended exclusive private school Groton and then Harvard, where he resided in the exclusive Gold Coast, not mixing with poorer students. He attended during the time of William James’ philosophy department (and James deploring the social stratification at Harvard) but FDR was never good at abstract thought and never took philosophy courses. He quipped in 1941, “I took economics courses in college for four years and everything I was taught was wrong.” He is referring to the Adam Smith “invisible hand” of laissez-faire economics taught at Harvard at this time (and to Greenspan at Columbia later) and that led directly to Milton Friedman and the Chicago School of the 1950s. As President, his brain trust introduced FDR to the economics of John Maynard Keynes which formed the underpinnings of his fiscal policies. His proudest achievement at Harvard was to become editor of the Crimson Tide newspaper.

FDR served as undersecretary of the Navy during the Wilson presidency and WWI, giving FDR a unique insight into the workings of government in Washington and of the workings of the military and armaments industry. This experience was invaluable in his subsequent political career and his preparation to act as Commander in Chief during WWII. Unlike Lincoln in the civil war, FDR made hardly a misstep in selecting his military commanders in WWII.

Confirming the TV movie Warm Springs , FDR’s struggle with polio, discovery of Warm Springs Georgia, and meeting for the first time, the poor of America and particularly rural southern America resulted in a dramatic change in his perceptions and empathy with the struggling poor. Without his polio and Warm Springs, it is doubtful FDR would have conceived and implemented the far reaching changes underlying the New Deal.

FDR reentered politics after fighting polio with a run for Governor in New York in 1928. This election, with New York still largely under the control of the Tammany Hall machine in NYC, resulted in a 91% turnout in the city and a turnout in upstate New York exceeding registered voters; a reminder that corruption in voting is not new to the era of mechanized and electronic voting.

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The stock market crash of October 1929 and the subsequent Great Depression first gave Governor FDR the opportunity to test some of the programs and reforms in New York that were later central to the programs that became the New Deal. The worsening economic conditions unlike anything ever seen in America and the unwillingness of President Hoover to do anything to correct the situation resulted in a unique opportunity for FDR to take the Democratic nomination for President and to be elected President in 1932.

FDR’s first term as President was to see the most dramatic change in the role of government in American history. As he took office almost all banks were on “holiday” to stop the run on banks as Americans rushed to withdraw their funds, and the stock market was closed. The government promised to print as much money as required to meet the demand, went off the gold standard to allow the dollar to weaken against other currencies, increasing foreign demand for American commodities. Bank deposits were guaranteed by the government. The CCC, PWA, and WPR put millions to work building parks, roads, schools, hospitals, etc. The FCC was created to regulate the airwaves and the SEC was created to regulate Wall Street. States were encouraged to place a moratorium on foreclosures for homes and farms and the Federal government stepped in with massive programs of refinancing and mortgages for homes and farms, saving millions of homeowners and farmers. In 1935, social security was created as a self supporting (employee and employer contribution) security net guaranteeing unemployed and disabled workers income and providing retirement income. Unions expanded their role and representation throughout industry. Wage minimums and work hour limits were set in many states.

During his reelection campaign in 1936, Roosevelt warned the American people of a threatening new tyranny:

Liberty requires opportunity to make a living - a living which gives man not only enough to live by, but something to live for.
For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people’s property, other people’s money, other people’s labor - other people’s lives.
These economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power. In vain they seek to hide behind the Flag and the Constitution.

FDR’s second term was marked by a number of missteps which Smith attributes to hubris on the part of the administration. FDR was dissatisfied with some decisions by the Supreme Court and attempted to add new justices to stack the court in his favor - he failed. Chief justice Hughes wrote letter defending the court and laying blame for the unfavorable decisions at the feet of the Attorney General for not paying enough attention to the law in drafting New Deal legislation. FDR cut back federal spending programs, sending the economy back into a severe recession. He reversed courses but not before significant damage was done. FDR attempted to eliminate Democratic congressmen who had opposed New Deal measures in the 1938 mid-term elections and largely failed. The only significant New Deal legislation of FDR’s second term was the Fair Labor Standard Act of 1938, setting minimum wages and maximum hours nationally.

Hitler Invades Poland

A second major shock following the great depression was unfolding throughout the rest of the world as Germany annexed Austria, Czechoslovakia, and other “German” territories lost in the Treaty of Versailles; Japan annexed Manchuria in 1932 then invaded China in 1937, and Italy joined by acquiring territory in the Balkans. It was these world events that convinced an exhausted FDR to seek a third term in 1940. An isolationist public had not forgotten the cost in American lives of WWI and the Spanish Flu epidemic that followed and while concerned about events in the world, did not want American lives at risk. FDR was able to expand spending on armaments and got legislation allowing him to sell arms to Britain on a cash and carry basis. The Republicans nominated Wendel Willkie who ran on an isolationist platform. When Willkie’s campaign gained traction, FDR weighed in with the promise “I have said before, but I shall say it again and again and again. Your boys are not going to be sent into any foreign war.” To aides he added privately “If we’re attacked, it’s no longer a foreign war.” FDR waged a masterful campaign, slowly bringing public opinion around to the realities of the global conflict. He won in a landslide.

By inauguration day, Britain was running out of money to buy arms and FDR single handedly invented the Lend Lease program by which the allies would be able to “borrow” arms and then, theoretically, return them after the end of the conflict. When Hitler invaded Russia in June 1941, FDR extended to lend lease program to them as well, amazingly with widespread public approval. FDR also succeeded in getting compulsory draft enacted using the effective argument that a draft is the most democratic way to raise an army. Soon 50,000 draftees a month were being added to our services. The draft age was set at 21 so it was American men who fought in WWII unlike the kids of 18 and 19 who fought in Vietnam. All four Roosevelt boys joined the military during the war and all received medals for their service.

Attack on Pearl Harbor

In June 1941 FDR imposed an oil embargo on Japan is an ill conceived effort to contain Japanese expansion in Southeast Asia. The embargo made Japan realize that they desperately needed the resources of the Dutch West Indies and Malaya. Japan sent delegates to the US and FDR appointed Cordell Hull to the negotiation. Smith wonders the extent to which racial prejudice distorted the US view of Japan that led to the failure of the negotiation but it clearly failed and Japan, with Yamamoto commanding, attacked Pearl Harbor, the most shocking thing they could have done, as Hawaii was so isolated and heavily armed. FDR got his non-foreign war. FDR’s seeming indifference to the relocation of west coast Japanese underlines the racially weighted way in which Japan was viewed in this era.

Once officially at war, the US threw its tremendous industrial potential into gear and complete recovery from the effects of the great depression were finally complete. A feature of the War Department contracts with armament suppliers allowed for renegotiation allowing the department to recapture government money from excess profits. There were no complaints of profiteering during this war. To stave off a massive demonstration to be staged by black leaders, FDR got legislation guaranteeing that government contracts would not be discriminatory. This is one of the few civil rights acts of the era.

The war further consolidated the New Deal whose social institutions became finally entrenched into the American system. It required two shocks to effect these social changes; the great depression followed by a great war. Without them the stranglehold of the conservatives on the distribution of wealth and concentration of power would not have been broken. The final piece of the New Deal came with passage of the GI Bill in June 1944 entitling veterans generous unemployment insurance, job counseling and enhanced medical care as well as guaranteed low cost loans for buying homes and farms and covering business costs. GI housing changed the face of almost every city in the country. Most importantly, the GI Bill provided federal money for university education. Of 15 million who served in the war, half took advantage of this assistance to attend college and by 1947 half of all college enrollees were veterans. This education created a trained work force that acted like an afterburner kicking the economy into the transformative decade of the 1950s.

FDR with Lucy Mercer FDR Missy LeHand ER

Smith spends some time exploring the strange dynamic of FDR and Eleanor’s (ER) marriage and family life. The personal life of politicians was considered off limits for the media in this era and the public was largely unaware of details of their private lives. FDR fell in love with Lucy Mercer Rutherford and she worked with him as his secretary at the navy in WWI. When FDR announced his intension of leaving Eleanor for Lucy, lifelong political adviser Louis Howe and mother Sara intervened, convincing FDR and ER to stay together for the sake of his political career. Sara even threatened to disinherit Franklin if he divorced. In 1936 King Edward VII of England abdicated his throne to marry twice divorced American Wallis Simpson, and in 1964 it is thought that Nelson Rockefeller’s divorce played a large role in his failure to gain the party’s nomination for president. Although no correspondence has been found, FDR and Lucy stayed in touch for the remainder of Franklin’s life. Lucy married and had a child with Rutherford, but attended each of FDR’s inaugurations and was the only person present when he died in 1945. Missie LeHand became FDR’s personal secretary in 1921 and was to stay with him at Warm Springs during his polio recovery, acting as his nurse and caretaker as well as his secretary. Smith says she was clearly in love with Franklin and accompanied him into the White House where she was said to be the fifth most powerful person in Washington. After a stroke disabled LeHand in 1941, Lucy seems to have reentered the picture on a more regular basis.

Three Graces Val-Kill

Eleanor always supported her husbands political ambitions but was never central to his decision making. On a number of occasions she proved invaluable to him (meeting the veterans camped in Washington in 1933, attending the democratic convention in 1940). Eleanor formed close friendships with women and FDR built her a retreat on the Hudson River at Val-Kill near Hyde Park which he called the “honeymoon suite” where Eleanor, Marion Dickerman and Nancy Cook lived and shared a single bedroom. The women made rustic furniture at the house. Marion and Nancy also retained an apartment in Greenwich Village in the city. FDR called them the three graces. Smith does not speculate on the women’s sexual orientation.

FDR and Earl Miller

As governor of New York, FDR assigned police sergeant Earl Miller, who was the Navy’s middleweight boxing champion and kept watch over FDR during his 1918 trip to France, as Eleanor’s bodyguard in 1929. Thus began a lifelong friendship between Eleanor and Miller that one biographer of ER compares to that of Queen Victoria and Scotsman John Brown (subject of the movie Mrs. Brown starring Dame Judi Dench). Son James believed the two were more than just friends but again there is no written evidence. The effects of growing up in this “open marriage” and political environment on the five children is hard to say but each of the children had multiple marriages.

The Shock Doctrine, Naomi Klein, 2007

Milton Friedman and John Kenneth Galbraith -The long and short of Twentieth Century Economics.

This book is a history of neoconservatism from its Milton Friedman Chicago roots in the 50s to today. The use of shock to effect neoconservative economic transformations started with the Indonesian military coup of 1965 and continued into Latin America (Chile, Brazil, Argentina, Uruguay) in the 1970s. Bolivia and Poland demonstrated in the 1980s that sufficient economic shock (inflation devaluation flight of capital) could coerce democratically elected governments to implement neocon economic “reforms”. Trinidad and Tobago showed that the IMF could effect an economic crisis by fabricating statistics and causing a flight of capital. With Russia and the 1997 Asian economic crisis, the neocons perfected the mechanism of crisis to engender massive transfers of wealth and ownership into private and foreign hands. And finally, the Bush administration neocons have learned to use armed force and the threat of force to create the crisis that can then be exploited to massively move ownership and wealth into new private hands. In fact, the force itself has largely been privatized. The public core is being emptied of all its critical functions.

Sukarno overthrown by Suharto

Augusto Pinochet

The theoretical underpinnings of neoliberalism (Neoconservatism) were born at the Chicago School of Economics in the 1950’s with Milton Friedman as chief guru although significant contributions were made by Harvard and Berkeley (in 1965, at the height of the Vietnam protests). Klein discovers that the Keynesian era with its New Deal, European and Japanese reconstruction under the Marshall Plan, and European social welfare programs were all made possible by the threat of Communism and radical socialism at the time. The Chicago (and Berkeley) boys (economists educated at these schools) were able to effect massive changes in Indonesia and in several Latin American countries such as privatization (often selling key national assets to foreign multinationals), removal of price controls, free trade, and reduction of social programs and safety nets because of crisis conditions in those countries. The crises led to or resulted in military coups and reigns of terror such as Pinochet in Chile and Suharto in Indonesia where thousands were arrested, tortured and died. Then the neoconservatives learned to exploit economic crises in a democracy without overthrowing the government with examples from Bolivia and South Africa.

To aid in creating or expanding economic crisis worldwide, the Chicago School effectively took control of both the IMF and the World Bank, created after WWII to reduce economic crises. By insisting that massive foreign debt incurred by corrupt dictatorships or Apartheid regimes be honored, and by refusing aid and loans to desperate governments, the IMF and World Bank could manipulate and expand economic crises to create conditions (runaway inflation, massive unemployment) to force governments to implement neoconservative policies or to be overthrown by those who would be willing to implement such policies.

Milton Friedman with Reagan

The Chicago School crisis addicts were certainly on a speedy intellectual trajectory. Only a few years earlier, they had speculated that a hyperinflation crisis could create the shocking conditions required for shock policies. Now a chief economist (Michael Bruno), an institution funded, by this time, with tax dollars from 178 countries and whose mandate was to rebuild and strengthen struggling economies, was advocating the creation of failed states because of the opportunities they provided to start over in the rubble.

Whistle Blower Davison Budhoo

IMF staffer and whistle blower Davison Budhoo explained some tactics used to precipitate and expand an economic crisis, the manipulation and fabrication of statistics, which he called statistical malpractice. In the mid 1980s Budhoo wrote reports doubling the actual cost of labor in oil rich Trinidad and Tobago and fabricated huge unpaid government debts. This resulted in financial markets labeling the area a bad risk and cutting off financing. The resulting crisis forced the government to come begging to the IMF for a bailout. The IMF could then impose its conditions. Budhoo’s confessions never made the New York Times, The Wall Street Journal, or any major newspaper.

Deng’s New China

In China Deng Xiaoping had to call out the army with tanks in Tienanmen Square to put down the student rebellion against his economic policies,

Yeltsin with Clinton

On Yeltsin and the remaking of the Russian economy:

…he (Yeltsin) ordered a reluctant army to storm the Russian White House (Parliament), setting it on fire and leaving charred the very building he had built his reputation defending just two years earlier. Communism may have collapsed without the firing of a single shot, but Chicago style capitalism, it turned out, required a great deal of gunfire to defend itself: Yeltsin called in five thousand soldiers, dozens of tanks and armored personnel carriers, helicopters and elite shock troops armed with automatic machine guns - all to defend Russia’s new capitalist economy from the grave threat of democracy.

With the conversion of China to free market policies under Deng Xiaoping and the collapse of the Soviet Union and overthrow of Communist regimes in Eastern Europe (Poland, Czechoslovakia, and Hungary), the Chicago school disciples were free to carry out their shock therapy throughout the world without fear of revolutionary reactions.

This volumes makes an interesting companion piece to the Legacy of Ashes. The CIA was directly involved in creating and exploiting virtually every crisis in Asia and Latin America, allowing the Chicago (or Berkeley) boys to remake their economies along Neoconservative lines. While the CIA history is a legacy of incompetence and blindness, the Neoconservative history is a history of success after success until the entire world is being remade in their image.

And that is how the crusade that Friedman began managed to survive the dreaded transition to democracy - not by its proponents persuading electorates of the wisdom of their world view, but by moving deftly from crisis to crisis, expertly exploiting the desperation of economic emergencies to push through policies that would tie the hands of fragile new democracies. Once the tactic was perfected, opportunities just seemed to multiply. The Volcher Shock (interest rates of 18-22%) would be followed by the Mexican Tequila Crisis in 1994, the Asian Contagion in 1997 and the Russian Collapse in 1998, which was followed shortly by one in Brazil. When these shocks and crises started to lose their power, even more cataclysmic ones would appear: tsunamis, hurricanes, wars and terrorist attacks. Disaster capitalism was taking shape

Nature Helps the Neocons

The movement that Milton Friedman launched in the 1950s is best understood as an attempt by multinational capital to recapture the highly profitable, lawless frontier that Adam Smith, the intellectual forefather of today’s neoliberals, so admired - but with a twist. Rather than journeying through Smith’s “savage and barbarous nations” where there was no Western law (no longer a practical option), this movement set out to systematically dismantle existing laws and regulations to re-create that earlier lawlessness. And where Smith’s colonists earned their record profits by seizing what he described as “waste lands” for “but a trifle”, today’s multinationals see government programs, public assets and everything that is not for sale as terrain to be conquered and seized - the post office, national parks, schools, social security, disaster relief and anything else that is publicly administered…Where Smith saw fertile green fields turned into profitable farmlands on the pampas and prairies, Wall Street saw “green field opportunities” in Chile’s phone system, Argentina’s airline, Russia’s oil fields, Bolivia’s water system, the United States’ public airwaves, Poland’s factories - all built with public wealth, then sold for a trifle. Then there are the treasures created by enlisting the state to put a patent and a price tag on life-forms and natural resources never dreamed of as commodities - seeds, genes, carbon in the earth’s atmosphere. By relentlessly searching for new profit frontiers in the public domain, Chicago School economists are like the mapmakers of the colonial era, identifying new waterways through the Amazon, marking off the location of a hidden cache of gold inside an Inca temple.

John Williamson, inheritor of Friedman’s guru status, explained the new strategy in January 1993:

One will have to ask whether it could conceivably make sense to think of deliberately provoking a crisis so as to remove the political logjam to reform. For example, it has sometimes been suggested in Brazil that it would be worthwhile stoking up a hyperinflation so as to scare everyone into accepting those changes…Presumably no one with historical foresight would have advocated in the mid-1930s that Germany or Japan go to war in order to get the benefits of super growth that followed their defeat. But could a lesser crisis have served the same function? Is it possible to conceive of a pseudo-crisis that could serve the same positive function without the cost of a real crisis?

The human costs of the IMF’s opportunism were nearly as devastating in Asia (1997 economic crisis) as in Russia. The International Labor Organization estimates that 24 million people lost their jobs in this period and that Indonesia’s unemployment rate increased from 4 to 12 percent. Thailand was losing 2,000 jobs a day at the height of the “reforms” - 60,000 a month. In South Korea, 300,000 workers were fired every month - largely the result of the IMF’s totally unnecessary demands to slash government budgets and hike interest rates. By 1999, South Korea’s and Indonesia’s unemployment rates had nearly tripled in two years. As in Latin America in the seventies, what disappeared in these parts of Asia was what was so remarkable about the region’s “miracle” in the first place: its large and growing middle class. In 1996 63.7 percent of South Koreans identified as middle class; by 1999 that number was down to 38.4 percent. According to the World Bank, 20 million Asians were thrown into poverty in this period of what Rodolfo Walsh would have called “planned misery”.

Rumsfeld and Cheney Enjoy New Wealth