Three Stampers

A thorough (800 pages) account of the life and impact of Deng on the modernization of China. Deng’s history including his years in France, where he first met Zhou Enlai and Ho Chi Min, and Russia, his roles in the war against Japan and the Civil War against the Guomindang and the early years of the Communist rule of China up to the Cultural Revolution are covered in only 45 pages. The tale really begins in 1967, when Deng, age 63, is placed under house arrest. In 1969 with the plane crash that killed Lin Biao and the first Soviet incursions into Outer Mongolia, Mao has Deng sent to Jiangi province where he was given light factory work in an army controlled facility. He would not be recalled to Beijing until 1974, when Zhou Enlai had again fallen from Mao’s grace and was dying of cancer and Mao himself was fast failing from Lou Gerhig’s disease. After some success in restoring order to the railroads and key provinces, Deng again is attacked by Mao starting in 1975. Zhou Enlai dies in early 1976 and Mao attempts a quiet ceremony only to see Beijing and Tiananmen overrun with spontaneous mourners. On April 5 1976 a massive demonstration is held in Tiananmen Square for Zhou and Deng. Jiang Qing (Mao’s separated wife) and the Gang of Four (so named by Mao) set out to quell the demonstration and continue the criticism of Deng. Hua Guofeng is named Mao’s successor and Mao dies on September 9, 1976. Hua immediately moves to arrest the Gang of Four who are tried and executed for their role in the Cultural Revolution and the purge following the April 5 demonstration. Deng immediately consolidates his power in the military and foreign affairs and quietly sets out to remove Hua. Deng never assumes the titles of leadership and never creates a cult of personality around himself.

The “Four Modernizations” to develop agriculture, industry, national defense, science and technology was formalized by Zhou Enlai in 1963 and underpinned the policies of Deng after 1977. Mao had believed in the need for continuous revolution which resulted in the chaos and tragedies that were the Great Leap Forward and the Cultural Revolution. Mao engaged in perpetual war against the landlords and capitalists. But Mao also attacked the intellectuals and educated Chinese and Deng led in the purges of the Hundred Flowers campaign starting in 1957. By 1977, Deng had come to realize that China would need an educated class to promote education, research, and modernization. Chinese universities had been largely destroyed during the Cultural Revolution, were occupied by the army, and were operating at a secondary school level. Deng moved to normalize relations with the US with a primary goal to send large numbers of Chinese students to US universities. He reformed the Universities to qualify students for admission to foreign Universities. Deng explained that working with your mind was the same as working with your hands and all work should be honored. Asked if Deng wasn’t worried that the students would stay abroad, Deng responded that it didn’t matter because they were still Chinese and would help China wherever they chose to live and work. As it turned out sizable numbers of students did return to China where they played key roles in China’s transformation.

Shenzhen old and new

Deng was famous for his memorable quotes “It doesn’t matter if a cat is black or white, so long as it catches mice.” and “When you open the door, flies will get in.” to explain his openness to economic and market experimentation and willingness to tolerate some corruption if economic progress results. The usual focus is on China’s development of the Special Economic Zones (SEZs) led by Shenzhen near Hong Kong which grew from a sleepy village of 20,000 to a metropolis of several million with tall modern buildings and all infrastructure needed to support modern manufacturing. But equally important to the transformation of China were allowing certain regions to move from collective farming to household farming resulting in huge increases in food production and the promotion of small enterprises at the collective and household level to produce and market products wanted and needed by the people Household farming and small scale enterprise came to produce half of China’s GNP.

Particularly interesting were Vogel’s reasons why China developed so differently from the Soviet Union and Eastern Europe. He points out the China had a long history as a culturally unified area dominated by the Han people. The entire country had a single written language and Mandarin was long the official government spoken language. Mao simplified the written language and made sure all Chinese were taught Mandarin and simplified Chinese writing. Second, China has a long coastline and many deep water seaports unlike the other Communist countries. This advantage makes it far easier to import technology and export products. Transportation in the interior of China was limited but the coastal cities were not held back by this limitation. Third, China had the examples of Singapore, Hong Kong, Taiwan, South Korea, (the dragons) and Japan to study and emulate. Finally, many millions of Chinese were living overseas throughout the developed world. China found these overseas Chinese very ready to assist in the modernization process. Deng was advised by Singapore’s Lee Kuan Yew and Hong Kong shipping magnate Y K Pao and several Chinese American Nobel laureates.

old steel and new

The largest foreign investor in China was Japan. Vogel points out that the eye opening trips made by Chinese leaders to Japan and Western countries in the late 1970s resembled the Iwakura Mission of 1871 in Meiji Japan. Like Japan, these trips served to show the Chinese how far behind they were. This was brought home most tellingly when Deng visited an automated continuous production steel plant in Japan whose production was almost the equivalent of all China’s antique plants combined. With Japan’s technical, financial, and management assistance, China today produces more steel than the US and Japan combined. Deng was equally interested in how Japan had converted from a war production economy during the war to a peacetime, consumer economy so quickly after the war ended.

Deng began his rule with two bold moves. He authorized a lightning strike military invasion of Vietnam to demonstrate that China could threaten Hanoi anytime it chose. Troops took control of all northern county capitals then withdrew to China in only 28 days. Deng calculated that this surprise move would stall Vietnam’s aggressions in Laos and Cambodia and to warn the Soviets to stay away from the southern region, would secure China for at least a decade, giving him time and space to implement his economic reforms. Second, Deng moved immediately to normalize relations with the US so that the Soviets would be detained from aggression, Chinese students could begin study in US universities to close the training gap, and the US could be encouraged to invest in China. Central in Deng’s mind was US education of China’s best students.

Vogel spends a lot of time discussing the Tiananmen Square student uprising of 1989. Deng started his leadership by normalizing relations with the US and wanted to bookmark his regime with normalized relations with the Soviet Union. Gorbachev visited Beijing in late May 1989 to finalize the normalization agreement. Hu Yaobang, as General Secretary was a reformer promoting freedom and democracy much beloved by Chinese university students. Hu was removed from office and criticized for his failure to deal with student demonstrations in 1986. When he died in 1989, the students came to Tiananmen Square to honor Hu much like the earlier mourning demonstrations in honor of Zhou. Hu replaced Zhou in the hearts of the students. Deng desperately wanted to clear the square by the time Gorbachev arrived. He wrote a tough editorial which only strengthened the resolve of the demonstrators. Days before Gorbachev and massive worldwide media arrived in Beijing the students started a hunger strike. Western press which came to cover the Gorbachev visit quickly turned their focus to the demonstrators. Deng tried to clear the square with unarmed soldiers but failed. He waited for Gorbachev and the Western press to leave then sent in heavily armed troops with orders to clear the square at any cost. Estimates of student deaths vary from 400 to several thousand. Zhao Ziyang was removed from power for disagreeing with Deng’s handling of the demonstration.

Factions remained under Deng with the reformers on the right and the conservatives led by Chen Yun on the left. The early success of creating a market economy in China resulted in double digit GNP growth for a number of years in succession. By the late 1980′s the massive growth led to inflation anticipated to be 30% in 1989. Inflation was particularly hard on the mass of Chinese living with fixed incomes. Chen and the conservatives blamed the Tiananmen demonstrations on this inflation and moved too aggressively to contain it bringing the Chinese economy to a hard landing with growth under 4%. The conservatives remained in control until 1992 until Deng, then 87 years old initiated one final movement during his winter vacation in the south. During visits in Shenzhen, Zhuhai, Guangzhou, and Shanghai, Deng spoke out colorfully and strongly for liberalization and expansion of his socialist market economy. Hong Kong media quickly picked up on Deng’s tour and began broadcasting coverage of his talked via television which was now widely available in the regions near Hong Kong. Popular support for his views exploded and his hand picked successor Jiang Zemin quickly changed sides from the Chen led conservatives to the Deng led reformers. In his last movement, Deng thus set the stage for the resumption of the fast growth that continues to this day. From this time forward, inflation fighting measure assured that the economy would have a soft landing and rapid growth continue.

the Steel Factory melts the Iron Lady

The British handover of Hong Kong took place in 1997 just months after Deng’s death. Preparations for the handover occupied a central part of Deng’s attention during his rule. He knew that Hong Kong would be invaluable as a financial and trade center as it had since the revolution in 1949. Deng consistency pressed the one country – two systems approach to dealing with Hong Kong. He continued to develop personal relationships with key Hong Kong businessmen and made sure that the right people from China were appointed to Hong Kong and that Hong Kong leaders were developed to be able to take over when the British administrators left. One of Vogel’s better stories is the visit of Margaret Thatcher (the Iron Lady) to Deng (the Steel Factory) in September 1982. Thatcher was riding high after her victory in the Falken Islands and intended to tell Deng that Britain had decided to keep administering Hong Kong indefinitely. Deng changed her mind for once and all. China would administer Hong Kong and warned Britain not to attempt to drain assets from Hong Kong prior to the handover.

China’s efforts to reassure the residents of Hong Kong received a big setback after the Tiananmen Square repressions and individual residents continued to leave Hong Kong for Canada and other destinations taking as much wealth with them as possible. For all the drama, the handover went smoothly and Hong Kong continues its role today as financial center and trading center for China and Hong Kong’s residents continue to prosper.

Modern Shanghai Bund

What about Shanghai, China’s largest manufacturing center when Deng took over? Shanghai was initially excluded from the SEZ creations because of its size and complexity and because Deng was worried that the SEZs would be seen as a recreation of the colonial past with the foreign concessions. Shanghai was allowed to modernize later and Deng’s successor Jiang Zemin made his reputation in Shanghai.

It is difficult for those in China an abroad who became adults after Deng stepped down to realize the enormity of the problems Deng faced as he began this journey; a country closed to fundamentally new ways of thinking; deep rifts between those who had been attacked during the Cultural Revolution and their attackers; proud military leaders who were resistant to downsizing and budget reductions; public animosity toward imperialists and foreign capitalists; an entrenched conservative socialist structure in both the countryside and the cities; a reluctance by urban residence to accept over 200 million migrants from the countryside; and dissension as some people continued to live in poverty while others became rich…It is doubtful that anyone else had the combination of authority, depth and breadth of experience, strategic sense, assurance, personal relationships, and political judgement needed to manage China’s transformation with comparable success.

Four Generations

Another reason to study this work is for the insights it gives into the inner workings of the political system, the campaigns, the training and promotion of leaders, the complex intrigues between ruling cliques. Deng watched events unfold as labor unions struck in Poland, Nicolai Ceausescu was overthrown in Romania, and as Gorbachev set out to reform the communist party only to see the collapse of the entire Soviet system. Deng was determined to keep a strong single communist party with adherence to the thought of Lenin, Marx, and Mao (with Deng as the high priest of interpretation). At the same time he believed that leaders should experiment, make mistakes, admit their mistakes, correct their mistakes, and experiment again. He carefully avoided the Kruschev mistake of critizing Stalin, finding quotes from Mao that he was correct 70% of time, in other words Mao made mistakes such as the Great Leap Forward and the Cultural Revolution, for which Mao accepted responsibility (he did?), corrected, and moved on to new experiments.

Deng believed that training leaders, giving them freedom to experiment, judging the results (did the cat catch mice? were the flies tolerable?), correcting mistakes, including changing leaders if necessary is the key role of the communist party leadership. Deng believed that reform and economic transformation could only be accomplished by the selection of the proper leadership at the national and regional levels. Deng and his cohort were the second and last generation to have experienced the wars as leaders. Deng was determined to force his cohort of old revolutionaries to retire with him and to pass the reigns to a much younger generation of leaders who grew up in very different conditions. We have now seem several and are about to see the next changing of the guard as the next generation assumes power in a peaceful transfer. All this is the rightful legacy of Deng.

Washington is a medical ethicist and bioethicist whose attitude seems to be summed up in this quote from Thomas Browne;
“No one should approach the temple of science with the soul of a money changer.”

The Real Henrietta Lacks, unsung hero of Polio vaccine

Who owns our bodies? Apparently not us judging from consistent court rulings. In 1951 tumor cells were extracted without consent from cancer patient Henrietta Lacks for further study. These cells, known as Hela were propagated and sold over and over and are still available for research today. They have generated millions of dollars in fees and have underpinned research breakthroughs and treatments too numerous to mention although their contribution to the development of Salk’s polio vaccine stands out for special mention. Henrietta’s husband had refused to consent to the cell extraction and the family only learned that the Hela line was world famous in 1994 when a son was approached to provide his cells for additional study.

Alistair Cooke’s Body Snatched

Appropriation of body parts without permission continues unabated and is a huge business worth billions today. Among those appropriated without permission were Alistair Cooke, long time host of PBS’ Masterpiece Theater. Some of these bodies including children have found themselves used in auto manufacturers crash tests.

Burroughs Ginsberg writings overturned plant patent

Then in 1980 the Bayh-Dole act was passed to allow the commercialization of patents resulting from government sponsored research. In that same year, 1980, the supreme court ruled that life can be patented leading to a gold rush of patents in plant and animal life. Traditional remedies and medicines known for hundreds or even thousands of years have been patented. Few have been overturned by the courts. A 1980′s patent on a Brazilian psychedelic plant was overturned not because of the plant’s traditional and sacred meaning to a Brazilian tribe but to the 30 year prior writings of Alan Ginsburg and William S. Burroughs. Bio-colonialism is OK but prior documented western “discovery” can be used to invalidate a patent.

While the human genome project itself and its discoveries were placed in the public domain, subsequent work to isolate individual genes responsible for certain diseases were allowed to be patented. That’s right, Alzheimer’s, cancers, and many other deadly diseases are owned and controlled by patent holders. More than 50,000, almost a fifth of all human genes are now patented, more than 36,000 by a single French company, Genset. Many genes were allowed to be patented even though researchers don’t know the gene’s function. These genes patents more than any single cause have stymied, slowed down, or even blocked outright research into tests and treatments of many deadly diseases. At the very least they have dramatically increased the cost of doing research as huge patent licensing fees must be paid.

The pharmaceutical industry was once the most profitable industry ever to exist on the planet. It has now fallen to the third most profitable and profits are in free fall off the cliff. Why? Because drug companies no longer develop important life saving blockbuster drugs like the statins (Zocor is off patent and Lipitor’s patent is expiring), but put their efforts into “me too” drugs and life enhancing drugs like Viagra or cosmetics.

They also pour enormous efforts and resources into defending through litigation and extending their patents with such tricks as combining two drugs whose patents are expiring into a “new” patentable drug, or re-branding a drug for a new purpose such as patenting an existing drug under a new name with FDA approval for use by black people (whatever that means genetically) exclusively. Remember thalidomide the drug that caused all those birth defects back in the 1950s and 1960s. Guess what, thalidomide is back as a relabeled newly patented drug for the treatment of lepers.

It costs upward of $1 million to fight a patent infringement case involving drugs. To prevent “me too” drugs, companies file not only the drug they want to market, but every near derivative they can imagine. One drug patent was surrounded by 1300 similar drug patents to make “me too” drugs virtually impossible to produce. Adding to the mess, some drug patents are 400,000 pages long (not a typo) and the company requesting the patent pays most of the patent office costs. Sounds a lot like the relationship between the ratings agencies and the financial companies who pay them. Imagine litigating over a patent that no one can possibly read or understand.

What can happen once a patent is granted for a drug? One drug capable of eliminating sleeping sickness was never marketed for that purpose but was re-branded as a facial creme to remove women’s facial hair. Not enough money in sleeping sickness? Several effective cancer drugs were not marketed because of low projected revenues and the university inventors were unable to override the company decision. Those drugs sit on the shelf useless.

Available cancer drugs have been singularly disappointing resulting in an overall extension of average American lifespans a mere four months. Yet a single course of cancer drug treatment can cost $200,000 to $300,000 each. In one case, the Canadian health system, unable to reach an acceptable price agreement with the manufacturer, paid $218,000 for one Canadian patient to travel across the border for treatment in the US. We now learn that speculators often corner the market and horde these expensive drugs in order to hold doctors-patients-hospitals hostage for incredible additional markups. Oh the wonders of unfettered capitalism.

Unable to get American consents for drug studies, companies increasingly are testing drugs in Africa and Asia where they ignore consent requirements and feel free to use placebos where they would be required to use the best available treatments for their comparisons. That’s OK, their test subjects won’t be able to get the test drug anyway after the study ends. This is The Constant Gardener on steroids. See also The Body Hunters. And if the patients or their families sue with government help as in a case in Nigeria where 11 children died during a test and many other were disabled for life, the drug company “lost” all its records yet once a settlement was negotiated was able to identify its test subjects through DNA tests. Very mysterious record disappearance. The drug was never FDA approved fortunately.

But avoiding the need for consent is not limited to poor countries but is practiced domestically as well. One company had developed a blood hemoglobin substitute whose early tests showed up bad side effects. Needing another large clinical study to proceed the company came up with a novel idea. They kept supplies of the “blood” in EMT vehicles operating in whose areas contained mostly poor, primarily black and Hispanic populations. Whenever the EMT team picked up a patient who had lost blood they administered the artificial hemoglobin rather than the usual saline solution on the trip to the hospital. The company’s thin justification for avoiding the need for consent was that the subject was unconscious (sometimes), that no family members were present (sometimes) and that treatment was urgently required. (No, saline would have stabilized the subject til arrival at the hospital.) Once in the hospital, the company extracted blood samples three times a day for the study. If a subject asked why they were told it was a normal part of their treatment. In other words the subjects were never informed that they were in the study, of the known risks and side effects of their treatment, they were lied to throughout. The FDA did not approve the hemoglobin substitute.

For those that think the horrors of the Tuskegee syphilis experiments on black soldiers is ancient history, think again. After the military grade anthrax samples were mailed to important congressmen and newsrooms, a drug company rushed to develop a vaccine for anthrax. While the vaccine was in testing and after significant problems such as loss of vision and hearing and miscarriages had already surfaced, the DOD determined to vaccinate more than 100,000 troops with the non-FDA approved drug. Thousands of soldiers refused and were dishonorably discharged from service at great cost to themselves and the military. A pregnant soldier asked to be transferred but her commanding officer not only denied the transfer but forcibly had her vaccinated as an example. She miscarried. The FDA never approved the vaccination but the soldiers learned they had no legal recourse either against the military or the drug company. Today thousands of former soldiers suffer from the side effects.

Also on the subject of bio-colonialism, researchers are increasingly descending on isolated groups of people whose isolation give them a limited gene pool and therefore makes them useful for isolating particular disease’s genetic causes. Thus Easter Island, Hawaiians, a 2000 year old group of Jews in India are recruited for studies for which they are unlikely to benefit. An interesting example is Iceland where an Icelandic researcher formed his own company and set out to collect samples and information promising financial rewards and medical breakthroughs beneficial to Icelanders. Icelanders love genealogy and can track their ancestry often back to a Viking. They also keep extensive medical records tracing back for generations. Thus the researcher was able to put together a uniquely valuable data base with cell samples. Unfortunately breakthroughs and profits eluded him and the company fell into bankruptcy where control of the valuable data was lost. The information has now been sold to drug companies and insurance companies (Did you know your disqualifying pre-condition originated with some ancient viking?) The possible horrors are hard to contemplate.

While government grants still fund the vast majority of research on disease and treatment, the drug companies have dominated the control and marketing of the resulting breakthroughs. Drug companies also include the government subsidies when justifying high drug prices. A Pharma sponsored study put the average cost per drug at $800 million which they round to a billion in talking points. Ralph Nader’s group, using Pharma’s own numbers puts the actual cost at about $100 million, still serious money.

The patenting mess has drawn the universities and other institutions into a dependency on marketing their patents and research that has totally compromised their role as independent investigators. One researcher assembled the worlds most valuable collection of cells and materials to study Alzheimer’s only to see his University of Washington sell the collection to Pfizer. He and his subjects were unable to reverse the sale. In one court case, Duke argued that their university researchers should be protected in their investigations only to have the court rule that since Duke patents research and sells licenses they are indistinguishable from any other corporation and their employees cannot be expected to have special privileges. Universities are no longer special. Further, virtually all researchers whether in the University or elsewhere are on the take from the drug companies.

Professional journals such as JAMA and the New England Journal of Medicine have been compromised to the point they are little more than paid drug ads. Journal articles are ghost written by drug employees with the named authors having no access to the underlying research numbers. Because everyone qualified is on the take, independent peer review of articles is no longer possible. The big danger in all this is that drug companies are able to hide and lie about the actual clinical trial results and cover over or minimize side effects. Thus doctors who rely on journals to keep up with medical advances are mislead as to the true risks of the drugs they prescribe.

Even worse, doctors are on the take to the tune of $6 billion a year with an additional $2 billion in junkets. How can a patient rely on a corrupted doctor’s recommendations for treatment?

Drug companies also contribute financially to the FDA’s operating costs. This gives them the power to remove FDA officials who may oppose approval. The FDA has moved from denying approval of questionable new drugs to requiring larger warning labels as if this will prevent or limit the drug’s inappropriate use. When a drug is pulled by the FDA it often is re targeted and relabeled and reintroduced with FDA approval such as the infamous thalidomide.

Lula da Silva announces Brazil’s HIV march-in

Governments all have the ability to require “compulsory licenses” for critical drugs like those for HIV. Brazil shocked Pharma in 2007 by announcing a compulsory license for Merck’s HIV efavirenz. India has long ignored drug patents and have become proficient as reverse engineering patented drugs. Brazil’s action has set off a chain reaction among other governments causing the drug industry to start to rethink its pricing policies for poor countries. In the last 20 years only 4 drugs have been developed for diseases unique to poor countries. One of those is sold only as a vaccine for visitors to those poor areas not for the residents themselves.

The Gates Foundation, WHO, and other groups are experimenting with a new model where entire governments in poor countries guarantee a market for a drug to treat diseases like sleeping sickness or malaria. It is hoped the guarantee will finally induce drug companies into manufacturing drugs for these diseases. International organizations are also encouraging drug companies to think of pricing tiers for poor countries and are helping to police the illegal re-importation of the cheap drugs. The actions of Brazil and India are encouraging this trend but counter pressures come from WTO attempts to enforce intellectual property rights, i.e. patents.

There have also been a few cases where gene patents have been overturned, most famously for the seven ovarian cancer patents on the genes BRAC1 and BRAC2. This case has been appealed and will likely end before the supreme court. Still this temporary limited victory gives Washington hope that things might be reversing and ever optimistic, she looks forward to the day when Bayh-Dole will be eliminated and the plant and animal and gene patent rulings reversed. Dream on. At least patents expire after twenty years unless companies figure cleaver ways to extend them so research and development may be able to resume after this wasteful interregnum.

Here is an update on the activities of Mortenson, the Central Asia Institute (CAI) and his self selecting “Dirty Dozen” following up on his previous Three Cups of Tea. Greg begins with an event from 1999 while he was visiting the Charpurson Valley. He had just met Sarfraz Khan, former mujahedin fighter with a disfigured hand who is making his living trading across the mountains into the Wakhan Corridor of Afghanistan (“no much success”) when they spot a group of 14 Kirghiz (nomadic Afghan) horsemen straight out of the 13th Century riding toward them. Their leader is the young son of the Kirghiz headman and he has heard that Mortenson is in the area and has ridden across the mountains to meet him and see if he would be willing to build a school for their children. Greg is so moved that he impulsively promises their school knowing full well he can’t go into Taliban controlled Afghanistan. It takes him ten years to keep his promise.

Video by Sarfraz Khan

Greg is so impressed with Sarfraz, who speaks seven languages and whose ancestors are Waki from the Corridor, that he hires him as his remote areas project manager. Thus begins what Greg calls the closest friendship of his life.

The promise of the school and the hiring of Sarfraz are the sort of impulsive decision making that make the CAI unique among NGOs. The other unique feature is their “last place first” philosophy, probably owing its origin to the first school Greg built in Korphe Pakistan a village so remote he first had to raise more money so he could build a bridge across a river in order to transport building materials to the village. Korphe was the village that rescued and nursed Greg after his failed attempt to climb nearby K2 and its headman Haji Ali is credited with Greg’s first and best education in the area (“After 3 cups of tea you will be friends forever.”). Haji Ali wanted a school for his grandaughter Jahan Ali, who became CAIs first high school graduate. The emphasis on girl’s education Greg acquired while growing up in Africa (where his father ran a hospital near Mount Kilimanjaro) and where he learned the expression “educate a boy and you educate an individual, educate a girl and you educate a community”. Greg has observed his girl students teaching their mothers to read and write proving to him the truth of this saying.

CAI offers scholarships to the smartest girls to continue their eduction. Once offered, these scholarships can be accepted at any time in the future. One girl was unable to accept a scholarship to become a health worker because of the opposition of the local headman. She married, raised children, and ten years later, the new headman asked her to accept her scholarship. She did, received her education, and returned to her village to help pregnant woman and their babies. Childbirth and infant mortality rates in her village fell to zero. She thinks that her own experiences as a wife and mother have helped her become a better trained health worker and she is grateful for the delay. This type of patience both by CAI and the students is one of the important lessons Greg has learned from his experience.

Wakhan Corridor

After 9/11 and the US displacement of the Taliban, Greg and Safran entered the Wakhan Corridor of Afghanistan and Safran began his education of Greg into Afghan “style“. Safran not only speaks the various languages of the area, but he adapts his accent to the specific region, speaking a fast, clipped Dari in Kabul, and slowing, softening, and rounding the language as he travels further into the Corridor until he morphs seamlessly into the next language of the region. He also adjusts his dress according to region and teaches Greg to follow him. Greg must have felt a little like Sir Richard Burton, the master of disguises. Safran also taught Greg about identifying the real decision makers during a Jirga (meeting of elders) just from their subtle gestures and body language. They develop close friendships with the leaders of the Waki and Tajik groups of the Corridor as well as the border security commander, Wohid Khan, who comes to their aid time after time. They build a series of more than 20 schools in the area. Safran also taught Greg the skills of avoiding kidnapping by never revealing your destination and changing transport frequently. This also assures that the driver is familiar with local conditions. They are constantly moving large sums of money from the Kabul bank to their remote schools to pay teachers, buy supplies and pay for construction. They are never robbed.

In 2005 the report that Americans had put a Koran down the toilet in an Iraqi prison set off riots throughout the Islamic world. NGO workers fled to Kabul and their offices and abandoned vehicles were destroyed. Greg stayed put as a guest in a house where he met for the first time the headman of the Kirghiz, Abdul Rashid Khan the father of horseman Greg and Safran had met in 1999. Abdul Rashid is returning empty handed from several months in Kabul where he had hoped to get help for his isolated people. Hamid Karzi made some half hearted promises which he had no intention of keeping. Abdul Radhid had spent much of his remaining capital to finance the trip. The government eventually sent one rusted out van to the Kirghiz who have no roads. Greg is able to again promise that CAI will build a school in Kirghiz so the old man can return home with some hope. The next day Greg traveled through scenes of destruction (the NGO offices) on his way to determine the fate of his nearby school. The school stood untouched because the village elders had stood in front of it explaining that the school belongs to the village. The rioters departed elsewhere. Greg credits the CAI strategy of making sure the local community takes full pride and ownership of their own schools with saving this school in the riots. The school was not viewed as international by the elders. Again on the NGOs, Greg comments that they insist on dressing in western clothes, drive the latest SUVs complete with nine foot satellite antennas, and generally just scream rich foreigners to the impoverished Afghanis. No wonder they find themselves targets of violence and resentment.

Greg is constantly approached by people wanting schools for their villages. Among those was the desk clerk at the Kabul guest house where Safran and Greg stay when in town. The clerk is a young Pashtun, Wakil Karimi, who grew up in Pakistani refugee camps and speaks several languages including English which is how he got the guest house job. Wakil persists about his school in visit after visit and Safran and Greg get to like him for his intelligence, energy, and persistence. They offer him a job as Afghan project manager and Safran begins Wakil’s boot camp training in Afghan “style“. Wakil’s village is in Taliban country but they visit and decide to let Wakil build his school once they see that the village elders really want it.

Azad Kashmir

Then, in 2005, a massive earthquake devastates much of Pakistani controlled Kashmir. The CAI rushes to the area to see what they can do. Most schools in the area have collapsed and many students have died. The CAI manage to get some tents for temporary schools and start traveling among their tent schools to give aid and pay the teachers. They can’t rebuild schools because people are on the move, farming terraces and drinking water springs have disappeared, the students are afraid to be inside buildings, and their usual stone construction would just collapse in the next earthquake. The CAI scrounged some PVC piping and found itself restoring water supplies so the girls could stop carrying water and return to school. This infuriated some NGOs who had lucrative contracts to restore water but CAI could care less. They just wanted to get their schools functioning again and the NGOs would probably never get the job done.

Greg is always emphasizing the importance of listening. His daughter asked him one day how the earthquake victim children played. Greg thought maybe they didn’t play at all so his young daughter launched a personal effort to round up jump ropes. Mothers joined in and soon he returned to Pakistan carrying hundreds of jump ropes. They were a big success in Kashmir and soon CAI is buying jump ropes locally. Greg starts thinking that while a couple of school have play fields (for soccer), none have a playground with slides, swings, and see-saws. CAI starts adding these to their schools. He relates a story on Bill Moyer’s Journal and in this book about a group of pro Taliban elders who come to see one of CAIs schools. They spend 30 minutes playing on the playground equipment and then started to leave. Greg asked them if they don’t want to see the school. They say no, they already decided they want CAI to build them a school like this one but they insist it must have a playground.

In another instance of listening carefully, Greg finally got one traumatized girl to relate the experience of the earthquake in her tent class. When Greg asked her why so few students had returned to class she said it was because there were no desks and it didn’t seem like a school. The students somehow associated having a desk with the learning and security of school. Greg immediately set villagers to work finding salvageable desks in the school’s rubble and building new ones. The students returned to school, some even without tents sitting under a tree once the desks were available.

Greg returned home to Montana to raise more money but Safran meanwhile uncovered some Chinese engineers in Pakistan who have experience building earthquake resistant structures in Xinjiang Province China. He arranges for the Chinese to design and fabricate three schools in Xinjiang, arranges transport for the materials from Xinjiang, and sets the logistics in place to compete the schools on site in Kashmir in only one month. Lastly, (after already committing CAI to the schools without authorization) he faxes Greg in Montana for the $54k needed for the schools catching Greg by total surprise. Greg takes the schematics for the buildings which are prefabricated from wood and designed to move in a quake to a civil engineering professor in Bozeman. they are to be assembled on a floating concrete pad which can also move in the quake. They are designed to withstand a magnitude 8.2 earthquake. The professor declares the designs sound and Greg gets CAI board approval, as always, to proceed. The schools are ready for occupation in 19 days. Just another typical CAI project.

The following link shows a video with one of these earthquake resistant schools, the Balseri Girls School, Patika, Azad Kashmir, Pakistan in the background.

Greg comments that they encountered very few NGOs in remote Kashmir but the extremists groups including the one that later bombed Mumbai were very effective at reaching the remotest villages and setting up madrasas, extremist Islamic schools often led by illiterate teachers who have memorized a little of the Koran. They feed most effectively on remote and ignorant villagers.

Greg and Safran are terrible at dealing with bureaucracies and are busy building schools throughout the outer regions of Afghanistan without any license or sanction from the central government. They initially tried to register CAI as a NGO with the government but quickly gave up. One official contradictorily claimed 1) there are already hundreds of schools in the Wakhan (there were none); 2) the Corridor is actually a part of China (never); and 3) no one lives in the Wakhan (there are three distinct ethnic groups in the Corridor, each with several thousand members).

Wakil took upon himself the task of getting CAI an NGO license. He spent a full month in the process, finally yelling and shaming the bureaucrats into stamping his final document. Unstated but implied is the refusal of CAI ever to pay a bribe to a government official even when it is clear all other NGOs have paid bribes to get their paperwork approved. CAI stretches their dollars and can construct a typical school and fund it for five years for about $40k. In this context, the cost of even a modest bribe would be intolerable to them.

Greg knows that some of the elders that support his schools make much of their income from poppies and the drug trade. He acknowledges that there are few other opportunities to make money in Afghanistan and praises those that give most of the proceeds back to the people in the form of low cost loans, seed, and other assistance. He regrets the some Afghanis become opium addicts, the cost of which further impoverishes them.

Greg discusses his strange relationship with the US military. He was initially opposed to the US military actions in Afghanistan while welcoming the removal of the Taliban from power, allowing CAI to operate to build schools in the country. As he saw it, a single US missile costing $850k could be used instead to build 20 schools which is a far more productive use of resources.

Then the earthquake struck in Kashmir and the US military loaned a number of Chinook helicopters from Afghanistan to transport supplies in and wounded earthquake victims out and Greg came to see the now popular crews in a new humanitarian light. The crews themselves, after Iraq and Afghanistan also came to see themselves in this new popular humanitarian light and liked it.

The other strange thing that happened was that military wives came across the Parade magazine article about the CAI and started reading “Three Cups of Tea” and discussing the book at their women’s clubs. Their enthusiasm spilled over and soon their husbands, serving or having served in Afghanistan started reading the book, particularly, counter insurgence soldiers. Pretty soon, “Three Cups of Tea” was required reading in counter insurgence academies. Greg discovered all this when forward base commander Christopher Kolenda asked if CAI could build a school near his base in Kunar Province. Kunar Province certainly fits the description of an “end place” but it is also Taliban country. Nevertheless, Wakil and Safran visit Kolenda then sat down with the village elders and decided to build the school.

Soldier Invites CAI to build school in Kunar Province

Thus began a major effort by CAI to build schools across the heart of Taliban country including Kunar Province and Nangarhar Province, the location of several Al Qaeda camps that includes the now famous Tora Bora caves where Bin Laden was thought to have hidden before slipping across the border into Pakistan. For one particularly vulnerable school they convinced a respected local Mullah to be headmaster. When warnings started appearing on the school, the Mullah went directly to Taliban leaders and convinced them to leave the school alone. They did. While CAI has had a little violence and threats at their schools, none have been damaged or closed unlike many other new schools that have been closed, students and teachers killed, and girls attacked with acid. Greg attributes the difference to the strong support the schools have had from the local elders and leaders. Even though CAIs schools are secular, they receive strong support from the local Mullahs.

CAI has by now received widespread recognition. Great Britain’s Prince Charles and his wife, Camilla, visited one of the Kashmir earthquake resistant schools; Greg became the recipient of the Star of Pakistan the highest civilian award in Pakistan; Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, opened one of the Panjshir Valley schools; and Gen. David Petraeus and Gen. Stanley McCrystal are both Mortenson fans.

Admiral Mullen with Mortenson

Greg quotes Mike Mullen to show how far the military has come:

The Muslim community is a subtle world we don’t fully – and don’t always – attempt to understand. Only through a shared appreciation of the people’s culture, needs, and hopes for the future can we hope to supplant the extremist narrative. We cannot capture hearts and minds. We must engage them; we must listen to them, one heart, and one mind at a time.

Quite a contrast to the usual nightly news Neanderthal general spouting nonsense about getting the bad guys like he’s playing some kind of video game, which incidentally, is how young military minds are recruited these days – through video games.

Kirghiz porting their school

In late 2009 the nomadic Kirghiz finally got their school built on the very roof of the world at 12,500 feet. The logistics of getting materials and workers to the site required some miracle planning and an approach from three sides. Money and lighter materials like the door and window frames traveled across the Wakhan Corridor to the end of road where they were loaded onto Yaks for the three day journey to the site. Trained masons hiked over the mountain passes from the Charpurson Valley in Pakistan. A truck laden with cement, roof beams and other heavy construction material drove across Tajikistan to an old Soviet tank trail leading south toward a lake in Kirghiz. To get permission for the truck to cross Tajikistan, border commander Wohid Khan agreed to personally accompany the truck. From the lake, more Yaks and men transported the heavy materials the final 15 miles to the building site. Greg considers this his last best school even though illness has prevented him from seeing it. In fact fate has twice prevented Greg from entering Kirghiz. But after 10 long years, he has finally kept his promise.

For those wanting a good introduction of this region this book is one of the best. Greg furnishes a series of maps but it is hard to grasp the impact of all those massive mountain ranges. For a while Safran shuttled overland between Kashmir and the Wakhan Corridor to supervise his various building projects. Although the bird flight distance is only 200 miles. Safran needed to cross three different mountain ranges. For two he could drive CAIs 28 year old Land Cruiser across but for the third, into the Wakhan, he used his horse. His first horse died of exhaustion in 2006 and he acquired a new horse which is pictured in the book (They mistakenly identify the horse in the picture as the one who died, probably in the rush to publish. There are a few nonsense sentences in the book as well.). The most startling of the maps shows the ethnic distribution of the area (Pakistan and Afghanistan). There are 18 distinct ethnic groups shown here, one of which is “other” which implies there are even more groups. With the mountains and the ethnic diversity no wonder everyone is confused.

For an account of how the boundaries defining the various countries, including Afghanistan and Pakistan came to be and why Kashmir ended up in India (none of which has very much to do with ethnic boundaries) read the untold story of India’s Partition the tragedy that set off the chain of events leading to our current state. The “Great Game” between Russia and England, which contributed to the partition and boundaries predates the Cold War by a hundred years.

For a recent history of Afghanistan, the Soviet occupation, the CIA (Charlie Wilson’s War) and Pakistani intelligence backing of the Afghan mujahedin, followed by the abandonment of Afghanistan after the Soviet pullout giving rise to the Taliban read Steve Coll’s Ghost Wars.

I first discovered the Scotsman Rory Stewart on the Bill Moyer’s Journal. Rory Stewart is now director of the Carr Center for Human Rights Policy at the Harvard Kennedy School of Government. Lynn Sherr introduced Stewart as advisor to both Secretary of State Hillary Clinton and U.S. Special Envoy Richard Holbrooke. The following is a small part of the transcript:

LYNN SHERR: What do you tell them?

RORY STEWART: Again, my message is: focus on what we can do. We don’t have a moral obligation to do what we can’t. People can get very fixed by saying, “But surely you’re not saying we ought to do nothing? Surely you’re not saying we ought to allow the Taliban to do this or that?” And I just keep saying “ought” implies “can”– you don’t have a moral obligation to do what you can’t do.

LYNN SHERR: How is your advice taken?

RORY STEWART: I think what I see at the moment is that people are polite, because they imagine maybe I have some experience with Afghanistan. But I’m one of a broad community of people — we have nine people working in my center at Harvard who’ve worked there for 20 or 30 years and the problem we all have is that if the Administration has for some reason already decided that they’re going to increase troops, they’re going to do a counterinsurgency campaign, it’s very difficult for them to take on board people coming back and saying, “Look, actually, I don’t think this is going to work. It’s a great idea. I can see why you want to do it. But by trying to do the impossible, you may end up doing nothing. I’d like to present an alternative strategy, which is lighter, more intelligent, and may end up actually achieving something.”

LYNN SHERR: And again, their reaction? They listen politely, you say?

RORY STEWART: They listen politely, but in the end, of course, basically the policy decision is made. What they would like is little advice on some small bit. I mean, the analogy that one of my colleagues used recently is this: it’s as though they come to you and they say, “We’re planning to drive our car off a cliff. Do we wear a seatbelt or not?” And we say, “Don’t drive your car off the cliff.” And they say, “No, no, no. That decision’s already made. The question is should we wear our seatbelts?” And you say, “Why by all means wear a seatbelt.” And they say, “Okay, we consulted with policy expert, Rory Stewart,” et cetera.

So much for being an expert today.

Rory Stewart’s biography sounds like fiction. Born in Hong Kong in 1973, he was educated at Eton and Oxford. He was tutor to Prince Harry and Prince William. In the 90′s he joined the Secret Intelligence Service and served in the embassy in Jakarta dealing with East Timor. He was next appointed British representative to Montenegro dealing with Kosovo.

Rory Stewart in Afghan garb with Mastiff Babur

This book recounts a small part of an amazing walking journey historian Rory Undertook over 20 months to recreate the 1514 journey of Babur (descendant of Timur and Genghis Khan) from Samarkand, Uzbekistan to Kabul which he conquered. By 1527 Babur had conquered all of Northern India establishing the Mogul dynasty with Agra his capital.

Rory spent 16 months walking from Iran to Nepal. The government of Iran took his visa away and he was refused entry to Afghanistan by the Taliban so he resumed his journey in Pakistan, crossing to Katmandu where, in December 2001, he heard that the Taliban had fallen, so he returned to Herat to pick up his journey from Herat to Kabul. Babur had made his journey through the mountains in the dead of winter and Rory seemed to find the prospect of doing the same thing in 2002 appealing. U.N. workers called him “a nutter” for his walk which he took as a complement.

This book recounts the kind of travel that is far more common in Europe than in America. Herman Hesse in Narcissus and Goldmund describes a young man wandering around medieval Germany indicating that this coming of age European “Walkabout” has been a tradition for a long time. Overland trips from Europe to India and Nepal by motorcycle, van, and bus were common in the 1960s and 1970s but with the Iranian Revolution and Soviet Invasion of Afghanistan in 1979 such journeys died down. A recent German biopic, Eight Miles High, of Uschi Obermaier features a three year trip with boyfriend adventurer Dieter Bockhorn by customize bus from Germany to India in 1973. Their adventure lasted three years and was highlighted by their wedding, complete with elephants, in India. God seems to protect the young and naive which is why most young travelers, despite taking crazy risks, seem to come through relatively unscarred by the experience.

As if walking through the mountains alone in the dead of winter were not enough challenge, Rory somehow acquires a dog, a half wild, uncared for 140 pound mastiff of indeterminate age that he names Babur. So not only does he have to beg for food and shelter in each village for himself, he must find food and shelter for his huge dog in a culture where dogs are considered unclean. A boy who is in training to become a mullah informs Rory that the Koran declares dogs to be unclean. When Rory asks to see the passage, the boy says he doesn’t know where it is. “But haven’t you memorized the entire Koran in your studies? Yes, but it is written in Arabic and I don’t understand Arabic.” Like Roman Catholics who loved the Latin mass they cannot understand, this boy has memorized the entire Koran without understanding anything in it. In many villages he has to fight off with his walking stick packs of dogs sent by children to harass him and his dog.

The journey itself is pretty bleak. Rory walks in sub zero temperatures, through blizzards with zero viability, fighting to forge a path through waist deep snow, and trying to break through thick ice to reach drinking water. Through the first half of his trek, he follows the Hari Rud river, climbing to its source. In Herat, Rory collects a series of letters of introduction which he hopes will result in offers of hospitality along his route. This plan is quickly dashed as a village headman demands the letters (for his own use) and Rory discovers that the local head men are mostly illiterate so cannot write much less read such letters. He falls back on an oral tradition where he recounts the list of men who have recently offered him hospitality and memorizes the names of important men he is likely to meet at the next villages. To make life more miserable Rory suffers from constant dysentery and headaches. He tries to document his travels by writing in his journal, sketching people he meets (some are reproduced in the book) and taking very dark black and white film photographs in which the features of people pictured can hardly be made out.

From Herat he is accompanied by two security soldiers who are ordered to walk with him halfway to Kabul. Both are wearing American camouflage overalls and ill fitting boots which damage their feet. The leader is a congenital liar who introduces Rory as an Ukrainian (Soviet), American Spy, U.N. high official with millions to disperse to the local authorities. After the two start suffering from dysentery and foot sores, Rory is finally able to bribe them to leave him and they return to Herat. With the occasional local guide as part of local hospitality, Rory completes his walk largely on his own.

Minaret at Jam

Rory comes to the ancient city of Jam, destroyed by Genghis Khan. A lone minaret remains of what was once a major trading center. In the 1970s professional archeologists were busy excavating the historic city but the Soviet invasion forced them to leave and they have never returned. Rory encounters hundreds of local villagers randomly digging throughout the ruins looking for any artifacts which they will be able to sell to collectors for $1 or $2 dollars.

Rory’s route took through all four major ethnic groups making up Afghanistan. The Pashtun posed the biggest threat to Rory’s trek. When he asks village elders who they want to lead a new Afghanistan they invariably start by naming their local strongman. When Rory persists, they all mention Ahmed Shah Massoud the Tajiks fighter assassinated by al Qaeda. When he asks their opinion of Hamid Karzai, the most remote villagers immediately respond that Karzai is America’s puppet.

Stewart encounters more U.N. and other aid workers and writes one the best accounts of this new breed that I have seen anywhere (as a footnote):

Critics have accused this new breed of administrators as neocolonialism. But in fact their approach is not that of a nineteenth century colonial officer. Colonial administration may have been racist and exploitative, but they did, at least work seriously at the business of understanding the people they were governing. They recruited people prepared to spend their entire careers in dangerous provinces of a single alien nation.They invested in teaching administrators and military officers the local language. They established effective departments of state, trained a local elite, and continued the countless academic studies of their subjects through institutes and museums, royal geographic societies, and royal botanical gardens. They balanced the local budget and generated fiscal revenue because if they didn’t their home government would rarely bail them out. If they failed to govern fairly, the population would mutiny.

Post-conflict experts have got the prestige without the effort or stigma of imperialism. Their implicit denial of the difference between cultures is the new brand of international intervention. Their policy fails but no one notices. There are not credible monitoring bodies and there is no one to take formal responsibility. Individual officers are never in any one place and rarely in any one organization long enough to be adequately assessed. The colonial enterprise could be judged by the security or revenue it delivered, but neocolonialists have no such performance criteria. In fact their very uselessness benefits them. By avoiding any serious action or judgment they, unlike their colonial predecessors, are able to escape accusations of racism, exploitation, or oppression.

Perhaps it is because no one requires more than a charming illusion of action in the developing world. If the policy makers know little about the Afghans, the public knows even less, and few care about policy failure when the effects are felt only in Afghanistan… A year before they had been in Kosovo or East Timor and a year later they would be in Iraq or offices in New York and Washington.

Murad Khane District of Kabul

A year after his Afghan trek, Rory Stewart was appointed Coalition (civilian) Deputy Governor of Maysan and Senior Adviser in Dhi Qar, two provinces in southern Iraq. From this experience he penned his second book The Prince of the Marshes: And Other Occupational Hazards of a Year in Iraq. For this he was made an Officer of the Order of the British Empire at age 31. In 2005, he founded an NGO, the Turquoise Mountain Foundation and spends much of his time in Afghanistan. Chalk one up for the neocolonialists.

James Galbraith’s father John Kenneth Galbraith (The New Industrial State 1967), in 2006 from his deathbed, suggested that James write this book. It was published in the spring of 2008 before the total meltdown of the financial system threw the economy into a downward spiral whose bottom we have yet to see.

The Keynsian Johns

Both Galbraiths are Keynesian economists, those forgotten guys. The basic tenet of Keynesian economics is that only aggressive government policy can stabilize the economy which is otherwise subject to massive swings, creating enormous problems such as run away inflation, failing financial institutions, failing corporations, and massive unemployment. But, hey, today everyone in Washington is a Keynesian, right? After forty years of Chicago school dominance, Keynes is back.

James Galbraith outlines a history of the world economy starting with the Bretton Wood Conventions following WWII which established the U.S. economy and the gold backed dollar as the standard on which all foreign currencies would be based. The breakdown of this system, started when Nixon went off the gold standard and allowed the dollar to float, provides the backdrop to a consideration of the major economic theories of the conservatives advanced to fill the void left by the abandonment of Bretton Wood; monetarism, supply side economics (with trickle down), balanced budgets, and free trade. Even the Democrats became advocates of balanced budgets and free trade.

One by one Galbraith exposes these theories to be false with no empirical evidence. Unlike Kline’s Shock Doctrine, which portrays Milton Friedman and his colleges as co conspirators in a massive transfer of wealth, Galbraith, who remains friends with some conservative economists, views them as benignly misdirected, living in their ivory towers where they consistently ignore the facts.

While the Presidents from Reagan through Clinton felt the need to incorporate conservative economists into their administrations to give a veneer of academic respectability, George W Bush felt no such need and simply appointed cronies who poured the public coffers directly into the pockets of lobbying client firms without any resort to economic theoretic justification.

Today there is open discussion of the role of Alan Greenspan in the current crisis. There is no corresponding discussion or remembrance of the role of his predecessor, Paul Volcker, who held interest rates at rates as high as 20%, ruining the economies in much of Africa, Asia, and Latin America who had borrowed heavily from the Chicago school dominated IMF who insisted on shock therapy changes as a condition of their loans. Unsurprisingly the struggling countries were unable to pay off the loans at the new extortionary levels. This led to a collapsed overseas markets for American products and to greatly strengthening the dollar, permanently weakening steel and auto production in the US as it was unable to compete with cheaper products from Germany and Japan. Galbraith points out that inflation is another thing economists are unable to understand or control. It seems to appear and disappear out of nowhere.

Galbraith attributes the fall of the Soviet Union largely to their inability of pay off their massive loans in an environment of super high interest. The rise of China and India as an economic powers was made possible precisely because they did not borrow heavily from the IMF or adopt shock therapy.

What actually ended inflation in 1984 was the incoming flood of foreign investments looking for high returns from the interest rates and the stability of the American government. It had nothing to do with monetarism, the supposed justification for the extortionary interest rates. Yet, worryingly, this same Volcker has been named to the new Obama economic team, presumably because of his “expertise” in fighting inflation. Lord, save us from the experts.

One concept, that of the free economy, Galbraith points out is without any meaning at all except perhaps to very large multinational corporations, yet all politicians who hope to be successful must pay lip service to it just as they must attend church even though they may be atheists. In the real world, free markets are so rare, they are almost non existent.

Galbraith points out when the Japanese real estate and financial bubble burst throwing that country into a decade long stagnation:

This dimmed the luster of the Japanese model for American observers, even as they largely overlooked the obvious point: there is evidently no development path that an unfettered, liberated, free capital asset market cannot screw up.

On the relationship between full employment (deemed by conservative economists to be inflationary and therefore bad) and wage inequality, Galbraith demonstrates, as do all Keynesians, that full employment, such as is enjoyed in Denmark, actually leads to greater wage equality, not less, and there is no evidence that full employment is inflationary.

Getting into the book’s central theme, he then makes some original observations along the lines of the Black Swan phenomenon. The big dominant corporations such as ATT and IBM lost their technological leadership to small startup entrepreneurs who were funded by new venture capital and equity raising wall street firms. The founders of these firms in Silicon Valley, Seattle, Boston, and other technology hubs overnight became extremely wealthy together with their supporting financial institutions.

Traditional companies became dependent on technology from outside rather than developing it internally and the CEOs of these traditional companies became extremely envious of the great wealth of these new technology usurpers. The CEOs formed closed groups, gained control of boards of directors, and demanded and received compensation and bonuses to close the gap with their entrepreneurial counterparts at levels unsustainable by the companies they ran. In a word, these CEOs became predators, preying on the companies they supposedly were leading (down the drain).

Unmanned Predator RQ-1

This group did not come from within their companies but were outsiders with little technical knowledge of the company. Their primary justification for their compensation was that they had been CEO of other firms where they were paid outrageously. As a new and small elite, they became predators, feeding off and destroying stockholder value and even whole companies as they competed with other CEOs to maximize their own compensation. They measured their own success and worth, not by the success of the companies they were failing to lead, but by their accumulation of personal wealth. Where did this loot go? Not into the productive economy, but into private mansions and conspicuous consumption.

Galbraith attributes the decline of the modern American industrial system studied by his father to:

These four phenomenon — the rise of trade, the reassertion of financial power (wall street and venture capital), the outsourcing of technological development, and the ascendancy of an oligarchy in the executive class — … had dramatic effects on American industrial corporations, on the way they are run, and on their broadly declining position in the world.

On the need for and desirability of regulation:

…Regulation helps the competitive position of relatively advanced businesses, by reducing or even eliminating the competition from backward enterprises that offset higher production posts with less safe factories and products and will lower wage bills.

Unfortunately for America the advanced “better” businesses of today are often offshore like the Japanese automakers.

Galbraith considers the rise of predator executives not to be a part of the normal process of growing wealth disparity, but a separate and more pernicious phenomenon. Not satisfied to raid and bankrupt their firms, this group set out to control and dominate the government and its apparatus as well. They are not normal conservatives, desiring a smaller government; they want a strong government, led by an imperial executive branch, in position turn a blind eye to regulation, to privatize as many government functions as possible with extortionary contracts, but also to be ready to bail them out when their destructive practices bankrupt their companies. By controlling government, they can minimize governments regulatory oversight that may interfere with their predatory practices while assuring that the government is ready with contracts and bailouts when needed. Hence the phenomena of Cheney turning the executive, and Newt Gingrich, Tom Delay, and Jack Abramoff turning the congress into the arms of the new predator state.

Predator State

…it is fair to say that the very concept of a public purpose is alien to, and denied by the leaders and operatives of this coalition.

Modern corporate decision-making structures exist … to permit senior executives to do what they want… This is the culture that Richard Cheney brought back into government… The operational result is a government by cliques operating in secret, indeed with their very membership unknown outside…We have instead (of checks and balances) a government public relations apparatus whose purpose is not to persuade but to deflect, deter, and frustrate inquiry into the operation of the government…It fills the courts with functionaries who are prepared to act as enablers for the executive branch.

But if the government is predatory, then it too will fail in every substantial way (just like the corporations). Government will not cope with global warming, or with Hurricane Katrina, or the occupation of Iraq, or Election Day chaos, or avian influenza, or nuclear weapons…Failure on that scale is not due to incompetence. It is intended. Inside government no one cares. The attention of the people in charge is focused on other goals (acquiring massive personal wealth).

So, can the predator state be turned around under an Obama Presidency to tackle current problems like global warming, broken health care, a financial meltdown taking more and more companies with it? Galbraith hopes so but recognizes how broken government is, how far down the predator path we have gone.

Galbraith ends with discussions of the need for reestablished regulation and the re institution of utilities where free markets do not exist (like California and Texas electric power), the need for massive new levels of government planning and investment to rebuild infrastructure, provide public services like education and health care, and to tackle really tough problems like CO2 emissions and global warming. He pleads for the reestablishment of standards for safety, working conditions, minimum and maximum income and the environment. We also clearly need new standards for financial markets and energy and global trade. Galbraith remains confident that America will be able to pay for all these reforms and recover its global leadership position as an innovative, moral, economic power.

This book is a compact 200 pages. It would have been helpful to provide more detail and facts to debunk the conservative’s economic theories, but maybe Galbraith thought too much detail would discourage readers.

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.

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

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?).

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.

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.