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FDR, Jean Edward Smith, 2007

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

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

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

FDR Sara and ER

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

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

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

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

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

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

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

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

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

Hitler Invades Poland

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

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

Attack on Pearl Harbor

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

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

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

FDR with Lucy Mercer FDR Missy LeHand ER

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

Three Graces Val-Kill

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

FDR and Earl Miller

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

The Shock Doctrine, Naomi Klein, 2007

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

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

Sukarno overthrown by Suharto

Augusto Pinochet

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

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

Milton Friedman with Reagan

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

Whistle Blower Davison Budhoo

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

Deng’s New China

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

Yeltsin with Clinton

On Yeltsin and the remaking of the Russian economy:

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

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

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

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

Nature Helps the Neocons

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

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

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

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

Rumsfeld and Cheney Enjoy New Wealth

As proto-disaster capitalists, the architects of the War on Terror are part of a different breed from their predecessors(like Allan and John Foster Dulles in the 50s), one for whom wars and other disasters are indeed ends in themselves. When Dick Cheney and Donald Rumsfeld conflate what is good for Lockheed, Halliburton, Carlyle and Gilead with what is good for the United States and indeed the world, it is a form of projection with uniquely dangerous consequences. That’s because what is unquestionably good for the bottom line of these companies is cataclysm – wars, epidemics, natural disasters and resource shortages – which is why all their fortunes have improved dramatically since Bush took office. What makes their acts of projection even more perilous is the fact that, to an unprecedented degree, key Bush officials have maintained their interests in the disaster capitalism complex even as they have ushered in a new era of privatized war and disaster response, allowing them to simultaneously profit from the disasters they help unleash.

The right to limitless profit-seeking has always been at the center of neocon ideology. Before 9/11, demands for radical privatization and attacks on social spending fueled the neocon movement – Friedmanite to its core – at think tanks such as the American Enterprise Institute, Heritage, and Cato.
With the War on Terror, the neocons didn’t abandon their corporatist economic goals; they found a new, even more effective way to achieve them.

Iraq’s current state of disaster cannot be reduced either to the incompetence and cronyism of the Bush White House or to the sectarianism or tribalism of Iraqis. It is a very capitalist disaster, a nightmare of unfettered greed unleashed in the wake of war. The “fiasco” of Iraq is one created by a careful and faithful application of unrestrained Chicago School ideology.

The Chicago School crusade, which emerged with the core purpose of dismantling the welfare statism of the New Deal, had finally reached its zenith in the corporate New Deal. It was a simpler, more stripped-down form of privatization – the transfer of bulky assets wasn’t even necessary: just straight-up corporate gorging on state coffers. No investment, no accountability, astronomical profits.

Paul Bremmer Remakes Iraq

Iraq under Bremmer was the logical conclusion of Chicago School theory: a public sector reduced to a minimal number of employees, mostly contract workers, living in a Halliburton city state, tasked with signing corporate friendly laws drafted by KPMG and handling out duffel bags of cash to Western contractors protected by mercenary soldiers, themselves shielded by full legal immunity.

Seen from this perspective the documentary film No End In Sight by Charles Ferguson containing interviews with the bewildered participants of the Iraqi occupation including Retired Gen. Garner who can’t understand why the policy decisions were made now make sense, if only to the neocon true believers who made them – total destruction of a country so it can be rebuilt from a clean slate.

For the Bush administration, it was a natural evolution: after claiming it had a right to cause unlimited preemptive destruction, it then pioneered preemptive reconstruction – rebuilding places that have not yet been destroyed…
Until Iraq, the frontiers of the Chicago crusade had been bound by geography: Russia, Argentina, South Korea. Now a new frontier can open up wherever the next disaster strikes.

The oil and gas industry is so intimately entwined with the economy of disaster – both as root cause behind many disasters and as a beneficiary from them – that it deserves to be treated as an honorary adjunct of the disaster capitalism complex.

This discarding of 25 to 60 percent of the population has been the hallmark of the Chicago School crusade since the “misery villages” began mushrooming throughout the Southern Cone (South America) in the seventies. In South Africa, Russia, and New Orleans the rich build walls around themselves. Israel has taken this disposal process a step further: it has built walls around the dangerous poor.

Kline ends on a higher note. The “third way” of Chile’s Allende is reemerging throughout Latin America. The IMF and World Bank are in sharp decline with only a fraction of their peak loans and struggling to survive. Lebanese poor, Thai fishing villagers, and New Orleans neighborhoods are learning to take control of their own reconstruction and recovery. Chinese protests and demonstrations are forcing improved rural health care and education.

For a short film inspired by the book see Alfonso Cuaron’s Shock Doctrine

Ghost Wars, the Secret History of the CIA, Afghanistan, and Bin Laden, From the Soviet Invasion to September 10, 2001, Steve Coll, 2007

Lengthy but meticulous study focusing on the CIA role in Afghanistan, this book is a long delineation of little known detail with a minimum of interpretive conclusion: “Just the facts, ma’am.” Treatment is quite sterile and it is easy to imagine the equally sterile environment and personalities of American policy makers in air conditioned offices in Washington trying to formulate a policy toward a place about which they don’t care, don’t know, and have given almost no thought.

Ronald Reagan and William Casey

When the Soviet Union invaded Afghanistan to shore up their communist client government from mujahedin insurgents, Reagan officials saw a golden opportunity to kill Russians by funneling money and arms to the insurgents. After winning Reagan the Republican nomination assuring himself of any cabinet post he wanted, William Casey, who ran spies inside Germany in the closing days of WWII for the OSS, chose to become Director of the CIA. The militant Jesuit trained Casey liked the idea of militant Isamic jihadist fighting the Soviets in Afghanistan.

He found a close ally in Prince Turki al-Faisal, son of king Faisal, the Georgetown Jesuit educated Saudi head of intelligence the GID. Together they funneled as much as $500,000 a year to the mujahedin. To maintain plausible deniability, (although everyone knew) the money and arms were fed largely through the Pakistan intelligence network, the ISI, giving them enormous power and influence inside Pakistan and out. Compared to the billions Afghanistan was costing the Soviets, the CIA and GID programs seemed an efficient bargain at the time. Afghanistan became the most costly covert effect ever for the CIA.

Ahmed Shah Massoud

The ISI, operating largely independently of Pakistan political and military control was dominated by Pashtun Pashto speaking personnel. They made sure the lions share of money and arms went to loyal Pashtun mujahedin, largely to Hekmatyar. Uzbeks, Tajiks, Turkmen and other Shia minority mujahedin received relatively little support until the CIA started dealing directly with these minority leaders like Ahmed Shah Massoud, who dominated the Panjshir Valley and was in the position to cut off the all important Salang highway, the central supply route from the Soviet Union.

A side effect of all this largess was the establishment of training camps for jihadists from Algeria and Morrocco all the way to Indonesia and the Phillipines including a heavy weighting of Arabs. An entire generation of holy warriors was prepared to return to their home countries to fight for the establishment of Ismamic states. The CIA was indifferent to this and only one American, the multilingual Edmund McWilliams voiced any concern over the long term implications of this radical training and indoctrination. At least one school near Peshawar, the epicenter of this training activity was funded and headed by Osama bin Laden. bin Laden was an unfavored son of a powerful family involved in construction for the Saudi royal family. While his half brothers attended school abroad, Osama attended a radical Islamic school at home. After school, in 1981 Osama went to Pakistan to join the jihad. The authors found evidence of only one skirmish between bin Laden’s funded group and the Communists in which a few followers were killed and bin Laden may have been shot in the foot. This small skirmish seemed to have ignited bin Laden into the megalomaniac he became.

At the time of the Soviet withdrawal from Afghanistan there were 33,000 madrassas teaching fundamental Islamic faith and jihad in Pakistan. For an account of a lone American building secular schools in Pakistan see

Firing Stinger Missile

The Soviet Union had spent $48 billion and the US, China, and Saudis spent $12 billion. Afghanistan was in ruins. Afghanistan had more personal weapons than India and Pakistan combined. Anti tank rocket launchers were everywhere, and of 2500 Stinger anti aircraft heat seeking missiles shipped into Afghanistan, over 600 were unaccounted for. The CIA abandoned all efforts in Afghanistan except to attempt to buy back Stinger missiles at $150,000 each to keep them out of Iranian hands. despite CIA efforts, at the time of the Taliban takeover an estimated 100 Stingers were in Iran and the Taliban had 50 or 60 which they refused to give up.

Much of the $12 billion from the US and Saudis had been funneled through the Pakistani ISI. The US cut off most of its other aid and imposed sanctions on Pakistan to try to stop the development of atomic weapons. Pakistan went ahead and tested their first nuclear bomb in 1998. The influence of the US was at a very low point during this period.

After the Soviet departure, Afghanistan descended into a guagmire. The stalemate with the Najibullah communist government was broken when Uzbek communist commander Aburrashid Dostum defected to Massoud’s Supreme Council. Kabul fell to Dostum and Massoud but Pashtun rival Hekmatyar took a portion of Kabul and the two groups proceeded to destroy much of the city and kill thousands of civilians.

When Iraq invaded Kuwait in 1991 and the US joined Saudi Arabia to expel them, extremist jihadists throughout the world including bin Laden and Hekmatyar denounced the Saudi royal family for inviting an infidel army into the holy land of Saudi Arabia. Surprised, the GID and Turki started funneling even more money to the extremist groups in a effort to neutralize their anti Saudi sentiments. As one GID official put it, “we don’t do operations, we write checks.” One result of the controversy over Kuwait was the Saudi falling out with Osama bin Laden. Bin Laden proposed to the royal family a plan to send 60,000 of his own private fighters to drive Iraq out of Kuwait. When he continued to criticize Saudi policy, he was expelled from Saudi Arabia and later lost his citizenship. He fled to Sudan which was the new safe haven for jidahists after Pakistan.

Mullah Omar

This new stalemate in Afghanistan continued until Durrani Pashtun English speaking Hamid Karzai, living in exile in Pakistan, threw his support behind the Taliban, a disciplined, principled, effective fighting group of radical, rural, Islamic fundamentalists. The ISI and GID started funneling support and weapons to the Taliban who quickly gained control of Kandahar and Herat in the west.

The reentry of the US and CIA was engineered by (what else) oil and gas, this time from Turkmenistan with Houston based Unocal proposing a pipeline from Turkmenistan across Afghanistan to Pakistan. This crazy idea which even Kissinger called “the triumph of hope over experience” attracted Clinton White House interest. Unocal got an agreement with Turkmenistan but the Benazir Bhutto government preferred an alternative proposal from Bridas of Argentina. The CIA was convinced Bridas had bribed Benazir Bhutto’s notoriously corrupt husband Zardari. Bridas may also have funneled as much as $1 million to Massoud to gain his approval for their pipeline proposal in north Afghanistan. Unocal approached the Taliban.

The US and Saudi Arabia warned Sudan that harboring terrorists would be bad for them. The Sudanese asked Turki of GID if the Saudis would take back bin Laden but they were unwilling. It is still unclear if Sudan offered to give bin Laden to US authorities. In any event, Sudan expelled bin Laden who moved to Jalalabad in Afghanistan. When the Taliban took Jalalabad bin Laden offered $3 million to the Taliban to bribe mujahedin commanders. Defections mounted and the Taliban took Kabul forcing Massoud to retreat to his Panjshir Valley in the north. Bin Laden moved to Kandahar. When the Taliban took Kabul, former communist president Najibullah was completing his translation of the British era history The Great Game into Pashto saying “Afghans keep making the same mistake.” The Taliban executed him. For an account that blames the partition of India to create Pakistan and drew the Afghan border on the British Great Game see

GID’s Turki flew to Kandahar to meet personally with Mullah Omar to try to convince the Taliban to deliver an increasingly Saudi embarrassing bin Laden to the Saudis. Omar seemed to agree but then nothing happened.

Unocal opened a permanent office in Kandahar right across the street from bin Laden’s compound. Unocal built a facility to train Afghani workers to build the pipeline right next to a bin Laden training facility. The CIA which by now had a dedicated bin Laden group never talked to Unocal officials or asked them for help watching bin Laden. Instead, CIA covert operations trained a group of Afghani fighters to try to intercept and capture bin Laden. This group may have ambushed a bin Laden convoy but failed to capture him. The CIA next planned an elaborate scheme to storm bin Laden’s Tarnak farm but the plan was never approved by George Tenet and the Clinton administration.

Where earlier American policy toward Afghanistan was motivated solely by the attempt to kill Soviets, now the policy was motivated solely by attempt to get or kill bin Laden. Nothing else mattered to policy makers. The special group at the CIA assigned to deal exclusively with bin Laden were nicknamed the Manson Family for their rabid maniacal obsession.

Then bin Laden blew up two US embassies in Africa. The administration which was unwilling to endanger civilians in the Tarnak farm plan were suddenly willing to send missiles into Afghanistan to kill who knew who. Relying on typical bad CIA intelligence, Clinton authorized two missile strikes, one on a near empty training camp in Zawhar Kili and one on a pharmaceutical plant in Khartoum, Sudan. The CIA had wanted to hit more targets. Critics called the strikes Clinton’s Wag the Dog strategy to divert attention away from his sex scandal and impeachment. A covert ground operation suddenly looked more attractive. Despite several opportunities including bin Laden’s presence in an isolated hunting camp for a week, the administration never authorized another strike. When CIA bad intelligence caused the US to blow up the Chinese embassy in Belgrade by mistake in 1999, Tenet and Clinton never authorized another serious attempt on bin Laden.

Throughout the Taliban and bin Laden Afghanistan era, the US continued to rely on Pakistan and Saudi intelligence even though both countries were actively supporting the Taliban and bin Laden was actively training Arab fighters that Pakistan could deploy in Kashmir in their conflict with India. Moussoud, who fought al Qaeda troops regularly and once trapped bin Laden behind his lines, never received serious US arms and support. Moussoud had to rely on Iranian and Russian support to stay in action. Moussoud was assassinated by jihadists on the eve of the September 11 attacks.

A new deal on the oil and gas pipeline was signed on 27 December 2002 by the leaders of Turkmenistan, Afghanistan and Pakistan and in 2005 Asian Development Bank submitted the final version of feasibility study. The pipeline is currently stalled because the Taliban is still operating in areas crossed by the proposed pipeline.

For a complete look at the CIA’s failures see Legacy of Ashes.

For a closer look at the CIA’s efforts in Tibet see the CIA’s Secret War in Tibet.

The Age of Turbulence, Alan Greenspan, 2007

Memoirs of a Naive City Kid
Confessions of a Naked Bad Numbers Ideologue Zealot
Pray with us to the Invisible Hand that Steadies the Economy

Was there something about George Washington High School where Alan Greenspan and Henry Kissinger were classmates that produces ethically challenged citizens with zero empathy?

Enrolled in a PhD program at Columbia in 1950, Greenspan apparently managed to navigate the campus without meeting a single liberal professor. His doctoral adviser Arthur Burns admonished his students “Excess government spending causes inflation.” Greenspan learned econometrics which he treats like a religion from Jacob Wolfowitz, father of Paul, architect of the new Iraq and discredited former president of the World Bank. Not satisfied with his conservative professors in the liberal hotbed that was Columbia see, Greenspan develops a thirty year admiration for Ayn Rand and still calls himself a libertarian Republican. Greenspan was sorry that Soviet hating Rand did not live to see the economic collapse of the Soviet Union. Greeenspans spends many pages gloating over the demise of central planning on her behalf. He particularly enjoyed Putin’s economic adviser wanting to talk to Greenspan about Rand.

On the origins of Greenspan’s notorious Fedspeak, he offers this book inscription written by his father:

May this my initial effort with constant thought of you branch out into an endless chain of similar efforts so that at your maturity you may look back and endeavor to interpret the reasoning behind these logical forecasts and begin a like work of your own.

The skill is obviously inherited. On his honeymoon:

Venice, I realize is the antithesis of creative destruction. It exists to conserve and appreciate a past, not create a future… The city caters to a deep human need for stability and permanence as well as beauty and romance… Silicon Valley is without question an exciting place to work, but its allure as a honeymoon destination has, I would guess, thus far gone largely unrecognized.

Chinese learn creative destruction during .com bust

He spends a lot of time talking about creative destruction as a driving force for economic expansion. It is a little like Blood and Guts Patton’s grunt’s comment; “Yeah, his guts, my blood.” The costs of creative destruction are largely borne by the worker, the little guy who gets crushed in the process. Yet Greenspan is highly skeptical of social safety nets to protect the falling workers. He talks about cultural differences where Germany, France, Italy, and Japan are more sensitive to the plight of the workers. He seems proud that Americans can be so indifferent to suffering in the greater interest of economic expansion.

Greenspan becomes FED Chairman 3 days before Black Monday. Guess he didn’t have time to perfect his Fedspeak yet.

He formed a close working relationship with Clinton’s Bob Rubin and Larry Summers and the Clinton era resulted in record budget surpluses projected to increase indefinitely into the future. By 2006, the national debt would be totally paid off. Greenspan and Bush’s about to be fired treasury secretary Paul O’Neill worried about what to do with the huge surplus. It is strange that someone who can’t figure out what to do with the government surplus strongly recommends private social security accounts where every busy American gets to figure out how to invest his surplus (retirement funds), especially since the retiree won’t be able to borrow his way out of a fiscal mess and will starve if they guess wrong.

Evidence of his incredible political (and social) naivety is given in this summation from the New York Times in 2001 concerning his testimony to Congress:

Just as his hedged backing of Mr. Clinton’s plan provided invaluable political cover… as [the Democrats] voted to increase taxes, his guarded endorsement of a tax cut today gave new impetus to the efforts by Republicans to push thought the biggest tax cut since the Reagan administration.

A monumental failure of econometric measurement and projection was about to occur. Tax Receipts for 2002 shrunk from estimates by $376 billion. Of this only $75 billion could be attributed to Bush tax cuts. Most of the rest was due to blown estimates of revenue from capital gains as stocks went south taking stock options with them. A projected debt to the public of $1.2 trillion under Bush policies, by 2006, turned into a debt of $4.8 trillion. Oops! That’s a 400% projection error! No apologies.

Most of what supported consumer spending through this period was housing. Greenspan lauds the increase in home ownership to 69% in 2006 due to low mortgage interest rates while seemingly overlooking the sub prime variable rate mortgages that from the very beginning were ticking time bombs. So much for an econometrician’s forecasting ability.

Shenzhen Built by FDI

Greenspan spends several chapters gloating over the failures of socialism in Europe and India and the collapse of central planning in the Soviet Union and Eastern Europe. He spends several chapters on China, the Asian Tigers, and India, where economic progress is almost all due to direct foreign direct investment (FDI) which requires special zones and protection of property rights (profits) whereby foreign capital can take advantage of local low wages. Vietnam is the current record holder of highest ratio of FDI to GPD at 61%. India is 6%, Pakistan is 9% China is 14%. The Asian economic miracle is all about foreign capital seeking cheap labor.

His Latin American chapter is largely a lament that populism which led to such reforms as nationalized oil in Mexico in the 30’s and in Venezuela today has had such dire consequences throughout the region. Despite huge disparities in wealth between the few and the many, capitalism should be allowed to play out for the good growth of the economy. He forgot to mention that a rising tide raises all boats (and drowns the vast majority of the population without life rafts). Fedspeak apparently doesn’t allow mantra spouting.

He also talks a lot about a phenomenon known as the Dutch disease whereby any country with a valuable natural resource such as gold, diamonds, or oil has its economy skewed as a result as is economically harmed by the resulting distortions. The affected country’s foreign exchange value of its currency is driven up making other exports less competitive. Even Britain was affected by North Sea oil in this way.

Here are highlights from his more misguided pronouncements and predictions (I’m 81. I was paid $8 million to write this. What do I care.)

On Health Care and Medicare He has clearly not read The Health Care Mess. Based on state studies, it is estimated that 25% of health care costs go directly to HMOs that produce no health care. So 4% of GDP may go directly to an administrative function of no benefit to the health of the nation and even worse that inhibits access to health care. If this is correct, then HMOs consume the same portion of our wealth as our entire military industrial complex, that is, defense. Greenspan, the numbers man with 18 years unique access to detailed actual numbers, should know this but doesn’t talk about it. Instead:
* The cost of health care is being driven up by technology (No supporting evidence.)
*The Boomers will bury the Medicare program. It will need extensive gutting with 100% copays (HMOs pocket the government subsidy and the patient pays everything!)
On Increased Income and Wealth Disparity
* Hope that growing dissatisfaction doesn’t lead to populism and policies that might ruin the economy.
* Import more educated work force from abroad who will be grateful for their pittance pay.
On Energy from Oil He obviously has not read Twilight of Oil
* Oil production will peak in 2050. (Sorry, it has already peaked)
* Speculators control of oil supplies has grown sixfold in the last 2 years. Speculators stabilize supply and prices. (You’re kidding?)
* A stable Iraq will produce large quantities of oil. (Yeah, right!)
* OPEC has 3/4 of the world’s oil reserves led by Saudi Arabia’s 260 billion barrel reserve. (Reserves are mythical.)
* Exploration will find more oil. (The last major finds were made in 1969. Clinton bit on this one.)
* Domestic oil producers should invest in refineries (Why, when oil is running out?)
* We will never ween ourselves of oil. (We will when we run out.)
On Alternate Energy He has obviously not read Oil and Alternatives
* Build more nuclear power plants (Ignore the shortage of nuclear fuel.)
* Wind and solar is good only for small scale deployment. (No evidence.)
* The market is buying fuel efficient cars (Have you visited an SUV infested shopping mall parking lot lately?)
* Hybrids are too quiet. (He recommends adding big engine sound effects.)

Windmill Dike

On Global Warming
* Build dikes. The Dutch have done it for years. (He’s not kidding!)
* Rename Glacier Park
* We will never reduce greenhouse gas emissions. (Live or die by those fossil fuels.)
* Hurricane Katrina disrupted our oil supply.

Enron Award 2001

Greenspan was awarded the Enron Prize in 2001 as the company collapsed. Having served on many board of directors for fortune 500 companies, he is not at all critical of interlocking directors, CEO appointed board members, the insider racket that is modern corporate top management, only of management that can’t make a profit.

On Corporate Governance
* If Corporations make huge profits why shouldn’t CEO’s get huge rewards.
* Sarbanes-Oxley that makes the CEO liable for accounting fraud goes too far.
* Whistle blowers are the best way to expose bad governance. (And ruin the whistle blower)
* The best way to remove bad management is the corporate takeover, probably hostile.

Greenspan is a throwback with his Adam Smith invisible hand and Ayn Rand brand of liberalism. The invisible hand is his crutch for explaining all the things he doesn’t understand and all the monetary policy moves that failed during Paul Volcker’s and Greenspan’s terms as FED chairmen. Volcker tried everything to control inflation and at the end we still had speculators in Miami buying condominiums with 18% mortgages and 12% savings accounts. When inflation and interest finally dropped, the Savings and Loan industry collapsed and Black Monday happened.

When Long-Term Capital Management was collapsing in 1998 Greenspan and the Fed along with Rubin and Summers called on Wall Street giants to rescue the ailing hedge fund monster. When do you sit back and watch the invisible hand at work like the Savings and Loan collapse and when do you step in to intervene in the madness? For evidence that the global economy may be shakier than we think see the Shaky Globe.

Greenspan doesn’t discuss Republican runaway spending and record deficits as playing a role in leveling the market plunge after the dot com bust. Eventually, without any apparent help from monetary or government policy, the invisible hand of the benevolent father reached down to rescue and stabilize the economy. If you can’t believe your numbers and models and your political party abandons your principles, you have to believe something. You can be an idealogue where mere facts don’t matter, or you can be an econometric numbers man. You can’t be both and judging from this book, Greenspan chose to be an idealogue.

Adam smith himself only mentions the invisible hand three times but true believer Greenspan calls on it at least seven times in his book, almost like a prayer.

The modern libertarian looks, not to Adam Smith and Ayn Rand for inspiration but to John Nash and his disciples. The game theorists devised artificial adversarial games that could be analyzed mathematically. They found that the outcomes of their games were maximized when every player acted according to their individual self interest. Game theory was quickly adopted by libertarians and applied to economics. Charles Wilson old “What’s good for General Motors is good for the country.” was transformed by game theory libertarians into “What’s good for a country’s greedy corporate managers is good for the country.” Individual greed benefits everyone. For a frightening look at the effects of metricizing everything and applying the adversarial game theory approach pioneered by John Nash and first applied to economics see The Trap.

Greenspan is someone who made numbers almost a religion. How could he get so many numbers so wrong for so long? And why are so many pronouncements without statistical support? And why aren’t the reviews calling him on his errors and omissions? How could he be so audacious, with his track record, as to predict the future which he does in the final chapter The Delphic Future? This oracle is blind.

Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, Matthew R. Simmons, 2005

Here’s a sleeper only discovered after watching the recent Sundance channel apocalyptic documentary A Crude Awakening: the Oil Crash which heavily featured comments by energy expert Matthew Simmons.

A Crude Awakening makes some startling revelations about alternate energy sources. Hydrogen fuel is 50 years away from solving the problems of production, storage, and distribution. Hydrogen today requires five times the energy to produce that it supplies. If all automobiles in the world were replaced by hybids tomorrow, the oil supply would extend another two years at best. Replacing current electric generation facilities with nuclear power would require the building of 10,000 nuclear generators that would run out of fuel in 10 years, far sooner than oil. Biofuels have the potential to replace only a negligible quantity of oil. The apocalyptic documentary points out that we are now dependent on oil not only for power, transportation, and heat, but for the very food supply needed (chemical fertilizers) to support our exploding population. Ironically, without oil, the crops needed to produce biofuel cannot be grown. Solar energy is virtually the only viable alternative, but solar energy will require massive investments in research to make it viable on a large scale. Today solar energy is half the efficiency of oil but will soon be as efficient to produce. Wind power is also economically viable but not on a large scale.

Without oil we may be reduced to the population and lifestyles that existed at the beginning of the 20th Century. But evolution only goes one way; forward. What will life look like without oil? If global warming doesn’t get us first, we’re about to find out.

A Crude Awakening openly accuses the Bush administrations of starting a very expensive war in Iraq simply to assure access to a continuing supply of Middle East oil. Oil at any cost. Future and continuing oil wars as oil becomes scarce are one of the forecasts of the documentary.

We have now come to understand that Sadam’s weapons cache was a figment of our brilliant intelligence imaginations. To the people who got us into the Iraq war, the important intelligence probably did not concern the mythical weapons at all but concerned the equally mythical 115 billion barrel proven Iraqi oil reserve. Yet the Kirkuk oil field was discovered in 1927 and is now 78 years old, poorly maintained, and damaged repeatedly by sabotage. It is very unlikely there is anything approaching 115 billion barrels of proven reserve oil in Iraq. Evidence from next door Kuwait is that the world’s best technology from Chevron-Texaco has been unable to revive production in old fields.

Matthew R. Simmons is an oil expert and an industry investment insider. His book does not deal with the environmental impact of oil consumption such as global warming see and here. In fact his only mention of environmentalists is to note their impact on U.S. oil exploration on both coasts and Alaska. No, here is an expert calling attention to the failure of other so called energy experts to understand much less predict the future of oil exploration, production, and demand beginning with the start of big oil after WWII. The failures of the experts to understand oil rivals the failures of the CIA to understand the world over the same period.

Abd al-`Azīz Āl Sa`ūd 1876-1953 First King of Saudi Arabia father of all kings

In the 1930’s oil sold at the unbelievable price of 10 cents a barrel. When oil stabilized at around $1 a barrel after WWII, experts predicted worldwide economic collapse if oil ever went above this level. The brief OPEC oil embargo of 1973 sent prices to $12 from which they continued to climb through the Iranian Revolution in 1979 to peak at $40 in 1980 after which it dropped into a $12-$20 range until 1998. Prices are now setting records above $80 a barrel. None of this was predicted and the impact on the world economy is unknown. So much for the experts.

If anything, we might conclude that oil is such a cheap energy source compared to anything else that demand is almost perfectly elastic, that is, demand continues to rise and is almost completely insensitive to the price. In the perhaps near future, not only price but armed conflict and force will determine who gets the remaining shrinking supply.

Pilgrims to Mecca were the major source of Saudi revenue before oil

This book focuses on oil reserves, particularly in Saudi Arabia and predicts a rapid decline in worldwide oil production that no price can remedy. No major oil discoveries have been made since 1969 when the Prudhoe Bay, Caspian Sea, and North Sea deposits were discovered. With modern exploration technologies including seismic surveying and computer modeling Simmons argues it is unlikely that there are large undiscovered reserves left somewhere in the world.

Saudi Arabia gets most of its oil from six super-giant oilfields led by Ghawar at 174 miles long and 16 miles wide by far the largest oil field in the world which has alone produced 55 billion barrels of oil to date. To tap these enormous super-giants, very few wells were drilled. To increase or decrease production, operators simply turned the values of these few wells. The American operators, knowing they would soon lose control of the fields to the Saudis greatly increased production starting about 1970. The Saudis took control of oil in 1979, producing through their giant national Saudi Aramco, the largest oil company in the world. Saudi Aramco is a world class company that still employs 8,000 western petroleum experts. Their technology is state of the art. Unfortunately, in 1982, Aramco and the oil ministry made the decision to keep production and reserves secret. Other OPEC members followed and today our knowledge of true production and reserves is limited.

As an example of the unintended consequences of this secrecy, in 1997 OPEC announced increases in quota for all members. A market myth grew to fill the data vacuum created by production secrecy that there was a glut of oil. By 1999, accompanied by an Economist cover article “Drowning in Oil”, prices plummeted. The resulting myths to explain the glut included secret oil reserves and lost tankers wandering the oceans. Oil experts arose everywhere including a company Petrologistics claiming to have spies in every oil port counting the movement of tankers. Petrologistics was one guy working out of his apartment over a bakery in Geneva.

We know that Saudi reserves, said to be 110 billion barrels in 1978 when American oil companies handed over control to Aramco, grew to 260 billion barrels by 1988. These figures have no substantiating details and were probably woven out of whole cloth. During this period, from 1978 to 1988 46 billion barrels had been produced. Simmons believes these almost 200 billion barrels of new proven oil reserves are imaginary. Simmons also notes these supposed reserve discoveries were all made before the technological breakthroughs of 3D seismic analysis. Of Aramco and Saudi oil secrecy Simmons notes:

History has frequently shown that once secrecy envelops the culture of either a company or a country, those most surprised when the truth comes out are often the insiders who created the secrets in the first place. Such surprises may well have occurred within the ranks of Aramco and even at Saudi Arabia’s Petroleum Ministry.

Don’t smoke your own dope!

To get to the truth of Saudi oil production and reserves, Simmons made a close study of more than 200 technical papers published by the Society of Petroleum Engineers (SPE). Many of these papers were written by Aramco scientists and engineers and Simmons wondered why they were allowed to be published when careful reading would contradict official oil statements. I suspect the country is proud of this world leading company and feels its own prestige is enhanced by allowing its technologists to contribute and attend conferences.

You would have to be a specialist to understand most of these papers although Simmons does his best to educate us in the fundamentals of oil production and geology and to summarize and translate the technical papers but its still tough going unless you have a background in petroleum and geology. Greatly simplified, oil is found underground under high pressure. The pressure is sufficient to force the oil to the surface through vertical wells. If oil is overproduced, the pressure drops and there is a risk of oil being lost. To maintain pressure, water is injected via water injection wells. In 1956 40,000 barrels of water per day were being injected. By 1998 12 billion barrels a day were being injected into the two biggest fields. The initial water came from salt water aquifers. Starting in the 70s salt water from the Persian Gulf was piped to the fields for injection. As oil is depleted, more and more water is mixed with the oil extracted. The ratio of oil to water varies but recently about 1/3 has been water. Special processing is required to remove the salt water from the oil. To maintain production Aramco has done extensive horizontal drilling out from the main vertical wells. Care must be taken not to drill through fissures which might water out the well. Papers also describe insoluble tar layers encountered and studies of the effects of changing pressure on seismic activities (narrowing or widening of fissures). These 200 papers, covering research and events over all the major oil fields of Saudi Arabia paint a picture of maturing fields and ever increasing problems trying just to maintain production.

These papers report problems with production consistent with aging oil fields near the end of their productive life. They wrestle with the major problems: When will the giant field water out leaving billions of barrels of oil still in place? Can new technologies recover the oil left behind? What would be the cost of new technology? Can a few remaining years be stretched to a few decades? Simmons major conclusions rely on two factors known to be true outside of secret OPEC and Russia:

First, Eight super giant oilfields including Prudhoe Bay fields and North Seas fields have exhibited the same lifetime production pattern of increased production followed by the peak followed by a decline toward zero. The time frame of useful productivity is typically twenty years with the sole exception of Slaughter in Texas that has lasted sixty years and is still producing. Typical are reserve estimates from Prudhoe Bay. Aramco’s super giant fields have been in production for fifty years.

Second, no giant or super giant oil fields have been discovered since 1969 despite improved exploration technology. That is long enough with enough serious effort to project that the era of discovering giant oil fields is past. These last discovered giants all quickly reached their maximum production and then plummeted to enter secondary or tertiary production phases which is much more expensive and produces far less oil. Simmons believes Saudi and other Middle East production is in decline or soon will be.

The Saudis themselves have periodically increased production to stabilize worldwide oil supplies, for example after the Iranian revolution and resulting drop in Iranian production, and during Iraq’s invasion of Kuwait, the gulf war, and oil disruption in Kuwait. Simmons gives elaborate explanations how increased production from Saudis super giants has damaged the fields, increasing the difficulty of future extraction, and reducing the amount of oil that will ever be extracted from these fields. This is called the risk of overproduction.

Simmons does not believe Aramco can increase production to meet further shortfalls in production elsewhere but most experts naively believe the Saudis can produce any amount they choose. Oil production in much of the world, including the U.S. where production peaked in 1970 is in decline. Where will the oil come from to meet increased demand even in the next few years? Simmons doesn’t know.

Simmons also points to the social impact of oil on producing countries. There were 4 million Saudis in 1970 when the price of oil starting climbing rapidly. The Saudis were able to greatly improve the standard of living for their citizens with subsidized or free social services. Unfortunately, their Wahhabist brand of Islam encouraged birth with an average of 6.3 children per household resulting in a population explosion approaching 30 million today. Even at today’s prices and levels of production oil revenue per Saudi is one fifth what it was in 1970. Oil and petrochemicals dominate the Saudi economy and neither require much labor. Without developing other sources of employment, the country is left with massive unemployment and the few jobs that exist are often taken by foreign nationals who are willing to work at menial jobs Saudis are unwilling to take. But even sophisticated Norway, huge beneficiary of North Sea oil, will need to plan carefully for when the oil runs out.

Legacy of Ashes, the History of the CIA, Tim Weiner, 2007

A 500 page history using recently released documents and extensive interviews, Weiner concludes that the gross incompetence of the current American intelligence community is not new, they have been incompetent since their beginning in WWII. Our impressions have until now been based on rumor, speculation, and revealed screwups. With this book we have the full history in agonizing, painful detail.

Americans are incurious people, terrible at languages and ignorant of other cultures. For most of our history, America has been staunchly isolationist, wanting nothing to do with foreign intrigues. During WWII America relied heavily on British intelligence. The wartime OSS was largely an adjunct of British intelligence. After the war, a small cadre of mostly Ivy League OSS officers tried to build an American intelligence service. Throughout the CIA’s history they have never been able to find or attract talented agents and the history of intelligence gathering is almost non existent. America had no idea what was happening in the Soviet Union or Communist China. The Russian atomic bomb, the first space rocket, the Chinese invasion of Korea were all total surprises to our intelligence gatherers. When Stalin died in 1953 the CIA was clueless what might happen. On the other hand, foreign powers found easy access to American intelligence, infiltration our service freely and feeding false information at will.

Weiner focuses the early history on three cowboys not much interested in intelligence gathering but keenly interested in covert operations, Frank Wisner, Allen Dulles, and Richard Helms. Their approach was to spend money to buy people and elections, to arm badly trained insurgents and then send them to their deaths in Russia, Eastern Europe, and China. One operative, nationalist general Li Mi, stranded in northern Burma was given money and guns. Li Mi refused to fight the Chinese communists and instead built a heroin drug empire in the area known as the Golden Triangle. The CIA had to start another war twenty years later to wipe out his drug empire.

In 1950, the CIA launched a fifteen year research program originally code named artichoke and later ultra to test heroin, amphetamines, sleeping pills, LSD, and “special interrogation techniques” for mind control. Some subjects were kept in Panama. One army employee test subject jumped out a hotel window in New York. Richard Helms later destroyed all record of these programs.

An early story of the Berlin tunnel reveals the pattern. The CIA committed 350 agents to dig a 1467 foot tunnel from American Berlin into East Berlin and to tap into a cable communications link. The tunnel was completed in 1955 and an army of translators decoded the tens of thousands of voice and telex messages. After 11 months, the tunnel was uncovered and an international uproar ensued. From documents released in 2007 we discovered that the Soviets had learned from a mole about the tunnel before it was even dug and were systematically feeding bad information to the CIA until they decided to create an incident over the tunnel itself. The Americans’ big coup was a disaster from the start.

During WWII the British SOE operations returned three out of four agents sent behind enemy lines to conduct covert operations see. The CIA has lost virtually every agent ever dropped into covert operations. Of these deaths the cavalier, urbane, Allen Dulles said;
Allen W Dulles

You have got to have a few martyrs. Some people have to get killed.

The agencies first “success“, was the overthrow of the elected Iranian government of Mohammad Mossadeq to preserve British oil rights in Iran. The CIA planned to return the weak willed Mohammad Reza Shah Pahlavi to power but he kept disappearing. In one bizarre coincidence. Allen Dulles ran into Pahlavi checking into the same luxury hotel in Rome. The CIA had lost track of him. The coup that restored the Shah was almost an accident. For the twenty years of Pahlavi’s reign in Iran, he was known throughout the country as the CIA’s Shah.

The CIA’s next “successes“, was the overthrow of the Arbenz government in Guatemala. Cowboy diplomat and CIA associate Jack Peuifoy said of his visit to Guatemala City;

I have come to Guatemala to use the big stick. I am definitely convinced that if the President (Arbenz) is not a communist, he will certainly do until one comes along.

The coup was again almost accidental but the result was forty years of military rule, death squads, and repression. The CIA was also responsible for the assassination of Trujillo in the Dominican Republic in 1961, personally sanctioned by JFK.

Following WWII the CIA was willing to work with anyone anti-Communist. This included former Nazis and Hitler youth throughout Germany and Eastern Europe. These efforts were largely futile as the Nazis were widely hated by everyone.

More successful were the recruitment and support of two Japanese war criminals. Nobusuke Kishi signed the declaration of war against the US in 1941. After his release from prison Kishi masterminded the conservative misnamed Liberal Democratic party that dominated Japanese politics for fifty years. Kishi’s prison cellmate was Yoshio Kodama was a gangster who amassed a personal fortune of $1,750,000 running black markets in occupied China during the war. Together, the war criminal cell mates ran crime and politics in post war Japan. All with the support and financial assistance from the CIA.

The CIA’s record of total failure in intelligence gathering was finally broken when Allen Dulles succeeded in infiltrating, bugging, and planting false information in the offices of Senator Joseph McCarthy who was upset that communists had been so successful in planting spies within the CIA. Dulles succeeded in discrediting McCarthy. Dulles said of his operative, James Angleton, in the McCarthy case; “You have saved the republic.”

In Feb 1956 Nikita Khrushchev delivered a speech to the 20th Congress denouncing Stalin. It took Angleton three months to get a copy of the speech from the Israelis who provided almost all intelligence, however biased, on the Middle East. The CIA immediately began broadcasting the speech via Radio Free Europe but were oblivious and ignorant of the ensuing political crisis in Poland, Hungary, and Egypt. When finally informed, Dulles and the CIA totally misrepresented these events to the President. The CIA knew nothing of Israel’s plan for war against Egypt and of Britain’s plan to use the war as a excuse to seize the Suez canal. Dulles advised the President that the Hungarian uprising meant that Khrushchev’s days were numbered. The CIA had one person in Hungary, Frank Wisner, who had no agents, no Hungarian speakers, no contacts with the rebels, no weapons, no plans, nothing except Radio Free Europe which they used to give the appearance of a full scale revolution. Wisner left Budapest for Vienna. Dulles reported to the President that 80% of the Hungarian army had joined the rebels. He was wrong, the rebels had no arms and the Russians crushed them.

By 1957, the Middle East and it oil became the front line in the cold war. Eisenhower did not believe that those in the Middle East would be able to successfully run free governments. He decided that the best course was to promote the idea of an Islamic Jihad against communism. “We should be everything possible to stress the holy war aspect” (Eisenhower). The CIA would deliver guns, money, and intelligence to King Saud of Saudi Arabia, King Hussein of Jordan, President Chamoun of Lebanon, and President Said of Iraq; “These four mongrels were supposed to be our defense and communism and the extremes of Arab nationalism in the Middle East”. The CIA spent the next decade trying unsuccessfully to overthrow the government of Syria. When the CIA ran into trouble in Iraq they eventually threw support behind the emerging Ba’ath Party where Saddam Hussein would rise to the top.

In 1957, Eisenhower ordered the CIA to overthrow the non aligned Sukarno regime in Indonesia where oil had been discovered, and where the communist party was gaining strenth. The resulting attempt was a total failure with an American bomber pilot captured with full identification and records of his missions. The CIA backed off and Sukarno stayed in power for seven more years while the communist party gained strength. Indonesia, following Hungary drove covert operator Frank Wisner over the edge into insanity and he was committed and subjected to shock treatment.

Frank Wisner

The CIA’s best analyst, Abbott Smith,wrote in 1958:

We had constructed for ourselves a picture of the USSR, and whatever happened had to be made to fit into that picture. Intelligence estimators can hardly commit a more abominable sin.

The CIA, defense department, and military contractors convinced Eisenhower that the USSR had over five hundred ICBMs pointed at the West. In reality they had four.

Frank Wisner was replaced as head of clandestine operations by Richard Bissell on Jan 1 1959, the same day Fidel Castro came to power in Cuba. In December Bissell was ordered to remove Castro from Cuba. Bissell and his second in command Richard Helms hated one another. The players from the successful Guatemala coup were brought together and the invasion group of chatty Cubans was sent to Guatemala for training. Nixon, facing a touch presidential race, asked them to hold off an invasion until after the election. In the meantime, the CIA backed the overthrow of Patrice Lumemba in the Congo by Joseph Mobutu. He ruled for thirty years, stealing billions and slaughtering thousands to preserve power.

Kennedy won a tight election and was told by his father Joe to retain J Edgar Hoover and Allen Dulles because they knew Kennedy family secrets including a wartime affair of John with a Nazi spy. Kennedy assumed that Eisenhower had approved the Bay of Pigs invasion and Bissel did not tell him otherwise nor that Bissel believed the invasion would fail. The invasion without proper air support was a disaster.

An autopsy of the Bay of Pigs, the Tailor Board heard the following testimony from CIA pioneer General Walter Bedell Smith:

A Democracy cannot wage war. When you go to war, you pass a law giving extraordinary powers to the President. The people … assume when the emergency is over, the rights and powers that were temporarily delegated to the Chief Executive will be returned… When you are at war, cold war if you like, you must have an amoral agency which can operate secretly…

JFK, after the debacle at the Bay of Pigs, moved covert operations to the control of brother Bobby who launched almost as many covert operations in three years as Eisenhower launched in eight years.

When JFK was killed, LBJ, Nixon, Ford, and others including the CIA worried that Fidel Castro was behind the murder. LBJ once said “Kennedy was trying to get Castro, but Castro got to him first.” The Warren Commission that included Gerald Ford was never told that RFK had ordered the assassination of Castro and had made several attempts including poison and a mafia hit man. Castro had a mole in the CIA and presumably knew of all these attempts.

Spy Kim Philby

James Angleton’s old friend and tutor in counterintelligence, Kim Philby, defected to Moscow in 1963. The paranoid Angeton, seeking redemption after Philby, believed that KGB defector Yuri Nosenko knew something about JFK’s murder. Nosenko was imprisoned and tortured for five years until the CIA finally decided he was telling the truth and knew nothing.

Immolated Monk

Among covert CIA operations, Vietnam stands out. The CIA created a government under Catholic Diem who started oppressing the Buddhists more than he fought the communists. The embarrassed CIA, tired of watching images of burning Buddhist monks and nuns on TV and newspapers, arranged for his removal, starting a long succession of CIA puppet governments set up and removed one after the other.

A supposed incident in the Gulf of Tonkin where two American destroyers were attacked was used by LBJ to push through the Gulf of Tonkin Resolution of August 7, 1964 authorizing war in Vietnam. The incident never happened but the lie only came fully to light in 2005. Intelligence about Hanoi during the war was non existent. The CIA estimated enemy troop levels at 500,000 in 1966 but this was reduced under military and diplomatic pressure to 299,000. At 500,000, the actual number, the Americans would never win the war. While pretending to negotiate an end to the war Nixon and Kissinger simply stalled until Americans were forced out in 1975. Neither ever intended to end the war despite Nixon’s campaign promises in 1968 and 1972 to end the war if elected.

Covert operations were taking place in Thailand, where a CIA backed political party, elections, and military government was created in 1965.

The CIA paid an annual subsidy of $180,000 directly to the Dalai Lama and established Tibet Houses in New York and Geneva. Their attempts over twenty years at a cost of millions of dollars to train insurgents to harass the Chinese in Tibet killed numerous insurgence and resulted in capture of a single satchel of Chinese military documents. See the CIA’s secret war.

Covert operations continued in Indonesia, where attempts to overthrow Sukarno were given a boost as the aging Sukarno joined forces with the communists to remove key military leaders in 1965. Five generals were assassinated, The CIA recruited and funded Indonesian diplomat Adam Malik who together with a central Java sultan and army general Suharto and a political movement the Kap-Gestapu, launched a civil war in which 500,000 Indonesians were killed and 1 million arrested, Suharto began his long standing military dictatorship and Malik became foreign minister and eventually President of the UN General Assembly. For forty years the CIA denied involvement in this massacre.

Tony Poe’s Troops

Covert operations in Laos focused on the Ho Chi Minh Trail through the country, where the CIA coordinated American bombing and headed geurilla forces involving tribal Hmong fighters. Notorious CIA operator Anthony Poshepny known as Tony Poe, was the probable model for Colonel Walter E. Kurtz in the movie Apocalypse Now. Like Kurtz, the CIA believed Poe mad. Like Kurtz, Poe had his fighters cut off the ears of dead enemy combatants. Unlike Kurtz, Poe was left alone to fight as he saw fit.

Tony Poe

In Latin America the CIA was backing the leaders of eleven nations, providing money, weapons, and military training. The CIA sent agents in the hunt for Che Guevara and in 1967 he was found and killed in Bolivia.

Helms and LBJ

LBJ finally appointed Richard Helms as Director of the CIA. James Angleton, who the Israelis had given the 1956 Khrushchev speech, now received complete details of the upcoming 6 day war of 1967 when the Israeli military overran the entire area. This intelligence coup was the high point of CIA prestige. They totally missed the 1973 Yom Kipper war because no one told them about it before hand. On balance, Angleton’s paranoia concerning Soviet infiltration of the CIA meant that the CIA remained almost totally blind to Soviet events throughout his tenure at the agency. If Angleton ever learned anything, he often kept it to himself telling no one else.

Helms and Nixon

When Nixon came to power Richard Helms formed the Covert Operations Study Group in 1968. Among their findings (secret of course);

Covert operations can rarely achieve an important objective alone…At best, a covert operation can win time, forestall a coup, or otherwise create favorable conditions which will make it possible to use overt means to finally achieve an important objective.
On balance, exposure of clandestine operations costs the U.S. in terms of world opinion. To some, exposure demonstrates the disregard of the U.S. for national rights and human rights; to others it demonstrates only our impotence and ineptness in getting caught…Our credibility and our effectiveness in this role (expanding the international rule of law) is necessarily damaged to the extent that it becomes known that we are secretly intervening in what may be (or appear to be) the internal affairs of others.

Henry Kissinger

The only recommendation of the group adopted by Nixon was to appoint Henry Kissinger to direct covert operations. One of Kissinger’s covert successes was the overthrow of democratically elected Salvador Allende in Chile in 1973 after three years of effort. Chile, which had been a democracy since the 1930s was thrown into a violent repressive military dictatorship under Pinochet. In 1976 Pinochet arranged to blow up a car with some enemies only forteen blocks from the White House. Pinochet’s reign of terror lasted seventeen years. Today survivors of Pinochet’s Caravan of Death are pursuing Kissinger in the courts of Chile, Argentina, Spain, and France.

The CIA backed a rogue Greek general Ioannidis who started a Greek Turkish war over Cyprus. The intense Watergate investigation brought light and heat on CIA operations greatly weakening the agency. During this time, the extent of CIA domestic surveillance came out. Seymour Hersh of the New York Times broke the story of CIA domestic spying on anti Vietnam war forces in 1974. During the investigations that followed Angleton said:

Angleton

It is inconceivable that a secret arm of the government has to comply with all the overt orders of the government.

From Nixon’s time forward, CIA intelligence was generated (made up) for political purposes and had little to do with reality. This continued into the ridiculous claims about Soviet military power to support the Reagan star wars initiatives. An assessment by John Huizenga in 1971 sums up;

I really do not believe that an intelligence organization in this government is able to deliver an honest analytical product…and have it taken at face value… I think that intelligence has had relatively little impact on the policies that we’ve made over the years. Relatively none. ..The intelligence effort did not alter the premises with which political leadership came to office. They brought their baggage and they more or less carried it along.

Under Carter, the CIA missed the overthrow of the shah of Iran by a fanatic ayatollah and the Soviet invasion of Afghanistan. They not only missed them, they were in denial that these things could happen. The CIA didn’t even know who Khomeini was. In 1979 a group of Iran students and followers of Khomeini stormed the American embassy. CIA agent Daugherty, captured in the raid remembers;

It had been difficult enough for them to accept that the CIA would post an inexperienced officer in their country. But it was beyond insult for that officer not to speak the language or know the customs, culture, and history of their country.

The hostages in Iran were released when Carter left the White House in 1981. Iranians seized other hostages and Reagan indicated his willingness to sell arms to Iran for hostage release. Delirious, Iran seized more hostages. In the most boneheaded scheme in CIA history, the agency spun off money from arms sold to Iran to give to the Nicaragua contras. The complex scheme leaked and the ensuing scandal did more to damage the CIA than Nixon’s Watergate.

Carrying on the grand tradition, the clueless CIA watched the fall of the Berlin wall in 1989 live on CNN along with the rest of us. With the collapse of the Soviet Union, the CIA all but ceased to exist. The fall of the Soviet Union had an impact “analogous to the effect of the meteor strikes on the dinosaurs.” Well said!

Aldrich Hazen Ames

In 1994 Aldrich Hazen Ames, CIA agent since 1967 was arrested. Ames was a Soviet mole since 1985, giving up virtually all agents operating behind the iron curtain. Most were executed. No wonder the CIA had no intelligence on the Eastern Block.

The CIA went on to miss the nuclear tests in India and Pakistan in 1998; and the bombings of three embassies in Africa and the attack on the USS Cole by Al Qaeda. They then provided bad actionable intelligence leading Clinton to bomb a Pharmaceutical plant in the Sudan, the Chinese embassy in Serbia, and an empty Al Qaeda training camp in Afghanistan. The CIA became so gun shy after these debacles that they passed up numerous opportunities to send agents to assassinate Osama Bin Laden in Afghanistan.

The CIA failures to uncover the 9/11 attacks and the false intelligence generated to support war with Iraq were the final straws. Bush sent conservative political hack Porter Goss to dismantle the service. All senior and liberal agents were sacked and replaced by fellow conservative political hacks. Intelligence and covert operations moved to the Defense Dept. and State Dept. and to private beltway bandits who have built a $50 billion intelligence industry out of the ashes.

Personal Conclusions

Eisenhower warned Truman, Kennedy, and Johnson that war cannot be won without good intelligence. In Korea, Vietnam, Iraq, and Afghanistan, we did not and do not have good intelligence. Maybe it is time to admit certain truths. We can start with an admonishment from Richard Helms;

Richard Helms

The only remaining superpower doesn’t have enough interest in what’s going on in the world to organize and run an espionage service.

The following are my personal conclusions after reading this well researched book and should not be confused with Weiner’s own conclusions.

First, democracy and war are incompatible and a President should only be given war powers under very extreme circumstances such as those that existed in WWII and have not existed in the cold war or since. Having war every few years to enhance executive power is dangerous and perhaps fatal to our democracy. All other conflicts should be handled through diplomacy and international organizations.

Second, espionage requires deception and amoral judgments, in addition to language and cultural skills that are basically and perhaps fortunately rare skills hard for Americans to acquire. Those capable of deception are equally capable of deceiving themselves, the American people and the President. Judging from the CIA, they tend to be rogue characters impossible to harness. If possible, Americans should devise ways of acquiring intelligence without relying on espionage.

Third, covert operations should be banned altogether. Most of todays international conflicts find their origins in our own past covert actions and many of the weapons used and trained personnel involved in today’s conflicts were provided and trained under cover of American covert activity. This continues to be true throughout the world including Afghanistan and Iraq. Covert actions during the cold war invariably supported fascist right wing extremists all over the world and the repercussions of their repressions are still felt today and will be felt for some time. Covert operations did more to encourage Islamist Jihadist radical extremists than Middle East oil money supporting extremist madrasas. What goes around comes around.

In summary, An open democratic society is incompatible with a government that operates, even in part, in secret. The government must remain completely transparent throughout all its parts and to its people. A government with secrets is a danger both to itself and to everyone else.

As an aside, some of Barack Obama’s recent remarks about actionable intelligence to capture or kill Osama Bin Laden brings back nightmare images from Clinton’s mis targeted bombings. I hope Obama takes the time to carefully study this book before making further foreign policy pronouncements.

Dreams from My Father, Barack Obama, 2004

First published in 1995 before Obama won his first election as a state of Illinois Senator, this is not your typical political biography, just as Obama is not your typical politician.

Obama was born in Honolulu in 1961 early in Hawaii’s statehood. His mother’s parents were from Kansas, his grandfather serving WWII in Patton’s army but seeing little actual fighting, his grandmother working in an aircraft manufacturing plant in Wichita. After the war the grandparents moved to Texas then Seattle, then Honolulu where his grandfather worked as a furniture salesman. Obama seems to view them as Midwest conservatives and a bit bigoted but they seem pretty progressive, open, and tolerant. They received no end of teasing from Obama and his mother for voting for Nixon in 1968.

His mother attended the U of Hawaii where she met, fell in love, and married an African student, supposedly the first to attend the U of H. The African, the original Barack Obama, a Luo from Kenya, was already married and with two children. When he was accepted to Harvard graduate school, he left his American wife and son behind.

Obama’ s mother then met, fell in love, and married an Indonesian foreign student probably an East-West Center grantee. In 1967 Obama and his mother accompanied the Indonesian known here only as “Lulu” back to Djakarta. Obama attended a Catholic then a Muslim school. He learned Indonesian.

In 1965 Indonesia saw the overthrow of the Sukarno government to be replaced by the military rule of Suharto. The violence of the overthrow soon erupted in a mass scale slaughter of as many as 500,000 mostly ethnic Chinese living in Java. The excuse was that the Chinese were sympathetic to the Communist government in China but the real reason was the hatred of their success and dominance in business. Lulu was soon drawn into ethical compromises and shady dealings and Obama’s mother worried about Lulu’s influence over Obama. In 1971 she send Obama back to Hawaii to live with his grandparents.

An influential business associate of his grandfather got Obama, age 10, accepted to the prestigious Punahou prep school in Honolulu. At this point Obama’s future was assured. Hawaii is multi-ethnic without any one group having complete dominance; The Japanese are dominant in politics and government bureaucracy; the Chinese in banking and finance whites as the heads of corporations. Punahou reflects this distribution. There were maybe three black students at Punahoe at the time. Obama could have relaxed into his white heritage and intelligence but instead started to obsess about his black roots. This is probably due to his father’s abandonment and absence of other black influences in Hawaii. He talks about U of H basketball which became prominent for a couple of years in the early 70’s when a white former NBA player became coach and recruited an all black team from the military ranks then in Hawaii. The team won enough in its second year to get invited to the NIT tournament gaining national recognition. With this, the coach was able to recruit some top mainland players (come to beautiful tropic Hawaii with no racial bigotry), several of which went on the NBA careers. Obama took up basketball and became a Punahou (not exactly a powerhouse) player.

Punahou Campus

Obama’s search for roots in Hawaii took him to military base black parties, to reading Harlem renaissance writers like Langston Hughes and later Chicago’s James Baldwin and Malcolm X. He listened to Billie Holiday and Stevie Wonder. His father returned to Honolulu briefly when Obama was 10 and spoke at Punahou.

Obama’s grandfather played checkers in Ali’i park and had a wide variety of friends including an old black poet living in a shack in Waikiki. The poet gave Obama wise advice just as Obama was leaving Hawaii for college;

You’re not going to college to get educated. You’re going to get trained. They’ll train you to want what you don’t need. They’ll train you to manipulate words so they don’t mean anything anymore. They’ll train you to forget what it is that you already know. They’ll train you so good , you’ll start believing what they tell you about equal opportunity and the American way and all that shit. They’ll give you a corner office and invite you to fancy dinners, and tell you you’re a credit to your race. Until you want to actually start running things, and then they’ll yank your chain and let you know that you may be a well-trained, well paid nigger, but you’re a nigger just the same.

Obama went to college in Los Angeles and New York. His father died when he was in New York, age 21, and he didn’t take a planned trip to Kenya at that time. Instead he took a job for a while then became a political community organizer in South Chicago. He decided to return to law school at Harvard but took some time to travel in Europe and finally go to Kenya to meet his family for the first time.

The remainder of the book is an account of his trip to Kenya and meeting members of his extended family and their complex relationships. His grandmother was able to give him a clear picture of the lives of his grandfather living in British controlled Kenya and of his father. The picture was very different from the idealized, false picture Obama had built in his mind. A Kenyan historian tells Obama;

You know, young black Americans tend to romanticize Africa so. When your father and I were young, it was just the opposite – we expected to find all the answers in America. Harlem. Chicago. Langston Hughes and James Baldwin. That’s where we drew our inspiration. And the Kennedys – they were very popular. The chance to study in America was very important. A hopeful time. Of course, when we returned we realized that our education did not always serve so well. Or the people who had sent us. There was all this messy history to deal with.

One of the strangest things in this biography is the absence of Obama’s mother. She is obviously the most important influence on Obama’s development as a moral and ethical liberal yet she hardly appears at all and one gets very little sense of her as an independent character. Its like the anchor that made Obama possible got lost in his search for a mythical black heritage that turns out to be largely illusionary in light of the true story from Kenya. But finally, the honesty, humility, and openness of this account comes through and leaves one to wonder what will become of this unusual character.

The Audacity of Hope, Barack Obama, 2006

This book is dedicated to Obama’s mother and maternal grandmother. In his chapter on faith he acknowledges the influence of his mother on his life.

And yet for all her professed secularism, my mother was in many ways the most spiritually awakened person that I’ve ever known. She had an unswerving instinct for kindness, charity, and love, and spent much of her life acting on that instinct, sometimes to her detriment. Without the help of religious texts or outside authorities, she worked mightily to instill in me the values that many Americans learn in Sunday school: honesty, empathy, discipline, delayed gratification, and hard work. She raged at poverty and injustice, and scorned those who were indifferent to both.

Unlike his secular mother, as an adult Obama felt the need to be baptized in a moderate protestant church.

This second book is largely a polemic by professor Obama on various subjects; political parties, values, the constitution, opportunity, faith, race, the world. Still peaking through are occasional glimpses of the personal candor and humor of the first book; wrestling with whether to fly on personal jets rather than commercial airlines; temptations to engage candidate and fellow Harvard man, Alan Keyes, a mess of a politician perfectly capable of losing his own race without any help from Obama; the megalomania of politicians in general himself included and still able to see the humor in this; family get to gathers resembling mini-UN meetings with one relative resembling Margaret Thatcher.

In the family chapter, Obama voices his doubts about being a good father having grown up without one. He acknowledges his debt to his wife, Michelle, he enjoys the stability of her own family. Michelle, on her part, seems to enjoy the relative chaos and adventure of Obama’s wide ranging relatives.

The Shadow of the Great Game The Untold Story of India’ s Partition, Narendra Singh Sarha, 2006

Written by a lifetime Indian diplomat and onetime aide-de-camp to Lord Mountbatten, this is the well researched account of the partition of India to create Pakistan in 1947. The book was the number one bestseller in India. The Great Game is the name used to describe the rivalry and strategic conflict between the British Empire and the Russian Empire for supremacy in Central Asia from about 1813 until 1907. The term was popularized by Rudyard Kipling in his work Kim. Sarila believes that the most important factor leading Britain to support the creation of Pakistan after WWII was their fear of Russian Soviet expansion into the Middle East and South Asia. Britain came to believe that the British dominion, Pakistan, envisioned by Muhammad Ali Jinnah would be a continuing ally, source of troops, base of operations, in their attempt to contain the Soviet Union. Congress Party president Jawaharlal Nehru, insisted on the non alignment and neutrality of an independent India.

Mahatma Gandhi

The great Mohandas Karamchand Mahatma Gandhi comes off here as an ineffective loose canon. He is reported to have said in June 1940 to the Viceroy of India Linlithgow, who thought he must be senile;

Let them (Nazis) take possession of your beautiful Island, if Hitler chooses to occupy your homes, vacate them, if he does not give you free passage out, allow yourself, man, woman, and child to be slaughtered.

The next day Gandhi wrote a letter to Linlithgow;

You are losing: if you persist it will only result in greater bloodshed. Hitler is not a bad man. If you call it off to-day he will follow suit. If you want to send me to Germany or anywhere else I am at your disposal.

At this time Gandhi said that he “…expected the Jews to pray for Hitler, who was not beyond redemption.” A biographer Robert Payne comments:

In the quiet of the ashram the greater quiet of the gas chambers was inconceivable; he did not have and could not have any imaginative conception of their plight, nor had he much conception of dictatorships.

Gandhi also wrote to Hitler in December 1941:

In the non-violent technique there is no such thing as defeat…I had intended to address a joint appeal both to you and Signor Mussolini

Gandhi had supported the British during the Boar War and during WWI but since had developed his ideas of satyagraha (non-violence) and Indian mass movement using traditional Hindu religious techniques such as fasting. He spent most of his time in his ashram. He became enormously popular in India and in the West but was unprepared for the realities of WWII. He remained ineffective and tragically outside of decision making through the key period.

In the meanwhile, and without Congress interference, the British to able to recruit as many soldiers as they could train, over 2.5 million throughout the war. During the war, India’ s role as a market for British goods declined, but the requirements for fighting manpower became the colonies chief value to Britain. 35% of Indian soldiers were Muslims and 50% of all soldiers came from one province the Punjab.

Nehru and Gandhi

Jawaharlal Nehru, pushed by his father, Motilal Nehru, to become President of the Congress Party, and named by Gandhi his legal successor, comes off here as a longwinded, indecisive, ineffective, naive, almost innocent politician. The entire Congress Party withdrew from the British created Federal government in 1939 after demanding a British promise of complete independence for India after the war.

Winston Churchill was notorious for his hatred of India and Gandhi. Throughout the war, British leaders had no intention of losing India as a colony. The British leaders perhaps foresaw a gradual transition over forty or fifty years, of India into a Commonwealth nation like Canada or Australia.

FDR saw WWII as demonstrating the need of Europe to divest themselves of their colonies immediately after the war. Since the US lost the Philippines to Japan early in the war, Churchill met this advocacy with some skepticism:

The concern of the Americans with the strategy of a world war was bringing them into touch with political issues on which they had strong opinions and little experience…states which have no overseas colonies or possessions are capable of rising to moods of great elevation and detachment about the affairs of those who have.

Britain had divided India into eleven administrative provinces. There were still 350 princely states in India with Hyderabad the size of France and Rajasthan even larger. Muslims made up a quarter of the population of India, about 90 million as a whole and were in the majority only in the British provinces; the NorthWest Frontier, Punjab, Sind, Baluchistan, and Bengal, with about 30 million. None of these provinces was in favor of partition.

Muhammad Ali Jinnah

Muhammad Ali Jinnah was a secular non practicing Muslim living in Bombay, a dandy lawyer married to a beautiful younger Parsi (the most westernized of Indians originating in Persia 1000 years ago and having their own religion and traditions) woman. Jinnah was so ignorant of Muslim traditions that he scheduled a lavish dinner for a visiting British dignitary during Ramadan, a period of Muslim fasting. Sarha characterizes Jinnah as a megalomaniac.

Jinnah’ s Muslim league was in decline, capturing only a quarter of the votes in all Muslim elections. He latched onto the idea of partition in a desperate attempt to gain personal power. Sarha discovered that Churchill and Jinnah carried out a secret correspondence over some years via a person living in the Churchill household. For Jinnah partition was a power play, for Churchill and the British authorities in India the idea that the princely states and provinces might choose to divide from India after the war was the old British strategy of divide and conquer. Churchill also made this concession to appease FDR. The Congress leaders refused to compromise their position of full independence and remained outside the process.

In July 1942, believing that the axis powers (Germany, Italy, Japan) would win the war, a furious Gandhi initiated a Quit India, ratified by the Congress in August, demanding that the British grant immediate independence to India and leave. The British reacted by arresting the leaders and putting down demonstrations and riots. Gandhi lost even the support of the Labour Party in Britain with this move:

If you persist in demands which are at this moment impossible to grant, you will cripple your cause and humble the influence of us who are your proud and faithful advocates.

To regain some support Gandhi initiated a fast in February 1943 from prison. Unimpressed, Churchill wired Linlithgow; I understand Gandhi has glucose in his water could you confirm? FDR conveyed to London the message that “Gandhi should not be allowed to die in prison.”

Sarha portrays Gandhi’s later life as pathetic and futile stating that the last great service Gandhi gave for India was in 1932 where he successfully opposed holding separate elections for the lower castes (separate elections were held for Muslims since 1907.) Today the lower castes make up 20% of the population and wield great political power.

Field Marshal Wavell

In 1943 a new viceroy was appointed, Field Marshal Wavell, an upper middle class military man with victories over the Italians in North Africa and stunning defeats against the Japanese in Singapore, Malaysia, and Burma. The vice royalty was considered by Churchill an honorable retreat for a man “eminently suited to run a provincial country club.” Wavell came to the job with extreme animosity toward the Congress party. He had suffered the defection of 50,000 Indian troops to revolutionary Subhash Chandra Bose, a Congress member, in Malaysia and sabotage of military facilities in the Congress Quit India campaign.

By 1944 Wavell came to the conclusion that the best way forward was to build up Jinnah and create a British dominion, Pakistan, where British forces could maintain bases including the ports at Karachi and Dacca and from which it could continue to recruit military forces.

After the war much had changed. An Indian scholar writes:

The growing role of strategic air power and the vital importance of Middle Eastern oil had transformed British policy in Asia. For over a century, British policy in the Gulf had largely been shaped by the strategic interests of her Indian Empire. This was no longer the case… By 1947, the tables had been turned – Britain’ s strategic interests in the Gulf and Middle East had become a major factor in her South Asia policy.

1945 brought a number of pressures and changes. The Labour Party won the election in Britain. The Americans dropped the Atom bomb on Japan ending the war and leading the Americans to increase pressure on Britain to eliminate their colonies. A major famine swept India due to both lack of resources and the growing incompetence of the British Raj; The British colonies were costing the government 2 billion pounds annually which the British had to borrow from America.

Labour believed they could work effectively with Nehru and Congress. Unfortunately Labour also appointed two pro-Jinnah cabinet members to key Indian positions, one a former aid to Linlithgow, the other a close associate of Churchil. Wavell remained viceroy. The official Labour policy was:
1 Britain must maintain bases of operation in India to counter the Soviets.
2 Partition is the only way to guarantee 1 since Congress will not promise to cooperate with Britain on foreign policy.
3 Partition must not be attributed to Britain.

Indian Partition Map

In February 1946 Wavell introduced his blueprint for Pakistan, shown in green on the map, dividing Punjab to pacify the Sikhs with Gurdaspur and Amristsar their holy city remaining in India, and dividing Bengal to pacify the Hindu majority in Calcutta. The provinces to remain in India are shown in orange. No provision was made for the fate of the princely states, uncolored on the map.

Nehru sent a typically longwinded letter to the British in January 1946 giving his position which is quite clear; the fate of India should be left to plebiscites in the provinces; Jinnah’ s support is shallow and could be overcome easily; Muslim majority provinces are unlikely to vote for partition; Indians are prepared to struggle against Britain for independence.; Nehru would prefer a negotiated settlement.

Muslim elections in India in 1946 showed Jinnah’ s Muslim league strong in Hindu dominant provinces and weak in the designated Pakistan provinces where the Muslims were already in control.

Jawaharlal Nehru with Sir Stafford Cripps

In March 1946 Labour Prime Minister Clement Richard Attlee sent a delegation headed by Sir Stafford Cripps to negotiate with Nehru and Congress with instructions to avoid Gandhi. Their goal was to get Congress to agree to a truncated Pakistan and enable the British to avoid blame and responsibility for the partition while assuring their military bases. The attention of this delegation made Congress leaders, promised control of a provisional government to oversee the transition to full independence, complacent while giving Jinnah the opening to launch direct violent action to force British acceptance of Pakistan. Attlee achieved his objective to:
1 put Congress leaders in charge of the interim government where they would be placated but blamed for any failure.
2 put on record the disadvantages of Pakistan scheme to later whittle away at Pakistan in later negotiations with Jinnah.
3 give the world the impression that Britain and Labour are trying to keep India united.

In July 1946 Jinnah opted out of the agreement and in August launched a violent attack against Hindus and Sikhs in Bengal and Bihar the only provinces controlled by the Muslim League. In the ensuring violence 5000 were killed and 20,000 injured. Wavell did not hold Jinnah responsible but used the violence to advance his views that Muslims and Hindus can’t coexist and partition is necessary.

Nehru assumed the position of prime minister of the provisional government and a new Congress leader emerges, Sardar Patel, a tough, practical politician. Patel advocated focusing Congress attention on the British, preventing the princely states from breaking with India and limiting the scope and damage of the Muslim League without direct confrontation. Wavell, in August 1946, believing that the British could hold out for no more than 18 months, submitted his plan for British withdrawal from Congress controlled provinces and the princely states. Wavell pressured Nehru into accepting Jinnah and the Muslim league into the interim government without Jinnah’ s agreeing to the principles of the government or promise calling off violent actions, thus enabling Jinnah to undermine the Nehru government from within.

The British had divided the NWFP province, designated to be part of the new Pakistan into two administrative parts, the settled Pathan regions including the cities, and the area of the nomadic Pathan tribes. The boundary with Afghanistan was drawn up in 1893, the Durand line, but the border has still not been accepted by Afghanistan. The British controlled the nomadic area through “subsidies”, a small cadre of tribal experts, and 10,000 troops. Their policy of control was always the less seen the better. The Amir of Kabul warned; “if at any time a foreign enemy appears on the boundaries of India these frontier tribes will be your worst enemy.” Over 30 major invasions of India have come through this area over the last 2000 years.

The NWFP considered Jinnah a pawn of the British and consistently supported the Congress party as long as they remained unseen. The naive Nehru decided to visit this province in October 1946. The tribes met him with hostility and demonstrations. Wavell said of the visit “Nehru’s visit more than anything else made partition inevitable.”

Lord Mountbatten

In March 1947 Louis Mountbatten, navy rear admiral and former supreme commander of southeast Asia was named viceroy. He has often been blamed for partition but like the good soldier he was, he was simply carrying out orders, if creatively. His charter:
1 fix responsibility for the division of India squarely on Indian shoulders.
2 persuade Congress leaders to give up NWFP and persuade Jinnah to accept a much smaller Pakistan.
3 Ensure that India remain a member of the British Commonwealth.

The Mountbattens and Gandhi

After meeting Nehru and V. P. Menon, Mountbatten decided to leave item 3 til last. Mountbatten, pretending to oppose partition, asked immediately to meet with Gandhi who had been ignored by previous viceroys. Gandhi became a regular source of information about Congress matters. Gandhi offered the suggestion that Jinnah be asked to form a new interim government. Mountbatten ignored Gandhi. Sarha points out that had Gandhi made this offer in 1928 and not in 1947 and Jinnah had become president of the Congress Party instead of Nehru, Jinnah, a more able and intelligent politician would have had his ambitions satisfied and the question of partition may never have arisen.

Mountbatten persuaded Jinnah that his strength lay with British support. Jinnah begs;

I do not care how little you give me as long as you give it to me completely…you must realize that the new Pakistan is almost certain to ask for Dominion status.

The British plan was that elected members of assemblies in each province be given a free choice of independence or affiliation with the new All-India Constituent Assembly. This presented a problem in NWFP, which would choose affiliation as its assembly stood. Olaf Caroe Britain’ s expert on tribal affairs had been appointed Raj Governor of NWFP. Mountbatten convinced Nehru to accept a new province wide referendum on the question since Congress may have lost its mandate since the last election.
Bengal, with its distinct culture and own language would certainly choose to be independent.
The deal as understood by go-between V. P. Menon was now;
1 the Wavell plan for a smaller Pakistan.
2 immediate transfer of power.
3 under the Act of 1935, the independent states would automatically become Commonwealth nations without Assembly action.
4 If India accepts the truncation of NWFP, Mountbatten will persuade the princes to join one or another state and not opt for independence.

This would mean 90% of princely territories would become part of India offsetting the loss of NWFP.

V. P. Menon had been born in the princely state of Cochin (now Kerala) and as the most able Indian tactician, draftsman, and negotiator, played a key role in total absorption of the princely states into India.
V. P. Menon became Mountbatten’ s closest adviser and believed that all territorial issues and boundaries should be resolved before independence to avoid instability and chaos after the hand-over. V. P. Menon raised this issue with Nehru in May 1947 and Nehru agreed.

Mountbatten revealed to Nehru the current British plan for the hand-over, which might have led to the Balkanization of India, should many provinces and princedoms choose independence from India. Faced with the original plan and the possibilities of Balkanization, Nehru was quick to understand the benefits of V. P. Menon’ s alternative to try to resolve all decisions and boundaries before the hand-over. Mountbatten then approached Gandhi with the plan saying it should be called Gandhi’ s plan. Gandhi agreed and intervened with the All-India Congress committee on June 14, 1947. His intervention was decisive.

Mountbatten with V. P. Menon’ s assistance then went one by one to the princely states threatening them with Muslim League inspired violence if they did not agree to join India or Pakistan. They succeeded without a single princedom choosing independence. Maharaja Hari Singh of Kashmir, a friend of Mountbatten surprised him by choosing to accede his kingdom to India, although a majority of the kingdom’s population was Muslim. This set off a series of events and wars between India and Pakistan that continue to this day.

Independence of India and Pakistan was celebrated on August 14, 1947.

Delhi Refugee Camp

Not covered in this book were the massive displacements, violence and deaths caused by partition. As of 1951, 7,226,000 Muslims went to Pakistan from India while 7,249,000 Hindus and Sikhs moved to India from Pakistan. About 11.2 million or 78% of the population transfer took place in the west, with Punjab accounting for most of it. 5.3 million Muslims moved from India to West Punjab in Pakistan. 3.4 million Hindus and Sikhs moved from Pakistan to East Punjab in India. Elsewhere in the west 1.2 million moved in each direction to and from Sind. Deaths were estimated at 1 million but may have been as high as 1.5 million.

There have been three wars between India and Pakistan since independence. In 1971 a civil war in East Pakistan split the country apart to form the new nation of Bangladesh. India and Pakistan became nuclear powers in 1998 increasing the risks in future warfare between the two.

Two years after leaving India Wavell said in 1949:

There are two main material factors in the revolutionary change that has come over the strategical face of Asia. One is air power, the other is oil…The next great struggle for world power, if it takes place, may well be for the control of these oil reserves…This may be the battleground both of the material struggle for oil and air bases, and of the spiritual struggle of at least three great creeds – Christianity, Islam, Communism – and of the political theories of democracy and totalitarianism.

Around such lofty principals do people suffer, become refugees, and die.

Connected: 24 Hours in the Global Economy, Daniel Altman, 2007

A compact 255 pages this is a wide ranging exploration of topics in the global economy; synergies; good governance and independence of central bankers; corruption; money supply; stock markets; oil; stability; intellectual property; disruptions like weather events. Using the gimmick of first person accounts of their workday June 15, 2005 by various global actors we get an idea the the wide range of activity and complexity of the global economy. These first person narratives by some global economy globetrotters reminds us of the assessment of B. H. Bahbra’s diplomat Burnham:

They know so little. They are so small, so stupid, so arrogant, empty and assured, without even the wealth or empire which gave us our assurance. They travel without tasting. They look but do not see.

Google Earth Develops a Wobbly Spin

Altman asks if the financial system is becoming more vulnerable to the actions of a few. He sites the employee of private Swiss bank Julian Bar who stole virtually all client records, 169 megabytes worth.

In 1995 employee Nicholas Leeson in Singapore singlehandedly destroyed 233 year old investment bank Barings through his derivative trades. In 1996, Leeson published his autobiography, Rogue Trader. The book was later made into a film starring Ewan McGregor. Leeson today is a professional gambler and has written a second book on how to deal with stress.

In 1998 Long-Term Capital Management, a hedge fund masterminded by two Nobel Laureate economists lost so much on its interest rate bets that it had to be rescued by the Federal Reserve and a group of Wall Street giants. The Fed believed that letting LTCM go under would have destabilized the entire worldwide financial community.

In 2002 currency trader John Rusnak cost his employer, Allied Irish Bank nearly $700 million in secret losses.

In 2005 a broker at Mizuho Securities in Tokyo entered an order to sell 610,000 shares of a stock at 1 yen each instead of 1 share of stock at 610,000 yen. The trade could not be reversed. Cost to Mizuho; $224 million.

Wall street has had to implement a system which automatically stops all trading if the market makes too big a move. Program electronic trading reacts instantly and automatically (without human intervention) to big falls in prices. Again, this shows how unstable the global financial system is today.

Altman speculates about what would happen if a rogue employee at Moody’s suddenly downgraded the US Treasury Notes and Bonds by a single notch. This single individual action could automatically trigger an electronic sell off on such a massive scale as too destabilize the the entire world and put the US government at risk of insolvency, unable to borrow to cover its massive indebtedness.

Crude: The Story of Oil, Sonia Shah 2004

This 175 page book is a condensed look at oil, its history and future. It is packed with fact and detail and doesn’t miss much. Sonia Shah has now taken on the Pharmaceuticals in a new book See our previous post

Unholy Trinity (Big Oil Big Auto Big Tire), the Presidents, and the American Consumer

Oil, Auto, and Tire have for more than a century marketed ever larger, more expensive, gas guzzling, unsafe, products to a willing American public. In 1930 they banded together to take over and eliminate electric streetcars from American cities. Once in control, they removed the rails to be sure streetcars would never return. In 1947 GM, Standard, and Firestone were convicted of collusion to remove streetcars and fined $10,000 collectively.

New York City Streetcar

Around 1969, OPEC raised oil prices fourfold and threatened to limit supplies to the friends of Israel. Nixon wanted to invade the oil producers but was bogged down in Vietnam. Gerald Ford started the program to hoard oil in the “Strategic Petroleum Reserve”. Many Americans followed his example, burying large gas tanks of hoarded gas in their backyards.

A second wave of fear was triggered by the overthrow of the Shah of Iran in 1979. Carter announced that the U.S. would use any means to secure Gulf oil. American consumers went into full panic, spending hours or even days in gas lines to top up their tanks.

American Presidents, dependent on the Unholy Trinity for campaign money and terrorized by public reaction to the threat of gas shortages, worked overtime to assure an adequate supply of the addictive stuff. Initially the moves were positive with Carter’s “gas guzzler tax” and increased mileage requirements. California led the way to tighter emissions requirements. By the late 1980’s the U.S. was well on its way toward energy self sufficiency.

Hummer

Then the Unholy Trinity struck again; this time with the SUV. Large vehicles requiring large tires are far more profitable than smaller more efficient vehicles. Somehow the public was convinced that these totally impractical, dangerous, unreliable monsters were “safer” because of their 4 wheel drive and massive size. Self sufficiency went out the window as profits soared for the Unholy Trinity. The SUV falls into a regulatory loophole which allows them to emit 5 times the pollutants of normal vehicles. To get around mileage requirements, big auto built over 1 million dual fuel vehicles which are able to burn ethanol. Since Americans are unable to buy ethanol this was curious. The manufactures were using ethanol fuel to pass EPA mileage standards tests, even though the vehicles using gas would get far lower mileage.

Suez, Valdez, and a Negligent Industry

Suez from Space Valdez Spill Oily Bird

In 1956 Nasser seized the Suez canal in Egypt forcing oil to shipped around the horn of Africa. This started a boom in building ever larger single hulled tankers to haul the stuff. (Most ships are double hulled for safety) Then in 1989 the Exxon Valdez hit a reef and spilled 250,000 barrels of oil. The resulting lawsuits and bad publicity caused all big oil to conceal the ownership of their tankers and operate them through foreign flags like Panama, Bahamas, Liberia. The result is no government oversight or inspections, poor or no maintenance and inadequately trained and under-payed crews. The Valdez itself was repaired, renamed, and now operates in the Mediterranean. A few days ago, a court greatly reduced the damages owed by Exxon for the Valdez.

The same negligence is found throughout big oil. Offshore rigs are neglected and continue to collapse or otherwise kill their workers. Pipelines leak, refineries blow up, spills occur.

Piper Disaster BP Refinery Disaster

Reserves in a Dying Industry

Oil production is in decline in virtually every country in the world. Where production is increasing, it will peak within a few years. Then why does the industry continue to tout its vast reserves to the public? For example, they project Greenland with a reserve of 47 billion barrels, the equivalent of the North Sea reserve, even though not one barrel has been found or is likely to be found in Greenland.
Big Oils internal reserves estimates are secret and available only to the CIA. They undoubtedly show the truth, that oil is fast running out.

The publicity surrounding Caspian Sea oil and Alberta tar sand oil make it sound like our problems are over. The Caspian Sea oil has yet to be found even though pipeline construction continues and the Alberta oil is nearly useless and is plagued by enormous production problems to say nothing of the environmental impact where Alberta stands to lose much of its water and all its trees.

The internal reality is reflected in the fact that no U.S. refinery has been built since 1975 and the entire infrastructure of off shore platforms, pipelines, tankers, etc. is in dismal repair.

Co opting the Universities, Lying about Global Warming

Big oil spends about 3% of revenues on research compared to 20% for typical technology companies. Some of this largess is given as strings attached grants to universities; primarily to the U of Texas, U of Tulsa, and Stanford. The seismic and other research supported by these grants is not shared with the public. Big oil treats the universities as if they were private labs. These grants are important to the universities, of course, and when big oil needed “scientists” to counter the research showing overwhelmingly the fact and implications of CO2 increases on global warming and climate changes, several professors were ready to sell their souls.

Public media has shockingly chosen to treat the conclusions of the entire scientific community against the opinions of a handful of hack academics in the pockets of big oil as equal sides in a serious debate about the reality of global warming. Hence the confusion of the general public mind on the whole question of global warming and its potential impact. See our recent climate change post

The military and Big Oil in the World

The British made the decision to convert all their ships to oil in 1912 even though Britain has no oil. As the worlds preeminent imperial power, Britain had no doubt that they could get all the oil they needed from the Middle East using military force where necessary. In WWII FDR and Churchill divided middle east oil between them with the U.S. taking Saudi Arabia’s oil.

The U.S. military today is the world’s largest consumer of oil. Fuel supply lines form the biggest and most expensive part of modern warfare. A fundamental tenant of warfare is to have permanent bases of operation near any theater of war.

Abrams Tank in the Desert

It is no accident that George W’s VP is the former head of Haliburton, and that Condoleeza Rice is the only secretary of state to have an oil tanker named after her. When Saddam Hussein signed oil exploration and drilling contracts with Russia and China it was time for big oil and the U.S. military to move in. The Bush administration first coded their plan Operation Iraq Liberation (OIL) but soon thought better of the name. To this day journalists and media do not talk about permanent military bases and securing oil in the debate about the Iraq war.

Scenes from Iraq War

In the developing world, the discovery of oil has almost always resulted in worsening conditions for the people. The pattern is for big oil to do a deal with a small elite who enrich themselves in return for providing security for oil (killing anyone who gets in the way). When fighting and destruction occur, such as in Nigeria, western media (including the prestigious BBC, Financial Times, Reuters, New York Times, etc. mis portray the events as internal tribal warfare or insurgency, anything but protest against big oil which is destroying homes and livelihoods.

Alternate Energy Sources

A measure of efficiency for energy sources is to compare the ratio of amount of energy produced against the energy required to produce. In the early days, oil had an unbelievable ratio better than 100 to 1. With todays declining reserves, the ratio has fallen to 23 to 1. This still compares favorably to hydro power at 11 to 1; coal 9 to 1; and nuclear power at 4 to 1.

Solar Plant Solar Electricity Wind Power

Solar energy has a ratio of 1.9 to 1 reflecting the high cost of producing solar panels. Wind power is about the same. Further research and building large scale production plants could improve the ratios for these renewable sources of energy.

Big Oil seems to look to natural gas for their future survival. Natural gas is cleaner burning but cannot be transported easily or for long distances. Overlooked by big oil in its promotion of natural gas is that any natural gas leaks pour methane gas which is far worse than CO2 into the atmosphere. At 3% leakage (the industry is near this level now), methane equals CO2 in its overall impact on global warming. As natural gas is developed and as existing pipelines and equipment age, we can expect methane to overtake CO2 as the major source of warming.

Natural Gas Pipeline Leaks

Producing Ethanol from corn requires almost as much energy from oil as would be saved and wouldn’t significantly reduce CO2 emissions unless the ethanol plants somehow trapped the CO2. Then there is the question of how and where to store the trapped CO2. Ethanol also requires new pipelines and delivery technology because is mixes itself with water unlike gas. Big oil is clearly not interested in this investment yet they have a monopoly on retail outlets (gas stations).

Centralized hydrogen producing plants similarly require large consumption of energy and the delivery problems are even worse than for ethanol.

The current favored Bush plan, resulting in grants to the big three automakers is to produce vehicles that turn gas directly into hydrogen. These cars would be no more efficient or less polluting than existing hybrid vehicles but the government subsidies seem to assure that they will be built.

Gas Hydrogen Honda

Conclusion: Apocalypse?

So are we headed for the end of life as we know it? Certainly. Will we all kill ourselves in the process? Don’t know. At present, in spite of Al Gore’s best efforts, there is little will to change our consuming behavior. Massive changes in our attitudes and behavior is the only way changes will be affected. The power of the Unholy Trinity and the struggle for their very survival will continue to throw enormous forces into the political process and consumer marketing. Only individual consumers by modifying their behavior are in a position to withstand these forces.