CommonPrejudice

The Opportunity to End This

The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger - but recognize the opportunity.

-John F. Kennedy, Speech in Indianapolis, April 12, 1959

There is much talk and debate about the merits of tax cuts versus increased spending as the policy best suited to confront the current economic crisis in the United States. However, with interest rates for all intent and purposes already at zero everyone from George Will to Paul Krugman recognize that it is fiscal policy rather than monetary policy, that must be changed or adjusted. Moreover, except for the much less than sincere Republicans who, now out of power, have rediscovered their affection for balanced budgets, it is widely accepted that it is not at all the moment to think of austerity. That is, for them. For the gander, not so much. Noam Chomsky notes the hypocrisy.

It is a worldwide crisis and it is very serious. It is striking that the ways that Western countries are approaching the crisis (entirely contradict) the model that they enforce on the Third World when there is a crisis. So when Indonesia has a crisis, [or] Argentina and everyone else, they are supposed to raise interest rates very high and privatize the economy, and cut down on public spending, measures like that. In the West, it is the exact opposite: lower interest rates to zero, move towards nationalization if necessary, pour money into the economy, have huge debts. That is exactly the opposite of how the Third World is supposed to pay off its debts.  That this seems to pass without comment is remarkable.

And the vehicle to carry out this hypocrisy is once again a factor. Besides all of the other dreadful effects this economic crisis is having on the poor people and poor countries of the world, another disastrous result has been the reemergence of the IMF.

The global financial crisis has revived the International Monetary Fund, which just a year ago was pushing to sell a chunk of its gold reserves because it was making so few loans it didn't have enough income. Now, it has committed about $50 billion in loans to try to rescue Pakistan, Iceland and a clutch of Eastern European countries.

The Wall Street Journal prefers to label the organization a "new-look IMF" and quotes one of its officials:

"The change reflects a shift away from the thinking that the IMF can micromanage a country," said Anne-Marie Gulde, an IMF senior adviser for Europe.

Yet in the very same article they state:

The IMF is still far from a fast-track loan program for developing nations. Rather, it confines its demands to the monetary and fiscal policy in which it is expert. For some countries, that still can mean difficult changes. Latvia, for instance, must slash the salaries of teachers, soldiers and other government workers by 15%, while Ukraine must cut its spending at a time when the economy is expected to contract severely -- a prescription that is bound to make its recession worse, at least for a time.

Despite some modest improvements in the IMF's terms (see Pakistan) to say I'm skeptical would be an understatement. It all boils to down to what the goals are. The goal for the IMF in the developing world, as the Journal notes, "is to help stabilize poor countries battered by a recession." But stability for whom? Investors, of course.

Obviously third world economies need to grow and to grow they need investment. This is not in dispute. The problem is twofold; first these poor countries absolutely lack the infrastructure and human development to significantly expand the middle class and get the majority of the poor jobs with sustainable wages. Secondly, this is - as acknowledged by most US economists with respect to their economy - the very worst time to slash wages, balance budgets and keep money out of the hands of those who most certainly will spend simply out of need to put food on the table. Krugman, commenting on the Argentine crisis of 2001, put it perfectly:

I.M.F. officials -- like medieval doctors who insisted on bleeding their patients, and repeated the procedure when the bleeding made them sicker -- prescribed austerity and still more austerity, right to the end.

There is little question that today in the United States the Keynesian approach - increased deficit spending in the midst of one of the worst recessions in decades  - is favored by much of the ruling class. There are few demanding that the United States, in the midst of its worst economic crisis since the 1930s must suspend its war plans in Afghanistan because it can't afford the cost (though many are opposed for other reasons of course). Health care reform, investment in education and huge infrastructure investment will take place under Obama. Hundreds of billions of taxpayer dollars have gone to the banks and hundreds of billions more are to come. And there are many calls for the government to lend or give the auto industry huge sums of money to keep that industry going and keep those workers employed.

Meanwhile this is what Ukraine must do now to get IMF aid.

Ukraine approached the IMF weeks ago to raise money for its own bailout plan for its banks, something similar to what Treasury Secretary Henry Paulson orchestrated in the United States. The IMF was more than ready for a new client (it eventually lent $16.4 billion), but was concerned about the size of Ukraine's debt-to-GDP ratio. Ukraine's debt was seen as unsustainable at about 30% of GDP. Yet U.S. debt stands at more than 300% of its GDP.

To comply with the IMF's loan conditions, Ukraine will have to cut its annual deficit down from 4.2% of GDP to 1%. Wages will be cut while the cost of essential services such as heating will rise by as much as 35% as fuel subsidies are eliminated. Currency restrictions will also be loosened, meaning that the cost of living will probably go up while the value of the currency falls. Tough times if you're a Ukrainian citizen — unless of course you happen to be one of those banking executives to whom all this money will be going.

As with the case in Pakistan there has been some softening of the IMF approach in Iceland. Iceland, which had replaced Argentina as the poster-child for the IMF after Argentina crashed like no other country had previously, has recently received a 2.1 billion loan with few conditions. French Economy Minister Christine Lagarde said last November:

...many countries feel that the Fund has acted in a "very orthodox and imperialist" way in the past. "The old-school IMF has left some scars,"...

But as I said I'm skeptical because, as the think tank Foreign Policy Focus notes is the IMF raison d'être, "[t]he IMF's policy advice is always designed to reflect the best interest of investors." A few years ago there was a critical report regarding the IMF's role in Argentina.

The International Monetary Fund's handling of the crisis in Argentina three years ago almost certainly deepened a recession that threw millions of Argentines into poverty and sparked political chaos throughout the country, according to a report released yesterday by the IMF's internal audit unit.

By overlooking Argentina's growing indebtedness in the 1990s and continuing to lend the country money when its debt burden had become unsustainable, the fund significantly contributed to one of the most devastating financial crises in history, the report concluded...

On the surface this sounds like the IMF learned its lesson. But did it? The report criticized the IMF's failure to pressure creditors to accept reduced terms in debt repayment yet still makes it clear that it is the investors, not the country nor its people, that are the determining factor in any policy recommendation.

At the same time, the study helps rebut criticism that the fund insists on excessive austerity in developing countries. In Argentina's case, the report concluded that officials were too lenient.

The report also criticized a loan given in 1997, saying it wasn't warranted. Notwithstanding some token comments about how "painful" it would have been for Argentina not to receive the loans, it is still very clear that the IMF more than anything else regrets the debt default that they drove Argentina undertake. It didn't really matter that in the heart of the crisis 10000 people fell below the poverty line everyday or that 30% of the children under 15 suffered from irreversible physical and mental defects due to malnutrition.

No the problem was that Argentina defaulted, the creditors didn't get paid and that the Fund lent money when shouldn't have (let them eat cake). I lived there during the crisis in Argentina and produced a documentary on it. The human cost was devastating. The alleviation of this should have been -but never was - the priority and an institution whose prime role is protecting investors is not capable of dealing with crises like this.

What makes this hypocritical approach to economic crisis even more nefarious is that developing and underdeveloped countries critically need the investment in infrastructure, housing, health and education regardless of whether the economy is in the dumps. In fact, the entire economic history of Latin America demonstrates that there is little hope of ever developing without this investment.

On a related note, while in the current economic climate it seems clear to me that a Keynesian approach, as opposed the tax cutters and the truly loopy supply siders, is the far superior policy to deal with the US economic crisis, I don't feel even here that there is nearly enough attention to what the money is being spent on.

John Cole, while expressing his pessimism on the bail out package, stated:

I am not sold on the current stimulus bill and seriously doubt it will accomplish anything. I am pretty much of the opinion we have passed the point of no return and are on the way to the bottom, and nothing is going to stop the slide. What should be the focus is restructuring the foundation once we crash completely, and making sure we put in place regulations and rules so that this never happens again.

But back to the point- if we are going to piss away trillions, I would like some bridges, roads, and other things that can serve us for the next century. I find it appalling that there is no real money for high speed rail or mass transit. Why are we not re-doing the entire power grid and throwing up nuclear plants?

We may be a “wealthy” nation, but we seriously [sic] have third world governance.

My point is that if the money is spent wisely on areas that clearly need investment and development then by definition it is NOT pissing away the money. In the same post Cole notes the need for infrastructure investment in the United States:

Because decades of underfunding and inattention have endangered our nation’s infrastructure, $2.2 trillion in repairs and upgrades is needed over the next five years to meet adequate conditions. That’s the conclusion of ASCE’s new 2009 Report Card for America’s Infrastructure, released today, which assigns an overall grade of D to the nation as well as individual grades in 15 infrastructure categories. Since ASCE’s last assessment in 2005, there has been little change in the condition of America’s roads, bridges, drinking water systems, and other public works.

The old cliche about spending on what, guns or butter, is still very relevant. It always matters what the money is spent on and the needs of society must be paramount. We can't forget that the economy is to serve the people, not the other way around. And given the state of poverty and human suffering in much of the third world this is even more the case there.

Finally I have to take exception to Cole's last statement. The "governance" that has kept much of the third world underdeveloped and overly dependent comes from the same power structure that deregulated the U.S. economy and led to this crisis. Their concern is and has always been personal and institutional enrichment and power. They don't give a damn about the unemployed auto worker in Detroit nor the starving family in Pakistan.

For most of us this system is known as neo-liberalism and in this crisis lies opportunity; the opportunity to invest in society and its people and to finally allow neo-liberalism to permanently join its mirror image, communism, in the dustbin of history's failed economic models.

Unjustifiable

As all the war criminals and incompetent minions from the Bush administration start to appear on tv and in opinion columns trying to justify the unjustifiable, their war policy, one common refrain is heard . And the media unsurprisingly twiddle their thumbs.

I just heard Condi Rice on CNN say that while she regretted not finding WMDs (why not regret butchering the intelligence and lying to the public?), she did not regret "liberating Iraq."

This argument is a corollary to the same type of thinking from those who supported the war before it began. Whereas if you were against the war back then you were "pro-Saddam," now they will justify the invasion and occupation as a good thing because Saddam was removed.

Of course it's faulty logic, just don't expect any prominent media figures to hold their feet to the fire. First the issue is framed in a Bush friendly way. Why not ask them if they support killing hundreds of thousands of innocent people and devastating a country's infrastructure and social relations for generations?

But I believe an analogy typical of a intro philosophy of law course will work better here. A very dangerous killer is hiding in a large building. If he escapes he is certain to kill again. So the police decide to blow up the building, killing him and several hundred innocent people along the way (not to mention the millions of dollars of damages).

Later the police chief appears on CNN. She's asked by the probing journalist if the action was warranted. Her response is that she didn't regret killing the brutal murderer.... And the journalist leaves it at that.

(update: I noticed that the Rice interview on CNN was originally from The View so it's not like I think they would ask the difficult questions. Then again, would you really expect any more from CNN "journalists?")

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While everyone is focused on the stimulus package here in the United States, not surprisingly there is little discussion of the very important election in Iraq on Saturday. From a informed observer of the goings on in Iraq:

On Saturday, January 31, Iraq will conduct its first elections since 2005, when Iraqis went to the polls to select both their national parliament and provincial councils. This time, the election will decide only the provincial councils in 14 of Iraq's 18 provinces. Still, the election is likely to be a turning point for Iraq. Which way it turns -- toward greater democracy, or toward further instability and a return of violent resistance -- depends on what happens on Saturday.

It's not a pretty picture. The elections promise to be marred by violence, fraud, intimidation, vote-buying and bribery, bloc voting by tribes and ethnic constituencies, and undue influence by Shiite clerics.

If things don't go smoothly, and if the elections don't result in gains for parties that were shut out of the political process in 2005 -- especially among Iraq's disenfranchised Sunni bloc -- then it's very likely that violence will increase once again. It's even possible that many Sunnis will return to armed resistance, and some of them will rejoin Al Qaeda in Iraq

Read the rest of the article. It's a very good rundown of the current political situation/mess in Iraq.

Must Read

This perfectly sums up the enormous hypocrisy in American society. Really sad.

Public policy and mainstream journalism

I'd like to second what Atrios said yesterday and express my amazement when major journalists claim they have little influence on public policy. It really is equivalent to arguing that mainstream media has no influence on public opinion. It's nonsensical.

Actor Ben Affleck said the following last week regarding Newsweek, their cover story awhile back on Treasure Secretary "King" Henry Paulson and the effect of that on public opinion and, consequently, the financial bailout legislation:

“Newsweek, I feel like, is basically culpable for the first [$350 billion],” Affleck said. “They did like this hagiography on Paulson. Did you read that?"

He continued: “They did that and they made it very difficult—it was one of many factors that made it difficult for people to say, [inaud] hold on a second, what is the difference between now and a week from now? Why can’t we examine this more closely? Can we talk about this? Why is it that we can’t have more transparency in this piece of legislation?”

“It’s the same kind of fear and demagoging that was used to authorize the Iraq War, was resurrected to authorize a piece of legislation which then squandered a lot of our tax dollars—tax dollars, in fact, that we don’t have,”

Of course naming Newsweek alone as culpable for the first part of the bailout package is a little over the top. Nevertheless his point is a very good one. In fact, it would really take a fool to question whether magazines like Newsweek play a profound role in the nature and content of public debate. Not ironically Newsweek also plays the role of this fool.

First neophyte journalist Kurt Soller tries to get smarmy by coming up with ten other problems - such as global warming and the Hudson river plane crash - that Newsweek is also responsible for. What's embarrassing is that, by missing the point of Affleck's critique by so much, the "joke" is not funny after naming just one problem yet he continues on for nine more. Then he precedes to say in a follow-up post

...Journalism criticism is one thing, but accusing us of actually influencing the economic bailout package? That's ludicrous thinking ...

The cliche is that they don't make the news, they just report the news. But that has little to do with reality. Quite obviously people base their opinions and their politics on what they see and hear in newspapers, magazines, and television (ie. the mainstream media). And until the last few years when the internet and blogging began to change that, TV stations like CNN, newspapers like the New York TImes and magazines like Newsweek were the prime sources for the vast majority (along with the extremely conservative talk radio shows). Daniel Gross, the author of the original "King" Henry cover story said this:

...Besides, “would that a Newsweek cover story mattered so much that it could sway policy and move markets,” says Gross. “

To parse the media side of the equation down to one story from one magazine versus "policy" and "markets" again demonstrates how clueless these journalists are in terms of their understanding of both the influence their magazine and others of their stature have on public opinion and public policy and the role it must have in any functioning democracy. With fawning articles like Gross's "the right man at the right time" 'King' Paulson article and CNN Moneyline/Fortune magazine's Paulson to the Rescue piece Paulson had much more free reign to implement whatever he wanted. And the consequences are clear. Noone knows who exactly has that 350$ billion that Paulson gave out and what they are doing with it. Maybe if the media had done fewer adoring 'cover pieces' on personalities and had spent more time questioning administration and mainstream rationale for giving out such huge sums of money without clear accountability or transparency there'd wouldn't be this problem.

That said, given the high self regard many mainstream journalists hold themselves, especially among the millionaire pundit crew, I sometimes wonder whether this contention that they are not significantly influential on public opinion as more than a bit disingenuous and self-serving.

You see, if they acknowledged that their endless focus on triviality and silly scandals, their failure to question leadership and investigate very serious crimes, and their pursuit of fame and money at the expense of principle was actually  a prime factor in allowing a criminal regime like the Bush administration to operate virtually unchecked, then maybe the hundreds of thousands of dead in Iraq would start to get to their consciences.

Whacking Economic Moles

It's appalling how desperate far-right conservatives in the midst of a moment when their base assumptions on the economy prove disastrously false create fantasy versions of events that continue in mainstream reporting long after they have been conclusively demonstrated as false. To paraphrase the expression, a lie makes it all the way to London before the truth gets out of bed.

In an article in the Guardian listing the supposed culprits of the global economic meltdown comes this:

Clinton shares at least some of the blame for the current financial chaos. He beefed up the 1977 Community Reinvestment Act to force mortgage lenders to relax their rules to allow more socially disadvantaged borrowers to qualify for home loans....

It seems Fox News and Weekly Standard (among others) have managed to get this piece of nonsense, this idea that the poor or those trying to help the poor deserve some of the blame for the crisis, inserted into conventional wisdom.

We know, and have known for some time that the CRA had virtually nothing to do with the economic meltdown, specifically the bursting of the housing bubble. But as is very often the case, if a conservative says it on TV then it has merit regardless of its relationship with the truth. And it's just so difficult and time-consuming to permanently dispel these lies. (Just ask Somerby).

Kristol out at NYTimes

Bill Kristol, as most will know by now, is out at the NYTimes. A more incompetent hack one would be hard pressed to find. In his last column he states.

Over the next three decades, it was modern conservatism, led at the crucial moment by Ronald Reagan, that assumed the task of defending liberty with strength and confidence.

For old times' sake , and just so we never forget.

....The contras' brutality earned them a wide notoriety. They regularly destroyed health centers, schools, agricultural cooperatives, and community centers-symbols of the Sandinistas' social programs in rural areas. People caught in these assaults were often tortured and killed in the most gruesome ways. One example, reported by The Guardian of London, suffices. In the words of a survivor of a raid in Jinotega province, which borders on Honduras:

"Rosa had her breasts cut off. Then they cut into her chest and took out her heart. The men had their arms broken, their testicles cut off, and their eyes poked out They were killed by slitting their throats and pulling the tongue out through the slit."

Americas Watch, the human-rights organization, concluded that "the contras systematically engage in violent abuses ... so prevalent that these may be said to be their principal means of waging war."

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I'm a contra, too  -Ronald Reagan

See ya, Bill.

Dr. Z still recovering

One of my favorite sports columnists is Paul Zimmerman - Dr. Z - of S.I. He had a stroke a couple of months ago and is still in the hospital recovering. In an update on his condition, Peter King wrote this:

... as of now, he cannot speak, has difficulty reading because of the effects of the strokes on his eyes, and does not have full use of his right side, including his arm and leg. He gets about three hours of therapy per day and is being trained to speak and walk again. It is probably going to be a long haul back to normalcy for Dr. Z -- and now we have to hope that the insurance company will see that his case needs more time in rehab. That's the thing Linda, aka The Flaming Redhead [Dr.Z's wife], is battling now.

They hope his insurance company will see he needs more rehab time. Well at least the bureaucrats in Washington aren't make decisions regarding someone's health (which, of course, never happens in a socialized system anyway). We can be certain that insurance companies always have the best interest of the patient in mind.

May Dr. Z. get better real soon.

Depressing

Kevin Drum on a new poll.

Via Andrew Revkin, the latest Pew poll on priorities contains grim news for those of us who think we're rapidly destroying out planet: the public couldn't care less. Global warming, once again, ranks as the lowest priority from a list of 20, and the more general category of "protecting the environment" fell 15 percentage points from last year.

And as if that's not bad enough, Revkin also points to a new Rasmussen poll, which finds that 44% of U.S. voters don't believe humans are the cause of global warming, compared to only 41% who do. That's even worse than last year's results...

There is the tremendous temptation to throw up your hands and say the hell with it, as a species we're just too stupid to survive. Some days I do. And while you may want to point to this lack of smarts as being predominant among the American people I believe it's the natural result of the insipid and consumerist culture, particularly the influence of the corporate media on this culture rather than the people themselves. This is why I'm not particularly optimistic. I find it difficult to imagine the fundamental nature of this culture changing in time to prevent climatic disaster. In 2009 more people in the United States believe that humans are not the cause of global warming than do! They didn't pull that out of the sky. Too many people of influence in this culture believe it.

Franken/Coleman Update

(update below): The legal proceedings continue in Minnesota. A few days ago Michael Stokes Paulson writing in (what else could it be) the Wall Street Journal makes the argument that the recount in Minnesota, due to the irregularities, was unconstitutional and therefore there should be a re-vote.

In the process Paulson rehashes much of  the same old nonsense that has been definitively debunked.

Consider the inconsistencies: One county "found" 100 new votes for Mr. Franken, due to an asserted clerical error. Decision? Add them. Ramsey County (St. Paul) ended up with 177 more votes than were recorded election day. Decision? Count them. Hennepin County (Minneapolis, where I voted -- once, to my knowledge) came up with 133 fewer votes than were recorded by the machines. Decision? Go with the machines' tally. All told, the recount in 25 precincts ended up producing more votes than voters who signed in that day.

There are NO inconsistencies here (see my link above) and the last sentence is embarrassingly dim for someone who apparently is a law professor and a former associate dean of a law school (actually it is embarrassingly dim for anyone, never mind a law professor). The absentee ballots quite obviously are the cause of more votes than voters who signed in on election day and for the countless time, there has been no evidence or claim that that there are counties where the vote totals exceeeded the number of people who legally voted.

 The following, as I have explained, is the only justifiable complaint. Paulson says:

...Then there's Minnesota's (first, so far) state Supreme Court decision, Coleman v. Ritchie, decided by a vote of 3-2 on Dec. 18. (Two justices recused themselves because they were members of the state canvassing board.) While not as bad as Florida's interventions, the Minnesota Supreme Court ordered local boards to count some previously excluded absentee ballots but not others. Astonishingly, the court left the decision as to which votes to count to the two competing campaigns and forbade local election officials to correct errors on their own.

No. That is not an accurate portrayal of what happened. The total number of falsely rejected absentee ballots were identified by local campaign officials independently (over 1300) which, subsequently campaigns got the right to veto due to a very unwise wise decision by the Minnesota Supreme Court. BUT the local election officials absolutely had the chance to correct the errors (going through some ballots that Coleman disputed 3 times). Not at all astonishingly Paulson gets it completely wrong. He continues:

The standards for evaluating rejected absentee ballots likewise must be uniform, with decisions made according to legal standards, not by partisan campaigns.

The standards were uniform and very clear (see my previous post). The problem was that originally Coleman didn't want any falsely rejected absentee ballots * (he thought he was winning then) and went to court to prevent it, which in turn led to the indefensible decision of the Minnesota Supreme Court to allow campaigns the right to veto ballots. (There is of course a very easy remedy if the Court does rule that, consistent with Bush vs. Gore, that standards must be applied uniformly to the ballots. Count the 400 odd ballots that were identified as falsely rejected by the local campaign officials but were vetoed by the campaigns. (And Franken will almost certainly still win)

*[On the absentee ballot question Coleman has showed a remarkable ability as a contortionist. From not wanting any counted (claiming there were NO falsely rejected absentee ballots) to desperately trying to limit the number counted via the courts to today's position of, can you believe this?, wanting all 12000 rejected absentee ballots counted. Classic]

Paulson concludes:

And what if there is no reliable way to determine in a recount who won, consistent with Bush v. Gore's requirements?

The Constitution's answer is a do-over.

Actually as has been painstakingly explained by me and many others, the recount in Minnesota has been as reliable as humanly possible.  Nate Silver adds, "there is certainly no sense in the Constitution that the Senate is supposed to say "Ehh... it's pretty close -- let's have a do-over!"."

Two Hail Marys are going on here. Count all the absentee ballots or redo the election. Neither are close to being warranted.

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Earlier today Franken's attempt to have Coleman's challenge summarily dismissed is in limbo with the court currently considering the motion. Tomorrow they will consider Coleman's counter-motion to have the court rule for a "summary judgement."

Maybe, though, Coleman finally sees the writing on the wall.

Norm Coleman (R) has taken a job with the Republican Jewish Coalition while contesting Democrat Al Franken’s lead in the Minnesota Senate race, his campaign confirmed Thursday.

In what could be seen as a sign that Coleman thinks his bid to return to the Senate may be lost, he has signed on to do consulting work for the group, which is comprised of a number GOP leaders.

Let's hope so anyways.

Update:

I think Brad at Bradblog has it exactly right on Reid's announcement today that the Democrats will probably try and seat Franken next week.

Isratine?

Daily Quiz: Which Muslim leader said this:

The basis for the modern State of Israel is the persecution of the Jewish people, which is undeniable. The Jews have been held captive, massacred, disadvantaged in every possible fashion by the Egyptians, the Romans, the English, the Russians, the Babylonians, the Canaanites and, most recently, the Germans under Hitler. The Jewish people want and deserve their homeland.

Answer on the jump.