Saturday, April 30, 2005

Re: The Democratic Party

Published on Friday, April 29, 2005 by The Nation
Open Letter to Howard Dean
by Katrina vanden Heuvel

"Now that we're there, we're there and we can't get out," Democratic National Committee Chair Howard Dean told an audience of nearly 1,000 at the Minneapolis Convention Center on April 20th. "The president has created an enormous security problem for the US where none existed before. But I hope the president is incredibly successful with his policy now that he's there."

I agree with Dean--a political figure I admire-- that the war in Iraq has put the US in greater danger. But the question facing us today is who will speak for the millions of Americans who believe that continued occupation increases the danger? Who will speak for the millions who believe that the US has gotten bogged down in Iraq? Who will speak out against the (majority of the) Democratic Party's silent consent to the Bush Administration's Iraq war policies? Who will speak out about the wrenching human and economic costs of occupation? Who will speak out in support of a clear and honorable exit strategy? Who will make a clear, unequivocal declaration that the US will not maintain permanent military bases in Iraq?

For those who believe that America needs to change course, Tom Hayden's open letter to Howard Dean appealing to him not to take the antiwar majority of the Democratic Party for granted is an eloquent and important document. Read it, share it. - Katrina vanden Heuvel

April 26, 2005

Dear Chairman Dean,

Thank you kindly for your call and your expressed willingness to discuss the Democratic Party's position on the Iraq War. There is growing frustration at the grass roots towards the party leadership's silent collaboration with the Bush Administration's policies. Personally, I cannot remember a time in thirty years when I have been more despairing over the party's moral default. Let me take this opportunity to explain.

The party's alliance with the progressive left, so carefully repaired after the catastrophic split of 2000, is again beginning to unravel over Iraq. Thousands of anti-war activists and millions of antiwar voters gave their time, their loyalty and their dollars to the 2004 presidential campaign despite profound misgivings about our candidate's position on the Iraq War. Of the millions spent by "527" committees on voter awareness, none was spent on criticizing the Bush policies in Iraq.

The Democratic candidate, and other party leaders, even endorsed the US invasion of Falluja, giving President Bush a green-light to destroy that city with immunity from domestic criticism. As a result, a majority of Falluja's residents were displaced violently, guaranteeing a Sunni abstention from the subsequent Iraqi elections.

Then in January, a brave minority of Democrats, led by Senator Ted Kennedy and Congresswoman Lynn Woolsey, advocated a timetable for withdrawal. Their concerns were quickly deflated by the party leadership.

Next came the Iraqi elections, in which a majority of Iraqis supported a platform calling for a timetable for US withdrawal. ("US Intelligence Says Iraqis Will Press for Withdrawal." New York Times, Jan. 18, 2005) A January 2005 poll showed that 82 percent of Sunnis and 69 percent of Shiites favored a "near-term US withdrawal" (New York Times, Feb. 21, 2005. The Democrats failed to capitalize on this peace sentiment, as if it were a threat rather than an opportunity.

Three weeks ago, tens of thousands of Shiites demonstrated in Baghdad calling again for US withdrawal, chanting "No America, No Saddam." (New York Times, April 10, 2005) The Democrats ignored this massive nonviolent protest.

There is evidence that the Bush Administration, along with its clients in Baghdad, is ignoring or suppressing forces within the Iraqi coalition calling for peace talks with the resistance. The Democrats are silent towards this meddling.

On April 12, Donald Rumsfeld declared "we don't really have an exit strategy. We have a victory strategy." (New York Times, April 13, 2005). There was no Democratic response.

The new Iraqi regime, lacking any inclusion of Sunnis or critics of our occupation, is being pressured to invite the US troops to stay. The new government has been floundering for three months, hopelessly unable to provide security or services to the Iraqi people. Its security forces are under constant siege by the resistance. The Democrats do nothing.

A unanimous Senate, including all Democrats, supports another $80-plus billion for this interminable conflict. This is a retreat even from the 2004 presidential campaign when candidate John Kerry at least voted against the supplemental funding to attract Democratic voters.

The Democratic Party's present collaboration with the Bush Iraq policies is not only immoral but threatens to tear apart the alliance built with antiwar Democrats, Greens, and independents in 2004. The vast majority of these voters returned to the Democratic Party after their disastrous decision to vote for Ralph Nader four years before. But the Democrats' pro-war policies threaten to deeply splinter the party once again.

We all supported and celebrated your election as Party chairman, hoping that winds of change would blow away what former president Bill Clinton once called "brain-dead thinking."

But it seems to me that your recent comments about Iraq require further reflection and reconsideration if we are to keep the loyalty of progressives and promote a meaningful alternative that resonates with mainstream American voters.

Let me tell you where I stand personally. I do not believe the Iraq War is worth another drop of blood, another dollar of taxpayer subsidy, another stain on our honor. Our occupation is the chief cause of the nationalist resistance in that country. We should end the war and foreign economic occupation. Period.

To those Democrats in search of a muscular, manly foreign policy, let me say that real men (and real patriots) do not sacrifice young lives for their own mistakes, throw good money after bad, or protect the political reputations of high officials at the expense of their nation's moral reputation.

At the same time, I understand that there are limitations on what a divided political party can propose, and that there are internal pressures from hawkish Democratic interest groups. I am not suggesting that the Democratic Party has to support language favoring "out now" or "isolation." What I am arguing is that the Democratic Party must end its silent consent to the Bush Administration's Iraq War policies and stand for a negotiated end to the occupation and our military presence. The Party should seize on Secretary Rumsfeld's recent comments to argue that the Republicans have never had an "exit strategy" because they have always wanted a permanent military outpost in the Middle East, whatever the cost.

The Bush Administration deliberately conceals the numbers of American dead in the Iraq War. Rather than the 1,500 publicly acknowledged, the real number is closer to 2,000 when private contractors are counted.

The Iraq War costs one billion dollars in taxpayer funds every week. In "red" states like Missouri, the taxpayer subsidy for the Iraq War could support nearly 200,000 four-year university scholarships.

Military morale is declining swiftly. Prevented by antiwar opinion from re-instituting the military draft, the Bush Administration is forced to intensify the pressures on our existing forces. Already forty percent of those troops are drawn from the National Guard or reservists. Recruitment has fallen below its quotas, and 37 military recruiters are among the 6,000 soldiers who are AWOL.

President Bush's "coalition of the willing" is steadily weakening, down from 34 countries to approximately twenty. Our international reputation has become that of a torturer, a bully.

The anti-war movement must lead and hopefully, the Democratic Party will follow. But there is much the Democratic Party can do:

First, stop marginalizing those Democrats who are calling for immediate withdrawal or a one-year timetable. Encourage pubic hearings in Congressional districts on the ongoing costs of war and occupation, with comparisons to alternative spending priorities for the one billion dollars per week.

Second, call for peace talks between Iraqi political parties and the Iraqi resistance. Hold hearings demand to know why the Bush Administration is trying to squash any such Iraqi peace initiatives. (Bush Administration officials are hoping the new Iraqi government will "settle for a schedule based on the military situation, not the calendar." New York Times, Jan. 19, 2005).

Third, as an incentive to those Iraqi peace initiatives, the US needs to offer to end the occupation and withdraw our troops by a near-term date. The Bush policy, supported by the Democrats, is to train and arm Iraqis to fight Iraqis--a civil war with fewer American casualties.

Fourth, to further promote peace initiatives, the US needs to specify that a multi-billion dollar peace dividend will be earmarked for Iraqi-led reconstruction, not for the Halliburtons and Bechtels, without discrimination as to Iraqi political allegiances.

Fifth, Democrats could unite behind Senator Rockefellers's persistent calls for public hearings on responsibility for the torture scandals. If Republicans refuse to permit such hearings, Democrats should hold them independently. "No taxes for torture" is a demand most Democrats should be able to support. The Democratic Senate unity against the Bolton appointment is a bright but isolated example of how public hearings can keep media and public attention focused on the fabricated reasons for going to war.

Instead of such initiatives, the national Democratic Party is either committed to the Iraq War, or to avoiding blame for losing the Iraq War, at the expense of the social programs for which it historically stands. The Democrats' stance on the war cannot be separated from the Democrats' stance on health care, social security, inner city investment, and education, all programs gradually being defunded by a war which costs $100 billion yearly, billed to future generations.

This is a familiar pattern for those of us who suffered through the Vietnam War. Today it is conventional wisdom among Washington insiders, including even the liberal media, that the Democratic Party must distance itself from its antiwar past, and must embrace a position of military toughness.

The truth is quite the opposite. What the Democratic Party should distance itself from is its immoral and self-destructive pro-war positions in the 1960s which led to unprecedented polarization, the collapse of funds for the War on Poverty, a schism in the presidential primaries, and the destruction of the Lyndon Johnson presidency. Thirty years after our forced withdrawal from Vietnam, the US government has stable diplomatic and commercial relations with its former Communist enemy. The same future is possible in Iraq.

I appeal to you, Mr. Chairman, not to take the anti-war majority of this Party for granted. May I suggest that you initiate a serious reappraisal of how the Democratic Party has become trapped in the illusions which you yourself questioned so cogently when you ran for president. I believe that an immediate commencement of dialogue is necessary to fix the credibility gap in the Party's position on the Iraq War. Surely if the war was a mistake based on a fabrication, there is a better approach than simply becoming accessories to the perpetrators of the deceit. And surely there is a greater role for Party leadership than permanently squandering the immense good will, grass roots funding, and new volunteer energy that was generated by your visionary campaign.

Tom Hayden

Wednesday, April 27, 2005

US Figures Show Sharp Global Rise In Terrorism

By Susan B. Glasser
The Washington Post

Wednesday 27 April 2005

State Dept. will not put data in report.
The number of serious international terrorist incidents more than tripled last year, according to U.S. government figures, a sharp upswing in deadly attacks that the State Department has decided not to make public in its annual report on terrorism due to Congress this week.

Overall, the number of what the U.S. government considers "significant" attacks grew to about 655 last year, up from the record of around 175 in 2003, according to congressional aides who were briefed on statistics covering incidents including the bloody school seizure in Russia and violence related to the disputed Indian territory of Kashmir.

Terrorist incidents in Iraq also dramatically increased, from 22 attacks to 198, or nine times the previous year's total -- a sensitive subset of the tally, given the Bush administration's assertion that the situation there had stabilized significantly after the U.S. handover of political authority to an interim Iraqi government last summer.

The State Department announced last week that it was breaking with tradition in withholding the statistics on terrorist attacks from its congressionally mandated annual report. Critics said the move was designed to shield the government from questions about the success of its effort to combat terrorism by eliminating what amounted to the only year-to-year benchmark of progress.

Although the State Department said the data would still be made public by the new National Counterterrorism Center (NCTC), which prepares the information, officials at the center said no decision to publish the statistics has been made.

The controversy comes a year after the State Department retracted its annual terrorism report and admitted that its initial version vastly understated the number of incidents. That became an election-year issue, as Democrats said the Bush administration tried to inflate its success in curbing global terrorism after the Sept. 11, 2001, attacks.

"Last year was bad. This year is worse. They are deliberately trying to withhold data because it shows that as far as the war on terrorism internationally, we're losing," said Larry C. Johnson, a former senior State Department counterterrorism official, who first revealed the decision not to publish the data.

After a week of complaints from Congress, top aides from the State Department and the NCTC were dispatched to the Hill on Monday for a private briefing. There they acknowledged for the first time the increase in terrorist incidents, calling it a "dramatic uptick," according to participants and a letter to Secretary of State Condoleezza Rice from Rep. Henry A. Waxman (D-Calif.).

The administration aides sought to explain the rise in attacks as the result of more inclusive methodology in counting incidents, which they argued made year-to-year comparisons "increasingly problematic," sources said.

In his letter urging Rice to release the data, Waxman said that "the large increases in terrorist attacks reported in 2004 may undermine administration claims of success in the war on terror, but political inconvenience has never been a legitimate basis for withholding facts from the American people."

Both Republican and Democratic aides at the meeting criticized what a GOP attendee called the "absurd" explanation offered by the State Department's acting counterterrorism chief, Karen Aguilar, that the statistics are not relevant to the required report on trends in global terrorism. "It's absurd to issue a report without statistics," said the aide, who is not authorized to speak publicly on the matter. "This is a self-inflicted wound by the State Department."

Aguilar, according to Hill aides, told them that Rice decided to withhold the statistics on the recommendation of her counselor, Philip D. Zelikow. He was executive director of the Sept. 11 commission that investigated the terrorist attacks on the United States.

The terrorism statistics provided to the congressional aides were not classified but were stamped "for official use only." Last week, State Department spokesman Richard A. Boucher said the government would publish "all the facts," but at Monday's session Aguilar told the staff members that even if the NCTC decided not to release the data, the State Department would not reconsider and publicly do so itself.

A State Department spokesman said last night that he is confident the data will be officially released. He said the government is committed to "providing the public all the information it needs to have an informed debate on this issue."

Under the standards used by the government, "significant" terrorist attacks are defined as those that cause civilian casualties or fatalities or substantial damage to property. Attacks on uniformed military personnel such as the large number of U.S. troops stationed in Iraq are not included.

The data provided to the congressional aides also showed terrorist attacks doubling over the previous year in Afghanistan, to 27 significant incidents, and in Israel, Gaza and the West Bank, where attacks rose to about 45, from 19 the year before. Also occurring last year were such deadly attacks as the seizure of a school in Beslan, Russia, by Chechen militants that resulted in at least 330 dead, and the Madrid train bombings that left nearly 200 dead.

The State Department did not disclose to the aides the overall number of those killed in incidents last year. Johnson said his count shows it was well over 1,000.

Doctors Influenced By Mention Of Drug Ads

Offbeat Study Finds Familiar Brand Name Can Evoke Diagnosis

By Shankar Vedantam and Marc Kaufman
Washington Post Staff Writers
Wednesday, April 27, 2005; A01

Actors pretending to be patients with symptoms of stress and fatigue were five times as likely to walk out of doctors' offices with a prescription when they mentioned seeing an ad for the heavily promoted antidepressant Paxil, according an unusual study being published today.

The study employed an elaborate ruse -- sending actors with fake symptoms into 152 doctors' offices to see whether they would get prescriptions. Most who did not report symptoms of depression were not given medications, but when they asked for Paxil, 55 percent were given prescriptions, and 50 percent received diagnoses of depression.

The study adds fuel to the growing controversy over the estimated $4 billion a year the drug industry spends on such advertising. Many public health advocates have long complained about ads showing happy people whose lives were changed by a drug, and now voices in Congress, the Food and Drug Administration and even the pharmaceutical industry are asking whether things have gone too far.

Nearly every industrialized country bans such advertising, and physicians said the new study raises new questions.

"It is a haphazard approach to health promotion that is driven primarily by the pharmaceutical industry's interest in turning a profit," said Matthew F. Hollon, an internist at the University of Washington in Seattle, who wrote an editorial accompanying the study in today's Journal of the American Medical Association. "The most overlooked problem in the health care system today is the extent to which it is permeated by avarice."

Hollon and the researchers who conducted the study said it was not realistic to expect such marketing to be abolished, given the climate of deregulation in Washington. But they said the ads should be tempered by educational messages funded by a tax on the industry and better training of doctors, or by a moratorium on ads for new drugs until their risks are fully known.

"We can do a much better job with the advertising," agreed W.J. "Billy" Tauzin, president and chief executive of the Pharmaceutical Research and Manufacturers of America (PhRMA). "The ads can do a great job making sure people who need medications and are undertreated get help. We can also make it clear that a particular product is meant for people with this particular problem and for those people only."

The study found that the ads did help patients with a stigmatized illness such as depression get treatment, even as they prompted overmedication of people who did not need treatment. Such marketing in effect exploits the diagnostic gray zone that characterizes many conditions in medicine, including heartburn, arthritis and allergies.

"There is a segment of individuals who would really benefit from pharmacological therapy; there is another large group that won't," said Richard L. Kravitz, lead author of the study and a professor of medicine at the University of California at Davis. "The easiest thing from a marketing standpoint is to increase use in all the categories, and that is what we are seeing."

The researchers sent actors with hidden tape recorders into general physicians' offices in three cities between May 2003 and May 2004. The physicians had previously consented to participate but were not told when they would be tested.

Half the actors simulated patients suffering from depression, describing lengthy periods of sadness, low energy, poor appetite and sleep, and early-morning awakening. The others described having suffered a career upheaval and having fatigue, stress and difficulty sleeping, symptoms that did not warrant medication.

More than half of those without simulated depression who mentioned Paxil got a prescription, underscoring how willing doctors are to go along with patients' requests.

Concerns have recently grown about the safety of antidepressants after disclosures that the pharmaceutical industry withheld studies that found the drugs were no better than sugar pills. The FDA recently concluded that the drugs increase suicidal thinking and behavior among children and required them to carry black-box warnings -- which have greatly reduced direct-to-consumer advertising of such drugs.

Advertising could be useful for drugs with large benefits and few risks, said researcher Ronald M. Epstein, but the industry's bias against negative studies raises questions about which drugs ought to be marketed in this fashion. Epstein is a professor of family medicine at the University of Rochester.

Nancy Leone, a spokeswoman for GlaxoSmithKline PLC, the maker of Paxil, said physicians are not unduly influenced by ads, and denied that such "education campaigns" lead to inappropriate prescribing. It was "difficult to draw conclusions" about the new study, she said, because Paxil was not being heavily advertised during the study period.

In his editorial, Hollon said 80 percent of physicians believe such ads prompt patients to seek medications they do not need, and less than 10 percent believe the ads are a good thing.

Johnson & Johnson's chief executive, William C. Weldon, now chairman of the PhRMA board, said last month that the industry ought to revise its approach to drug ads because they "may inadvertently minimize the importance and power of medicines and their risks."

Direct-to-consumer (DTC) advertising soared after the FDA allowed drug promotions on television for the first time in 1997. Efforts to limit such advertising have run afoul of Supreme Court rulings protecting commercial speech.

The ads are regulated by the FDA's Division of Drug Marketing, Advertising and Communications. The office, which has barely three dozen employees, must review 30,000 to 40,000 ads a year. Acting commissioner Lester M. Crawford said recently that "our patience is sometimes worn thin" by the advertising claims.

Dan Troy, chief counsel for the FDA in President Bush's first term and now with a Washington law firm, said laws on drug advertising written by Congress in the 1960s have made it difficult to change policy. He added that most FDA professionals were "quite pro-DTC."

PhRMA's Tauzin said companies are working on a new code of conduct that would be preferable to federal regulation.

The FDA has moved against scores of ads that it found to be inaccurate or misleading. In 2001, it warned Merck and Co. that its ads for the arthritis drug Vioxx were misleading and did not adequately warn viewers of cardiovascular risks. After Merck took Vioxx off the market last September, Pfizer Inc. aggressively increased advertising for its competing painkiller, Celebrex, but also got a warning from the FDA.

Tuesday, April 26, 2005

Snow job

Pardon the very bad pun. Here's an exceptional article by EPI president Lawrence Mishel in the American Prospect discussing the utter failure that is the John Snow.

Where are we? The economy went into recession as George W. Bush took office, so it would be unfair and inaccurate to blame the initial downturn on the current administration. The Bush policies, however, have been flawed because they were never intended to generate jobs or growth in the short-term; they were always about cutting government revenue and shifting the tax burden away from income from investments (from the few) and onto income from labor (that's most of us). A decent set of policies -- enacting one-time tax cuts aimed at lower- and middle-income families, building roads and bridges, renovating schools, providing aid to the states, offering improved unemployment insurance -- could have yielded a much better situation today.

What did happen? There were continuous and record-breaking employment losses for roughly two and a half years, followed by some modest job gains starting last September. Oh, there was one very good month for job growth, this last March. After three years, though, the economy has lost 2.6 million private-sector jobs and created about 600,000 government jobs for a net loss of 2 million. In every other business cycle since the 1930s, the economy had recouped all the lost jobs by three years from the start of the recession. In the current case, however, the economy is still suffering a 1.5-percent loss of employment after three years. In the better-managed cycles of the last three decades, the economy had gained 2.5 percent more jobs after three years. That 4-percent difference between the current cycle and recent cycles represents a shortfall of more than 5 million jobs. So, we've certainly had a tough time on the job front.

What's more, inflation-adjusted wages are flat, at best, and are eroding for many workers. When jobs are short, it is inevitable that weekly and hourly wages grow more slowly as employers take advantage of the situation. The offshoring of white-collar jobs has only added to these pressures this time around.

Poor job performance and wage stagnation add up to very little growth in overall wage and salary income -- what most of us live on. With fast productivity and minimal growth in wages and employment, you get big profits. This is exactly whats occurred. Even Alan Greenspan noted this recently, saying: "Most of the recent increases in productivity have been reflected in a sharp rise in the pre-tax profits of nonfinancial corporation … . The increase in real hourly compensation was quite modest over that period. The consequence was a marked fall in the ratio of employee compensation to gross nonfinancial corporate income to a very low level by the standards of the past three decades." (emphasis added)

(Hat tip, MaxSpeak)

Sunday, April 24, 2005

No accountability in Abu Ghraib

Published on Saturday, April 23, 2005 by the BBC News
Top Brass Cleared Over Iraq Abuse

Former commander of US troops in Iraq Lt Gen Ricardo Sanchez has been cleared over abuses at Abu Ghraib jail in Iraq.

A new inquiry found no evidence of wrongdoing by Gen Sanchez and three of his top aides, US officials say.

The US Army inspector general's report says only Brig Gen Janis Karpinski, commander at the jail, has been found guilty and reprimanded over the abuse.

Pictures of Iraqi inmates abused by US soldiers caused an outcry last year. Five US soldiers have been convicted.
The Pentagon has held nine major inquiries into the Abu Ghraib prisoner abuse scandal, with two more to come.

US Defence Secretary Donald Rumsfeld is being sued by two civil liberties group for allegedly authorising torture and then failing to stop it.

The results of the inquiry have surfaced in the week before the first anniversary of the publication of the first photographs showing US forces sexually humiliating and physically abusing Iraqi prisoners.

The scandal at the jail on the outskirts of Baghdad triggered international criticism of the US.

Since then, numerous cases of alleged abuse have come to light at US facilities in Afghanistan and at Guantanamo Bay.

Rights groups unhappy

Gen Sanchez, who commanded US troops in Iraq until the summer of 2004, authorised tougher interrogation techniques during a brief period in September 2003 during which the abuses are alleged to have been carried out.

But the inspector general's report says it has found no evidence that he was guilty of dereliction of duty.

Among the mitigating circumstances it lists:

* Initially, US military command was short of senior officers
* Gen Sanchez had to focus on an upsurge of insurgent violence
* He was under pressure to find ousted Iraqi leader Saddam Hussein.

Gen Sanchez's three top aides, including his deputy, Gen Walter Wojdanowski, have also been exonerated, the US officials said.

But Brig Gen Karpinski has been send a written reprimand and relieved of her command.

In the past, she has vowed to fight any measures against her.

She told the BBC last year that had been made a "convenient scapegoat" for abuse ordered by others at the top, including Gen Sanchez.

Human rights groups have criticised the latest findings, full details of which are to be made public after members of the US Congress are briefed.

"What this decision unfortunately continues is a pattern of exoneration and indeed promotion for many of the individuals at the heart of the torture scandal," said Amnesty International spokesman Alistair Hodgett.

"It only serves to underscore the desperate need for an independent investigation that will scrutinize the policy decisions and the individuals who made and implemented them in a manner that will expose the truth," Mr Hodgett told Reuters news agency.

© 2005 BBC News


Union Participation in Strategic Decisions of Corporations

This article was written way back in 2001, but it is one of the most interesting pieces I've read on corporate governance. I'm only posting the link because the paper is so long.

Bush ineffective in energy agenda

Bush Faces Hurdles on Energy Agenda

Sat Apr 23,11:16 PM ET

By TOM RAUM, Associated Press Writer

WASHINGTON - Running for president five years ago, George W. Bush pledged to jawbone energy-exporting nations to keep oil prices low and to win passage of legislation to spur more domestic energy production.

Delivering on either count has proved difficult for the Texas oilman.

Soaring oil and gasoline prices are beginning to take a toll on U.S. economic growth and on Bush's approval ratings. To get his long-stalled energy agenda passed, the president is putting more of his political prestige on the line.

The House voted 249-183 last week for White House-backed legislation that would give tax cuts and subsidies to energy companies and open a wildlife refuge in Alaska to oil exploration.

At a meeting Monday at his Texas ranch, Bush is promising to press Saudi Arabia's de facto ruler, Crown Prince Abdullah, to do more to help ease global oil prices.

Still, the president acknowledges that there is little that he or Congress can do to quickly lower gasoline prices, which have climbed past $2.20 a gallon nationwide.

Critics also claim that Bush's energy bill does little to promote conservation or alternate energy approaches, and that he has done little of the lobbying of oil-country leaders that he promised during in his first presidential campaign.

Robert Ebel, an energy analyst at the Center for Strategic and International Studies, said nothing that Bush is proposing "is going to have any immediate, or even near-term impact" on prices.

He said Bush is responding politically to consumer concerns that "gasoline prices are high, we haven't yet entered the summer driving season, and what is the president going to do about it?"

Ebel said increasing world demand for oil, particularly from fast-growing China, and lack of new refineries in the United States will exacerbate the problem for years.

With his Social Security overhaul plan winning few converts, Bush may find that promoting his energy agenda has a more immediate political payoff for jittery Republicans.

In a speech last week, Bush said high prices are "like a foreign tax on the American dream." He challenged Congress to send him an energy bill by August and described the proposal as making energy "more affordable and secure" in the future.

Similar legislation passed the House twice in Bush's first term, only to bog down in the Senate under a Democratic filibuster that was waged, in part, to protest possible exploratory drilling in the Arctic National Wildlife Refuge in Alaska.

Crude oil prices have risen 40 percent in the past year. But finding ways to curb them pose a particular dilemma for Bush — complicated by his own actions.

The war in Iraq, for instance, limited Bush's influence among Persian Gulf oil-producing nations.

The president recently ruled out releasing oil from the nation's emergency stockpile, saying he would only tap the 700 million barrel reserve in a national crisis.

Bush criticized President Clinton for tapping into the reserve in 2000, suggesting it was a political gesture to help Vice President Al Gore, then Bush's Democratic rival for the White House.


Bush also criticized the Clinton administration for not lobbying the Organization of Petroleum Exporting Countries, saying Clinton "must jawbone OPEC members to lower prices." Yet as president, Bush mostly has emphasized that market forces should set world oil prices.

In a CNBC interview, Bush said he would press the Saudi crown prince to boost production. "I'll be talking to our friends about making sure they understand that if they pinch the world economy too much, it'll affect their ability to sell crude oil in the long run," Bush said.

Still, he said, there was a chance the Saudis already were pumping crude at "near capacity" levels. Ahead of the crown prince's visit, Saudi Arabia said it would do what it could to step up oil production.

Saudi oil minister Ali Naimi said the kingdom is now pumping about 9.5 million barrels per day and could increase that to 12.5 million barrels per day by 2009 if necessary to maintain "market stability."

But, he told a conference in Paris, "The measures taken by OPEC in general and by Saudi Arabia in particular are only a few factors among those which affect oil prices; consequently, our influence is limited."

Bush's expected appeal to the Saudi leader already is drawing scorn from some Democrats. "The president is right to meet with this powerful man, but it is wrong that the leader of the United States must ask favors from a foreign prince," Rep. Ed Markey, D-Mass., said Saturday in his party's weekly radio address.

Jerry Taylor, an energy analyst at the Cato Institute, a Washington-based think tank that advocates less government regulation, said the idea that "jawboning OPEC or arranging for nice relations with OPEC will somehow get us more oil is utter illusion."

"The Saudis will produce as much oil as they think is necessary to maximize revenue. Period," Taylor said. China's rising thirst for oil, not supply shortages, is the main factor driving up global oil prices, he and other oil analysts suggested.

Wednesday, April 20, 2005

CEO Pay Soars, While Middle Class Struggles

by Christian E. Weller and John Alexander Burton
April 12, 2005

Four years into the business cycle, the fortunes of CEOs and middle-class families are pulling further apart. While inflation adjusted earnings in 2004 were on average below those in 2003 and 2002, CEO pay soared. For all of 2004, the typical CEO received $9.3 million. For those CEOs for whom data were also available for 2003, this meant an increase of 33 percent from 2003 to 2004. This meant that in 2004, CEO pay climbed to 240 times the average pay of a production non-supervisory worker, the vast majority of America's private sector work force, up from 185 times in 2003 (figure 1).

CEO compensation varied by industry. While the typical CEO was paid millions of dollars in 2004, compensation for the typical CEO ranged from $3.8 million in consumer services to $17 million for CEOs in oil and gas (figure 2). Similarly, gains in typical CEO pay varied. CEO compensation in oil and gas led the way with a typical gain of 109 percent, whereas CEOs in the telecommunications industry saw their compensation actually decline slightly (figure 2). Yet CEOs in the telecommunications industry still remained the second most highly compensated CEOs, after those in oil and gas.

The divergent trends between the compensation for workers and the compensation for CEOs reflect the fact that much of this recovery has been an "upside-down" economy. While workers typically see strong gains in a recovery and tend to reap the majority of economic gains during that period, this recovery has been marked by slow income growth for workers and record profit gains for corporations. CEOs at increasingly profitable companies have therefore seen their compensation greatly exceeding the fortunes of America's workers, who continue to struggle to make ends meet.

Christian E. Weller is a senior economist at the Center for American Progress and John Alexander Burton is a research associate at the Center for American Progress.

The orgy continues: American CEOs pocket billions more in pay and perks

By Jamie Chapman
14 April 2005

The unfathomable and growing wealth of the tiny elite who sit atop the corporations in the United States has been freshly documented by a series of reports released in the last two weeks. A USA Today survey of 100 of the largest public corporations showed a median increase of 25 percent in the total compensation of chief executives to $13.7 million last year.

Another survey of 200 large companies performed for the New York Times, found the average CEO compensation to be almost $10 million—excluding profits made on stock options—up 12 percent over 2003.

Meanwhile, the average full-time worker over age 25 struggles to get by on a mere $683 a week, an increase of less than 1 percent over last year. At that rate, typical non-supervisory workers—who constitute 80 percent of the workforce—would have to work for more than 385 years to achieve what the CEO brings home in just one.

Among the top earners last year was George David of United Technologies Corp. He cashed in $83.6 million of stock options, in addition to his straight compensation of $11.8 million for 2004. Lew Frankfort of Coach, Inc., a manufacturer of leather handbags and other fashion accessories, pocketed $84 million on stock options, along with a grant of an estimated $120 million worth in new ones.

The corporate largesse applies not only to CEOs of companies that are producing high profits, but also to those whose companies are doing poorly. Blockbuster chairman John Antioco received a salary and bonus of $7 million, even though his company lost $1.25 billion last year. In addition, he awarded himself 5 million stock options plus restricted stock valued at nearly $27 million.

Shares of pharmaceutical manufacturer Merck, Inc. dropped 30 percent after it was forced to withdraw its profitable painkiller Vioxx from the market, following revelations of its role in thousands of deaths. CEO Roy Gilmartin did not suffer, however. He still received a $1.4 million bonus for meeting “personal performance objectives,” in spite of operating results well below target. Gilmartin’s total compensation for 2004 rang up to $5.9 million.

A day after Ford Motor Co. revealed that it gave its chairman William Clay Ford, Jr. a pay boost of 51 percent last year to $22 million, the company announced a sharp decline in projected earnings. As with its rival General Motors, the automaker is not expecting to make a dime on its manufacturing operations, as opposed to the $1.5 billion previously forecast. Sales are declining, and the bond-rating agency Standard & Poor’s issued a “negative” outlook for Ford. The next step would be a reduction of the company’s credit ratings to junk status.

While the CEOs continue to rake it in, conditions for the workers who make the gargantuan salaries possible continue to deteriorate. Most auto workers are hard pressed even to put gas in their own cars, with prices averaging more than $2.20 a gallon even before demand picks up for the summer driving season.

Unemployment in Michigan, home base for Ford and General Motors, stands at 7.5 percent and rising. Census figures in Detroit show a child poverty rate of 35 percent. Fully 60 percent of Detroit’s children live in households with no parent who holds down a full-time job.

What the figures on executive compensation show is how much social wealth the tiny elite appropriates for their personal bank accounts. The huge sums the corporate executives are allocating to themselves today are far beyond those of prior decades. More and more, a financial oligarchy has wrested control of society. In no way do these oligarchs consider themselves accountable to the sentiments of ordinary people.

The corporate greed associated with such names as Enron and WorldCom has not at all disappeared. The outright criminality that led to the destruction of workers’ jobs and retirement security—as well as the fleecing of consumers by the millions—only a few years ago has continued unabated, as witnessed in the recent scandals that forced out the CEOs of insurance giants American International Group and Marsh & McLennan.

A similar process of looting corporate assets has become so widespread that the CEOs carry it out openly and unashamedly. The giant accumulations that they once got away with by “cooking the books” have become a perfectly normal and often legal process. The measures usually are approved by the boards of directors, most of whom are members of the same CEO club.

A sliver of the population, numbering perhaps a few hundred thousand, lead lives that are barely imaginable to the average American. These corporate chieftains and their coterie think nothing of dropping $100,000 on a weekend. The typical CEO earns more in a day than most workers earn all year—not even mentioning the millions of unemployed or others unable to work.

While these layers are gorging themselves, the rest of the country is footing the bill. The lavish lifestyle of the elite is fed in part by the tax cuts on wealthy individuals and on the corporations. Further huge cuts in government programs to assist the poor, such as housing and health care, are on the agenda. This transfer of wealth from the working class to the oligarchs is what sustains the exorbitant salaries and other perks the executives are racking up.

While greed plays a substantial role in this process, the universal nature of the phenomenon demonstrates that more than the subjective mindset of a few individuals is at work. Objective factors inherent in the working out of capitalist accumulation must be fundamental.

One of the key elements in allowing this to happen has been the utter collapse of the labor movement. Marked especially from the betrayal of the strike by air traffic controllers in 1981, the AFL-CIO unions have ensured the defeat of one workers’ struggle after another. As a result, workers have had no defense against the onslaught of wage cutting, plant closures, layoffs and restructuring.

Taking their cue from the targeting of pension plans by the airlines, the Detroit auto makers now have their sights set on what they call “legacy” costs, or those associated with retirement, job security protections and health care—benefits won by workers over 70 years’ time.

The sharp rise in social inequality and the prevalence of swindling in the upper echelons of society bespeaks a general irrationality that simply cannot endure. The pressures building up in American society must reach the point of exploding sooner rather than later.


Tuesday, April 19, 2005

No Free Lunches for Pensioners

Published on Tuesday, April 19, 2005 by the Guardian (UK)
No Free Lunches for Pensioners
Bush's deceptive plans for the US social security system show why privatisation is not the answer to the global pensions crisis

by Joseph Stiglitz
It is almost an optical illusion: looming on Japan's horizon, and on Europe's and on America's, is a pensions crisis. The problem is real, though exaggerated. The illusion is in some of the plans being devised to deal with it.
The main question is whether privatising pension systems, as George Bush has proposed for social security in the United States, would solve the problem or merely make matters worse. With many countries pondering whether to adopt variants of the Bush plan, the question requires careful examination.

By itself, privatisation is clearly not the solution. America's troubled private pension system - now several hundred billion dollars in debt - already appears to be heading for a government bail-out. There was a time when privatisation - allowing individuals to set up individual savings accounts - seemed better than social security, which invests in lower-yielding Treasury bills (government bonds). Advocates of privatisation argued that funds would do much better if invested in stocks, predicting a return of 9%.

But the stock market does not guarantee returns; it does not even guarantee that the stock values will keep up with inflation - and there have been periods in which they have not. America's social security system insulates individuals against the vagaries of the market and inflation, providing a form of insurance that the private market does not offer.

It does so with remarkable efficiency. The costs of managing the social security system are far smaller than those likely to be associated with privatised accounts. This is understandable: private investment firms spend an enormous amount on marketing and salaries.

It is possible that to reduce these transaction costs, Bush will propose restricting choice, which was the main argument for privatisation in the first place. But these limited kinds of choices - for example, a T-bill fund with 90% in T-bills and 10% in an indexed stock fund - could easily be introduced into the public social security system.

Bush says that reform is urgently needed, because the system will be insolvent in about a quarter of a century. But the problem depends on America's growth rate: if the growth rates of the late 1990s return, there is no problem. Even if there is a problem, it can easily be fixed: spending a fraction of the money that went into Bush's two tax cuts would have fixed social security for 75 years; slight benefit cuts, adjusting the age of retirement, or minor adjustments in the level of contributions could fix the system permanently.

Moreover, Bush's proposals won't fix social security - unless they are accompanied by drastic benefit cuts. For how could they? He proposes diverting almost a third of the social security tax to private accounts. That means less money coming in. If benefits are not reduced, the gap between receipts and expenditures will increase. One doesn't need a Nobel prize to figure that out.

So privatisation would not protect retirees against the social security system's insolvency; it would merely add enormously to today's fiscal deficit, because partial privatisation entails diverting money to private funds that would have been used to close the gap between government expenditures and revenue.

The anticipated increase in the fiscal deficit is striking. The central plan discussed by Bush's council of economic advisers would - according to the council's own estimates - increase America's fiscal deficit by $2 trillion over the next decade. Advocates of privatisation claim to believe in markets, but they are proposing budget gimmickry that would move those losses off the books, as if markets could be easily fooled.

America and the world should remember: Argentina's privatisation of its pension system was at the centre of its recent fiscal woes. Had Argentina not privatised, its budget would have been roughly in balance. The US is starting on its privatisation venture with a fiscal deficit of 4% of GDP.

Privatisation advocates insist, however, that investments in stocks would yield sufficiently higher returns to give individuals the same retirement income as before, with the surplus used to fill the gap. But if markets are working well, then returns will be higher only because risk is higher. There is still no free lunch in economics.

With higher risk, there is a chance that, 40 years from now, many individuals will find themselves with less than they need to retire. But if one really thinks that free lunches exist, there is still no reason to privatise: the government could get the additional returns by investing in the stock market itself. Indeed, President Clinton proposed doing just that.

With increased transaction costs, worsening solvency for the system, increased budget deficits and decreasing benefits and security for retirees, why the drive for privatisation? One reason is the interest financial markets have in grabbing a piece of all those transaction costs. A second is the Bush administration's ideological hostility to the modest amount of wealth redistribution implied by the public system. America's social security programme has been so successful in reducing poverty because the poor get back a little more than they contribute, and the rich get back a little less.

Even with social security's mildly redistributive effect, poverty and inequality in America are increasing. Privatisation will only make matters worse.

Bush has tried to scare America about the magnitude of the problem, and he has tried to fool America about how privatisation would solve it. The social security deficit pales by comparison with the deficits created by Bush's huge tax cuts for upper-income Americans or in comparison with the deficit in Medicare, which provides healthcare for the aged. Why has he ignored these problems? Is there another agenda?

Joseph Stiglitz is professor of economics at Columbia University and a Nobel prize winner. Project Syndicate

© 2005 Guardian Newspapers, Ltd.


Sunday, April 17, 2005

Japan and China Tensions and Washington’s Asia Geopolitics

William Engdahl writes in Global Research:

Coinciding with the re-election of George Bush we have seen a significant and strategic shift in US China policy. The shift involves a major upgrade of the US military security relationship with Japan. It portends major consequences for the dollar and world economic growth. Not surprisingly, the shift coincides with the near frantic efforts by China to secure energy security, particularly in oil and natural gas, through major deals with Iran, Russia, Canada and Venezuela, sometimes referred to as the BRIC alliance group of states.

The March visit to Tokyo, Seoul and Beijing by Secretary of State Condoleezza Rice, underscored the new Administration policy of trying to set Japan into motion against the growing economic and political clout of China in the region. The consequences of a new and deepening strategic opposition between China and Japan for world economic and financial health are potentially considerable.

In Tokyo March 21 Rice declared that Japan would be the ‘umbrella’ for US policy (read Trojan Horse) in Asia, since both Tokyo and Washington "have already chosen a common set of values and understandings" (sic). She went on to cite the "rise of China as a new factor in global politics." True enough, but the tone was markedly negative in comparison to US China policy since September 2001. "The internal evolution of China is still undefined" Rice added, naming "issues of freedom of religion, human rights…Taiwan" as "matters of concern that could take a wrong turn." She stated, provocatively, "we want to prod, push and persuade China…" The fact that she chose Tokyo to deliver the remarks was no doubt understood clearly enough in Beijing. Washington has put China squarely and openly on its radar screen for potential "regime change" and other fine things.

During her Asia tour Rice repeatedly stressed that Washington would back Japan in the region and supported the Japanese desire for permanent UN Security Council veto status. In Tokyo she called on Japan and other countries in the region to unite and demand that China "eventually embrace democracy." She openly opposed the recent effort of the European Union to lift the 1989 arms embargo on China as well, and warned of a new Chinese threat against Taiwan.

Not surprising, Washington is moving in a classic balance of power style to set Japan, the weaker of two rivals, in motion, in order to counter the growing influence of China, the larger rival, in the enormously important Pacific region. Last December, under US "encouragement" the Koizumi government issued its 10-year defense program which for the first time openly named China as a potential threat. Two months after, in February, Japan explicitly agreed with Washington that the Taiwan Strait was a "common strategic concern" of Washington and Tokyo.

This is the first time Japan has involved itself so directly in the postwar period in the Taiwan issue, and was, not surprisingly, viewed in Beijing as a brazen interference in China’s internal affairs. To add oil to the fire, on February 9 Tokyo announced the Japanese Coast Guard would officially take control of the disputed Senkaku Islands (Diaoyo in Chinese). As well Japan was the only major nation outside the USA to oppose the EU plans to end the China arms embargo.

Washington has repeatedly urged Japan to rearm and increase its military profile, as well as promising Taiwan that should China use force to prevent a Taiwan declaration of independence, the US would go to war on its behalf. Little wonder that anti-American sentiment in the region is rising.

Pentagon hawks refer to Japan as the "Britain of the Far East," a reference to the wartime and current US-UK historic "special relationship" in military and other strategic affairs. They see Japan, like Britain, as a geopolitical "island power." Their idea is evidently to use Japan as a proxy against North Korea and China. The US nurturing of Japanese military ambitions intersects Japanese rising nationalism and fear of Chinese domination economically. This is a volatile combination in every respect.

In addition to changing the Japanese Constitution recently to allow "out-of-area" military missions, i.e. not Japan defense related, Tokyo is also in advanced talks with the Pentagon on building enhanced US command and control base facilities in Japan and cooperation on missile defense as well as force deployment. Washington wants to relocate its Army 1st Corps from Washington State to near Tokyo, under command of a 4-star General. According to the Asia pacific Center for Security Studies’ Carl Baker, "The US is moving to restructure its alliance with Japan, to make it an enhanced maritime alliance. What had been implicit is now more explicit."

Washington is also reportedly eager to get Japanese help in its floundering anti-missile defense project and especially, Japanese money. Some even speculate with growing Japanese military assertiveness, Japan could rapidly join the nuclear club as it has all relevant technology at hand. It only lacks a nuclear capable submarine fleet.

The Koizumi cabinet at present contains no single member deemed ‘pro-China,’ remarkable given the enormous economic importance of the China relationship. Koizumi has been wooed by Bush including a trip to the Holy of Holies, the Crawford Ranch. He has sent troops to Iraq, and personally endorsed Bush’s reelection. His cabinet members are markedly pro-Taiwan and anti-Beijing according to Asia expert, Chalmers Johnson.

This is the background in which China passed its new Anti-Secession law on March 14. It was a clumsy Chinese response to an escalation of pin-prick provocations, carried out by Tokyo but quietly backed by Washington. That Beijing move played well into Washington hands as it made the position of France and Germany suddenly untenable vis-à-vis embargo lifting, and escalated regional tensions significantly, polarizing the relations between South Korea and China on the one and Japan on the other side. This is a major blow to quiet systematic efforts of those countries to build regional trade and economic co-operation.

Korea also a Tokyo/Washington target

There are other provocations including a Japanese school textbook whitewashing Japanese war crimes in the Korean and Chinese theatres. This year is nominally Korea-Japan Friendship Year.

In terms of South Korea, Japan created deliberate tensions when the Japanese Ambassador to Seoul, Takano Toshiyuki, declared that Japan asserted sovereignty over the disputed Takeshima islands, stirring old anti-Japan sentiment in Korea.

Washington is playing a less-than-honest broker role in the North Korea nuclear dispute as well.

The entire region from Korea to Taiwan is part of one strategic complex which threatens to go badly and quickly awry to the detriment of the world economic and finance flows. In response to the new Japan-USA front against China on Taiwan, China has reacted with coolness on trying to mediate a Korean solution. To the US-Japan "Taiwan Card" game, China is apparently playing at the moment its "Korea Card" game. China controls most North Korea trade and has decisive influence there. The London Financial Times recently noted that Beijing was "fearful of a unified Korea friendly to the US" and was content to keep the Korean status quo and draw out the nuclear talks. This is a distinct new tack for China which has been more than cooperative in efforts to settle the Korean dispute since September 11 2001.

Rice also gave clear low priority to South Korea during her visit and refused comment on the Korean protest over the Dokdo islands dispute with Japan, a move seen as a humiliation in Seoul. The issue is not at all minor in Korea. On March 23 President Roh Moo-Hyun urged his countrymen to prepare for "diplomatic war" with Japan over the islands, accusing Japan of failing to amend past wrongs against Koreans. He also attacked Koizumi for repeated visits to the Yasukuni Shrine for Japanese war dead, where General Tojo and other high-level war commanders are also buried.

Significantly, Roh declared, "There could be a hard diplomatic war…that may reduce exchanges (i.e. trade) in various sectors and cause economic difficulty." Fasten your seatbelts, hedge fund traders, this could be a rocky ride ahead for the dollar if they follow through this time with action not just rhetoric as the Korean Central Bank did a month ago, when they hinted at plans to shift from dollar to Euro and other reserves, only to "correct" the statement the next day.

Prior to September 11, Bush Administration Pentagon strategists were pushing to make China and the Korean issue its prime strategic threat focus. The post-9.11 obsession with toppling Saddam Hussein led to a shift in Washington priorities until recently. Now, by quietly encouraging Koizumi with its stick-carrot diplomacy, Washington is lighting fires which have lain dormant for decades. Chinese recall well that during the war, Japan was responsible for more than 23 million Chinese fatalities.

According to Japan specialist Chalmers Johnson, LDP member Shinzo Abe is a likely front-runner to become successor to Koizumi later this year. Abe, grandson of the former Prime Minister, has profiled himself as a hawk on the threat posed to Japan’s security by North Korea. His political career according to Johnson is as a Korea-basher, fanning Japanese security fears. Other Koizumi cabinet members including Defense Agency chief Yoshinori Ono and Foreign Minister Nobutaka Machimura, are open militarists. One quid-pro-quo demanded by Washington for US support of Japan’s UN Security Council bid is that Japan change its "Pacifist Constitution" and permit military deployments outside Japan. The message is not lost on China and South Korea.

Significantly, prior to the recent Japanese provocations, Beijing under President Hu Jintao had made clear moves to moderate relations with its important Japanese trade partner. It named a Chinese moderate as Ambassador to Tokyo and gave red carpet treatment to the September 2004 visit of the Japan Diet House of Representatives. Very significantly, Hu also proposed joint Sino-Japan exploration for oil in the disputed offshore region between the two. There is no economic security issue more important in Beijing than oil.

At the recent ASEAN Summit, Hu personally requested Koizumi end his visits to the war shrine in the interest of the growing friendship with China. Koizumi, no novice politician, replied with an insult to Hu, stating it was time China ‘graduated’ from status of being a recipient of Japanese development aid. The loss of face intended by Koizumi was clear, as Japan, the wartime occupier posed arrogantly as the ‘teacher’ of China today in economics.

China Premier Wen replied angrily in his speech at ASEAN that China always regarded the Japan aid payments as compensation in lieu of payment for war damages.

After last year’s May elections Chen Shui-bian was narrowly reelected and he named as Ambassador to Tokyo (informal) Koh Se-kai who lived in Japan for 33 years and is well-connected to Tokyo power circles. The Taiwan Parliament acted to bloc the attempt of Chen in August to amend the constitution to favor independence. In December Chen again lost a major bid to elect a Parliament majority and his proposed $20 billion US arms purchase apparently went down with his election loss.

Significantly, relations between Taiwan and China would likely resolve peacefully were there no outside interference. According to Johnson, Taiwan has invested $150 billion into China’s economy and under Chen Taiwan has opened trade and transport across the Taiwan Strait to China. China is in no position to make a military confrontation with either Japan or Washington, and Washington well knows that. In its December Defense White paper, Beijing stated, "so long as the Taiwan authorities accept the One-China principle and stop their separatist activities aimed at ‘Taiwan Independence’ cross-straits talks can be held at any time on officially ending the state of hostility…"

In 2004 the EU replaced Japan and the USA as China’s largest trade partner, a factor behind the EU push to lift China sanctions on arms. That trend opens up a very real prospect of an Eurasian counterweight to the overwhelming ‘800-pound gorilla’ in Washington. China’s trade with the EU in 2004 was worth 177 billion dollars, while US trade was worth 170 billion and Japan trade worth 168 billion dollars.

In the longer-term Japan faces a daunting demographic challenge. According to former World bank China Department head, S.J. Burki, by 2025 China will likely be the world’s largest economy. Japan at the same time is pre-programmed to decline dramatically with drastic population shrinkage after 2010, that is in five years. Japan’s male population in 2004 already declined by a small percent. At the same time, Burki notes China will likely demographically stabilize around 1.4 billion people and is heavily weighted, owing too their population policy, to males. Compared to Japan and the USA, China is relatively debt free and its external debt is small and covered by trade surpluses.

The background for the shift in Washington China policy is not hard to find. The recent China energy diplomacy with India, Russia and Brazil and Iran, as well as other strategic moves to secure some form of economic security after the Iraq war, has not gone unnoticed in Washington. The response to date, as noted earlier, is classic balance-of-power manipulation to set Japan against China and Korea, playing on Japanese fears of an emerging China superpower.

The risk for Japan is not small. In the past decade, especially the past 5-6 years Japanese industry has massively invested in outsourcing to China for its manufacture. Between 2001 and 2004 Japanese exports to China rose 70%. At the same time China dependence on Japan has diminished. During the 1990’s Japan was China’s most important trade partner. By 2004 the EU had replaced them followed by USA and then Japan as third. Over the past several years, ASEAN trade and investment has markedly shifted from the US to China as main focus.

The risk for the United States, and the hawkish Bush II Administration, with neo-conservatives or hawks in most key policy posts from the State Department to the UN Ambassador John Bolton, and now Paul Wolfowitz at the World Bank, is also not minor. Bolton, formerly dealing with Asia, and North Korea from the State Department, is openly pro-Taiwan independence and was previously a paid consultant to the Taiwan government, hardly neutral credentials.

China holds one weapon it could conceivably use if pressure from Washington and Tokyo increases as it clearly seems set to. The Bank of China holds some 610 billion dollars in US Treasury debt. Japan holds more, some 840 billions, but the size of China’s holding is still strategic. At present, with the dollar dependent on huge daily inflows of foreign investment to avoid crash, were China, the world’s second largest dollar holder after Japan, to decide to even temporarily boycott dollar purchases, let alone to begin selling holdings of same, it would force Japan to again turn on the inflationary printing presses as it did in March 2004. Or there would be danger of dollar free-fall. Yet Japan is ill-equipped to repeat the Herculean dollar rescue of March 2004. The recent comments by the South Korean government about shifting from dollar to Euro assets, even though ‘retracted’ the next day, suggest that Korea and China could be brought to such drastic measures or threat of same if the pressure rises.

Notably in this light, there are indications that trade between Japan and China has already begun to suffer. In February, Japan’s trade surplus with China shrank year-on-year for the second month in a row. It fell 22% to ten billion dollars, three times worse than forecast in Japan. More than one third all Japanese exports today go to China according to OECD data. Japanese economic growth is not looking robust and talk of entering yet another recession is growing.

For now these tensions remain as background factors, but the trends have become clear enough to warrant growing concern in the region. Any escalation on any front could have devastating consequences for world economic growth and even for world peace.

Wednesday, April 13, 2005

Is Cheap Broadband Un-American?

Is Cheap Broadband Un-American?
by Timothy Karr
We have Big Media to thank for saving Americans from themselves. Just as the notion of affordable broadband for all was beginning to take hold in towns and cities across the country, the patriots at Verizon, Qwest, Comcast, Bell South and SBC Communications have created legislation that will stop the “red menace” of community internet before it invades our homes.

And to think that Americans might want to receive high-speed access at costs below the monopoly rates set by these few Internet Service Providers (ISPs).

Today, monthly broadband packages offered by the national carriers hover above $50, barring access to millions of Americans who can’t afford the sticker price. Cities and towns across the country have taken up the task of building a cheaper alternative -- often choosing easy-to-build wireless mesh networks -- to bridge the gap that has kept many on the darker side of the digital divide.

Telecommunications giants have mobilized a well-funded army of coin-operated think tanks, pliant legislators and lazy journalists to protect their Internet fiefdoms from these municipal internet initiatives, painting them as an affront to American innovation and free enterprise.

Their weapon of choice is industry-crafted legislation that restricts local governments from offering public service Internet access at reasonable rates. Laws are already on the books in a dozen states. This year alone, 10 states are considering similar bills to block public broadband or to strengthen existing restrictions.Spinning broadband as theirs alone to provide, ISPs have chalked up some early victories—including a draconian law now on the books in Pennsylvania, which strips local governments of the right to choose their own homegrown broadband solutions without the prior approval of a monopoly phone company. In late 2004, Verizon dictated the law word-for-word to local legislators, who then quietly slipped it into the middle of a 72-page bill that appeared to call for improved communications infrastructure for all Pennsylvanians.

It will have the opposite effect.

Forcing public broadband networks to ask permission from Verizon before offering service is akin to forcing public libraries to ask permission from Borders before checking out books.

Meanwhile, the United States has slid from first to thirteenth place in national broadband penetration, falling behind South Korea, Japan and Canada, where effective private-public sector initiatives have paved over the digital divide, allowing more citizens to reap the economic benefits of the open information era at a fraction of the costs we take for granted.

Not so in the United States. A nation that once prided itself as the global pacesetter in technological innovation and affordable communications is now held in the thrall of corporations eager to keep a basic 21st Century right—the right to connectivity—from citizens who can’t afford their exorbitant access fees.

How has America fallen so far back?

The struggle for accessible, locally provided broadband has been building for several years. But it didn’t hit the corporations’ radar until the middle of 2004, when larger cities such as Philadelphia and San Francisco recognized broadband access as a basic public utility—no different from water, gas or electricity—that they could provide.

It’s easy to understand the local appeal. Broadband networks have proven a win-win for municipal governments: Community internet creates free-market competition for communications services, improves schools, enhances public safety and social services, and encourages entrepreneurs through public-private partnerships. These networks are relatively cheap to build and bring technology—and resulting economic opportunity—to low-income urban neighborhoods and rural communities that are routinely passed over by the large commercial providers.

For consumers and citizens, low-cost broadband is extremely popular. Across the country municipal referenda and city council measures in favor of building public broadband pass easily—in some cases offering not only community Internet, but also television and telephone service.

“Access to the Internet today is as much a necessity of life as the more traditional services and should be available to all,” says Jonathan Baltuch, an economic development consultant from St. Cloud, Florida, a city that voted to provide citizens with a wireless network covering 30 square miles.

According to Baltuch, St. Cloud’s municipal network has yielded a considerable return to residents. Prior to the city’s broadband network, a St. Cloud resident paid on average $450 a year for commercial Internet access. Today they pay on average $300 a year in property taxes—money that not only provides broadband access but also supports efforts to keep city streets clean, pick up residential garbage and provide for local police and fire protection. “By the city providing this one service to its residents the average household savings will be 50 percent more than the average tax bill for all city services,” Baltuch says. “Further the $3 to $4 million per year that is leaving the city to flow to corporate headquarters all over the country will stay in the local economy.”

Philadelphia decided to follow suit. Last year, Mayor John F. Street announced plans for “Wireless Philadelphia” a project that by next year will provide the city's population of 1.6 million, spread out over 135 square miles, with a full range of Internet services.

It was at this point that the incumbent ISPs began to show their horns. The ISPs is loath to loosen their stranglehold on a market that, according to the Telecommunications Industry Association, could yield $212.5 billion in revenues by 2008.With so much at stake, it was time to mark out their territory and smother municipal broadband projects wherever they began to take root.

The goal was simple—legislate competition out of existence. But to do so the industry needed allies in its fight against local choice. It found them easily among state representatives willing to sell statehouse votes to fill their campaign coffers, and Washington-based think tanks—such as the Cato Institute and the New Millennium Research Council (NMRC)—willing to produce “research” that pleased their corporate funders.

To this mix of industry sock puppets add a gullible media. In a finely targeted media campaign, the “evils” of municipal broadband were pressed upon local journalists who were willing to echo corporate concerns without digging for an opposing view. Too often, local papers failed to follow the money that linked their sources at the Cato Institute and NMRC to the industry—taking at face value comments and data from these think tanks without revealing the conflicts of interest that would impugn their research.

A report discrediting community Internet issued by NMRC, for example, has been cited nearly a dozen times by journalists in the two months since its release. Not a single reporter bothered to let readers in on the fact that the NMRC receives money from the same corporations whose policy positions it just happens to profess.

On February 17, the battle over access finally graced the front-page of the New York Times, with a story pegged to Philadelphia’s ambitious plans to turn the city into “one gigantic wireless hot spot.” The first quote by Times writer James Dao went to Adam Thierer, identified as “director of telecommunications studies at the libertarian Cato Institute.” He told the Times: “The last thing I’d want to see is broadband turned into a lazy public utility.”

Dao failed to note that the Cato Institute is funded by Verizon, SBC Communications, Time Warner, Comcast and Freedom Communications. Dao then interviewed David L. Cohen, executive vice president of Comcast, who also disparaged community networks.

Again, Dao failed to alert readers to Cohen’s web of interests that might impugn his integrity. In a previous incarnation, Cohen served as chief of staff to then Philadelphia Mayor Edward Rendell. Rendell has since moved into the governor’s mansion, while Cohen jumped to the private sector. This relationship might explain why the governor ignored widespread public opposition and signed into law last December the bill that shafted Pennsylvania communities seeking to offer homegrown broadband services.

These corporations say that they’re shutting down homegrown broadband efforts to safeguard the best interests of American free enterprise. But, as Dianah Neff, Philadelphia’s chief technology officer, asked in a recent column for ZDNet: “When was the last time they were elected to determine what is best for our communities? If they’re really concerned about what is important to all members of the community, why haven’t they built this type of network that meets community needs or approached a city to use their assets to build a high-speed, low-cost, ubiquitous network?”