Thursday, May 31, 2007

Why unions are key to protecting workers' rights

Dean Baker and Mary Beth Maxwell have written a short but solid Op-Ed in support of organized labor in general and the Employee Free Choice Act over at Common Dreams. They begin the article by stating that "one of the basic rights that workers are supposed to enjoy, under both US law and international treaties to which we are a signatory, is the right of free association at the workplace, including the right to form a union. While workers do, in principle, have a right to form a union, this right has been largely undermined by management practices over the last quarter-century."

Considering that the US arguably has the bloodiest history of labor of any industrialized nation on Earth, and the role organized labor has played in ensuring rights for workers as well as confronting child labor, pushing for a 35-hour work week and helping establish the country's first minimum wage legislation, it is impossible to understate unions' continued necessity in the anti-worker business environment which characterizes 21st Century America. The Bush-appointed NLRB, which in principle should exist as a redress for workers mistreated by their employers, has been stacked so heavily with anti-labor members as to render it useless as a arbitrator and enforcer of workers' rights.

The article cites a study by John Schmitt and Ben Zipperer at the Center for Economic and Policy Research which found that one in five union organizers can expect to be fired during an organizing drive. From the study, we learn that:
According to the NLRB data . . . since about 2000, pro-union workers involved in union-election campaigns have seen a substantial increase in their likelihood of being fired illegally. In the 1970s, a pro-union worker involved in a union-organizing campaign faced about a 1-in-100 chance of being fired illegally. The probability of being fired reached its historical peak in the first half of the 1980s, with about 1-in-42 pro-union workers being fired illegally.

From the second half of the 1980s through the second half of the 1990s, the likelihood of a being fired declined steadily but remained high, reaching about 1-in-87 pro-union workers by the end of the period. From 2000 on, however, the likelihood that a pro-union worker would be fired in a union-election campaign has jumped sharply --to about 1 in every 53 pro-union workers
And according to Baker and Maxwell:
Without a union, workers have few rights at the workplace. Employers can fire workers at almost any time for almost any reason -just ask the 3,400 Circuit City employees the company plans to lay off and replace with cheaper workers. While good employers will treat workers with respect, even if they don’t have a union, many workers are not fortunate enough to have good employers. That is why more than 20 million workers don’t have health insurance, and nearly a quarter of the workforce has no paid vacation or paid time off. These workers can be told by their employer that they must come to work on Thanksgiving or Christmas, or they won’t have a job the following day.

Union workers are far more likely to have paid time off, health care and pensions than their nonunion counterparts. They also tend to earn better wages. The decline in unions is one of the key factors that led to the enormous upward redistribution of income over the last quarter-century. Finally, union workers don’t have to worry about being fired because their boss is in a bad mood.

See also this briefing paper from the Economic Policy Institute from 2003 on "How Unions Help All Workers". Here are just a few examples of how unions benefit working Middle Class Americans:
1. Unions raise wages of unionized workers by roughly 20% and raise compensation, including both wages and benefits, by about 28%.

2. Unions reduce wage inequality because they raise wages more for low- and middle-wage workers than for higher-wage workers, more for blue-collar than for white-collar workers, and more for workers who do not have a college degree.

3. Strong unions set a pay standard that nonunion employers follow. For example, a high school graduate whose workplace is not unionized but whose industry is 25% unionized is paid 5% more than similar workers in less unionized industries.

4. The impact of unions on total nonunion wages is almost as large as the impact on total union wages.

5. The most sweeping advantage for unionized workers is in fringe benefits. Unionized workers are more likely than their nonunionized counterparts to receive paid leave, are approximately 18% to 28% more likely to have employer-provided health insurance, and are 23% to 54% more likely to be in employer-provided pension plans.

6. Unionized workers receive more generous health benefits than nonunionized workers. They also pay 18% lower health care deductibles and a smaller share of the costs for family coverage. In retirement, unionized workers are 24% more likely to be covered by health insurance paid for by their employer.

7. Unionized workers receive better pension plans. Not only are they more likely to have a guaranteed benefit in retirement, their employers contribute 28% more toward pensions.

8. Unionized workers receive 26% more vacation time and 14% more total paid leave (vacations and holidays).

Finally, unions play a pivotal role both in securing legislated labor protections and rights such as safety and health, overtime, and family/medical leave and in enforcing those rights on the job. Because unionized workers are more informed, they are more likely to benefit from social insurance programs such as unemployment insurance and workers compensation. Unions are thus an intermediary institution that provides a necessary complement to legislated benefits and protections.

Tuesday, May 29, 2007

The risks of continuing the occupation of Iraq

Kudos to Glenn Greenwald for discussing on his blog the very real risks posed by indefinitely keeping our troops over in Iraq. Many intelligent, thoughtful Americans, both Democrats and Republicans, think that even though the Iraq war was launched on the back of lies and has been horribly mismanaged by the Bush Administration, a precipitous military withdrawal would be a bad idea because it would lead to an increase in ethnic strike, make the country even more chaotic and be seen as a sign of "weakness" by jihadists who would inevitably follow us back to our homefront - Boston would replace Baghdad as the central front in the "Global War on Terror".

Leave aside the incredible ethical sleight-of-hand such a position entails - the argument requires one to take the position that an illegal, unprovoked war of aggression and the subsuquent occupation of a sovereign nation can be justified on the basis that ending the occupation could make things more chaotic for both the occupying power and the people being occupied. In other words, stability is more important than the rule of law and democracy (ironically a proposition that is the exact opposite of the rationale originally employed by the Neocons to justify the invasion in 2003).

As Greenwald astutely notes, the risks of invading a sovereign country were all but ignored by the mainstream media (i.e., endless occupation, civil war, intense anti-American anger in the Middle East and around the world, regional instability, conflict with Iraq's neighbors, unpredictable consequences, the need to resort to limitlessly brutal means to subdue the population, the temptation to establish a permanent presence) back in 2003.

And, as he goes on to point out: "Exactly this same deficiency plagues our debate now over whether to stay or leave". He goes on to explain that:
We are constantly told that any responsible, serious person -- even those who believe the original invasion was a mistake and/or that the subsequent war was terribly "mismanaged" -- must take into account all of the horrible things that will allegedly occur if we withdraw "precipitously." Terrible mayhem and violence will be the result, we are told, and therefore no responsible person would be in favor of straightforward withdrawal, because the risks are too great.

But these same pundits who dole out lectures about how Seriousness requires an acknowledgment of risks focus -- just as they did when advocating the invasion -- on only one side of the risk ledger. These Serious War Pundits studiously ignore the risks of keeping 150,000 troops in the middle of that region under the control of George Bush and Dick Cheney. There is virtually no discussion of the risks of that course of action. Exactly this same deficiency plagues our debate now over whether to stay or leave.

One significant risk from keeping our troops there is a heightened likelihood of a war with Iran developing - launched perhaps by the US bombing some pre-identified military targets (and maybe some civilian targets as well?) The reason for this is obvious:
One of the most under-discussed facts with regard to Iraq is that the very people who conceived of the invasion and who are the architects of our current military strategy have always believed, and still believe, that we must go to war with Iran. Our current strategy in Iraq was designed and, to a large degree, implemented with that goal in mind.

It's actually quite easy to imagine the way Bush's foreign policy brain-trust are imagining all of this going down: With tens of thousands of our troops stationed in two of Iran's neighboring countries, and the belligerent rhetoric and provocative actions escalating on both sides, nothing would be easier than provoking an "emergency" which would "justify" a military action against Iran. It worked as a method for selling the Iraq invasion to the American people in 2003 and they might very well imagine it will work again for Iran.

Bush's real policy objective for invading Iraq, Greenwald postulates, was to establish a permanent military presence in Iraq. Thus, continuing the occupation due to a lack of "progress" in pacifying Iraq is actually a success for Bush because we don't actually want to leave in the first place. This theory has a good deal of supporting evidence behind it (see this post from last June as well as this post from this week's TomDispatch). By the way, I think it's pretty obvious that another major reason behind the invasion was as a for the US to gain control of Iraq's massive petroleum reserves (see here and here), but this may have been a secondary consideration compared with establishing the permanent military bases.

Greenwald closes by posing a rhetorical question: "Whatever the "benefits" supposedly are from staying, are they worth incurring the substantial risk that we are enabling our country's warmongers to achieve their real goal of spreading our war beyond Iraq to their long list of Middle East Enemies, beginning with Iran?" To this question, I would add, "Is it worth the lives of hundreds or possibly thousands of American troops and even more Iraqi civilians due to logistical concerns of chaos following our withdrawal.

The bottom line, I think, is that we will ultimately have to withdraw our troops from Iraq, probably a lot sooner than the neocon foreign policy architects are currently planning on. The administration has already lost the public's support for the occupation, and eventually the public's anger will become too loud to keep ignoring. Crucially, the US occupation has also lost support from the Iraqi Parliament, which voted last month for the establishment of a timetable for a US military withdrawal of its country.

When we do withdrawal, there will indeed be mass chaos and the potential for a civil war breaking out between the Sunnis and Shiites. Lots and lots of people will be killed. The longer the wait, the more ridiculous our rationales for maintaining our military presence in the center of the Middle East region will appear, the more money our country will have flushed down the toilet and the more men, women and children will have been killed for absolutely no reason other than to secure Pax America.

Update: I found this article discussing the rationale for setting a timetable for withdrawal by MIT Political Science professor Barry Posen from the January/February 2006 issue of the Boston Review that I think pretty closely captures my position on the debate. The fact that this was written a year and a half ago reinforces just how prescient Posen's analysis was.

I'm not going to even bother excerpting from the piece since each and every paragraph contains in it such strong analysis that it ought to be read. Go check it out now.

Update #2: Also, check out this thought-provoking article by Professor Lawrence Wittner in Foreign Policy in Focus entitled "How the Peace Movement Can Win". Noting that peace activists helped swing the elections in November and most Americans want out of Iraq, Wittner asks why the peace movement hasn't succeeded already in ending the war.

He provides some good historical context, specifically drawing parallels to the Peace Movement's role in ending the Vietnam War, and concludes that "if peace activists are serious about reining in the forces of militarism, they should recognize that a movement composed of small, independent peace groups and large numbers of unaffiliated individuals is simply not up to that task. To attain organizational cohesion, strength, and programmatic direction, the movement needs a powerful national peace organization, with a mass membership. Only then will it be in a position to effectively challenge the masters of war, impress the politicians, and set the United States on a new, peaceful course in world affairs."

Update #3: Matt Yglesias explains how the continuing occupation has not and cannot succeed at eliminating the al Qaeda presence in Iraq (one of the administration's key justifications for maintaining our troop levels there:
The US-sponsored alliance of Sunni Arab nationalists in Anbar Province aimed at ejecting al-Qaeda seems to be fracturing as some elements of the alliance accuse others of being dupes and collaborators with the American occupiers. And, of course, this is the essence of the problem. It's simply impossible for the United States of America to be the main sponsor of a credible nationalist resistance to al-Qaeda. The only way to take advantage of Sunni Arab discontent with foreign fighters in Iraq is for us to step out of the way and stop trying to micromanage events. Instead, though, we insert ourselves into every embryonic promising trend and wind up wrecking it.

Sunday, May 27, 2007

Fire on the Mountain (Live)

Just found this on YouTube.

A nice, up-tempo version of the classic Grateful Dead classic song, performed live, with Jerry Garcia trading solos with Carlos Santana.

Good stuff!

Bernie Sanders on immigration bill

Longtime Independent Vermont Congressman, and now newly-minted Senator Bernie Sanders is as usual viewing potential legislation being considered on the Hill frm the perspective of Middle Class America. As he explains in The Hill's Congress Blog, he is opposed to the bill not because it is to lax on lenient in terms of homeland security, or say the human rights of would-be immigrants, but rather because its passage into law would depress US workers' wages.

Here's his short post:
I am sympathetic to the goal of strengthening our borders and holding employers accountable when they hire illegal immigrants. I also believe that we must develop a path to citizenship for the 12 million illegal immigrants already in the United States. What most concerns me about this legislation are the provisions that would bring low-wage workers into this country in order to depress the wages of American workers, which are already in decline. With poverty increasing and the middle-class shrinking, we must not force American workers into even more economic distress.

The CEOs who want this bill aren’t even embarrassed by their hypocrisy. One day they shut down plants with high-skilled, well-paid American workers, and move to China where they pay desperate people 50 cents an hour. The next day, they have the nerve to come before the U.S Congress and tell us that they can’t find skilled workers to do the jobs that they need. Give me a break.

Update (6/27)
: More on the political process, as well as the bi-partisan "drumming" the immigration bill is taking on the Hill, from the San Francisco Chronicle.

Saturday, May 26, 2007

What the trade deficits have wrought

Time Magazine columnist and blogger Justin Fox's latest article is must-reading for anyone who doesn't realize just how badly our trade deficits and the declining value of the dollar have imperiled this country's economic stability. He notes that countries like China, Japan and the Persian Gulf dictatorships own a large chunk of the this country's debt and that it's really just a matter of time before they call to call in all of their chits.

Importantly, according to recent researh by Bank of International Settlements (as cited by the Economic Policy Institute), foreign central banks financed 75% of the U.S. current account deficit in 2004, providing an inflow of $498 billion. The EPI notes that "Official reserve transactions by foreign central banks were somewhat larger than the net deterioration of NIIP. Foreign governments served as the lender of last resort to the United States in 2004, as they did in 2003. Most of that capital came from China, Japan, and other Asian countries, which sought to reduce pressure on their currencies to appreciate against the dollar. Without that intervention, the dollar, which declined 5.8% in 2004 in real terms, would have fallen more rapidly than it did. Were the dollar to decline, the competitiveness of U.S. export- and import-competing industries would improve, and production and jobs in industries in manufacturing and other sectors would strengthen."

Ultimately, Fox correctly observes that we are in a situation where "the US will effectively be sending big checks abroad each year to pay for good times past. Which is money Americans won't be able to spend on oil, cars and consumer electronics."

The campaign to misrepresent "free" trade critics

Writing in the most recent issue of the Democratic Strategist, Progressive Policy Institute president Will Marshall and his colleague Ed Gresser purposely mischaracterize the opposition many genuine progressives have for so-called neoliberal "free" trade deals with countries in the Global South. Either that, or the two pundits aligned with the DLC/New Democrat/Third Way movement just don't understand the basis for the progressive critique of these trade deals. Personally, I would argue that the authors are in fact deliberately misstating their opponents' case, as a fair reading of free trade criticism reveals economic policy arguments other than those being confronted in this article, and I think it's worth exploring this fact in some detail.

The point of the authors' piece, "Populist, Social Democrat or Progressive? The Democrats' Choice on Trade" is to create labels for opponents of "free" trade based upon truly meaningless distinctions. They unhelpfully divide up what they consider to be the center-left's three main schools of thought on trade: We have (1) the scary sounding "neo-populists", (2) the confusingly labeled "social Democrats" and what Marshall and Gresser describe as (3) the "progressive modernizers."

Here are the authors' operational definitions of these three ideologies: So-called neopopulists "blame trade for economic woes"; social Democrats want to "import the Nordic model of capitalism from Scandinavia"; and progressive modernizers want to "both raise America's game in global competition and raise the floor of security beneath ordinary working families." Of course, they believe the latter is the best policy position, even though it completely ignores the importance corporate lobbyist-influenced international trade policies play in impacting the economic security and inequality of the Middle Class, and how the critique of free trade played a key role in allowing Democrats to take back Congress last November.

So what exactly is wrong with the people who adhere to the first ideology, including Senator Bernie Sanders (I-VT) and Sherrod Brown (D-OH) - according to the authors? They argue:
The neo-populists, allied with industrial unions and a rump group of surviving protection-minded business lobbies, are convinced that foreign trade pressure is unfair and that the U.S. cannot compete against low-wage countries. A typical approach is to demand an indefinite halt to trade liberalization (a "strategic pause," as Jeff Faux terms it) along with trade protection through tariffs on Chinese goods and strict labor-standards tests on all imports, and to rail against offshoring without offering a policy-based way to block it--because, short of somehow turning off the Internet, none exists.

Notice anything wrong? Look carefully, because this is a textbook example of lying through omission. Yes, Fair Trade advocates like Sanders and Brown do indeed believe that the US cannot compete against low-wage countries, but the reason is that by signing trade deals with countries that pay workers less than a dollar an hour, it creates a race to the bottom in terms of wages for US workers. This is basic labor economics theory, and there is a large volume empirical data to support this contention (see here, here and here). If this doesn't represent a threat to the economic security of US workers, I don't know what does.

Another problem with their argument is the declaration that neopopulists are calling for an “indefinite halt to trade liberalization”, citing Faux as an example. The only problem is that this is not at all what Faux is calling for: Writing in a recent policy brief, for example, Faux explicitly argues that a pause in new trade deals should remain in effect "until Congress and the president come up with a credible program to reduce the trade deficit substantially and to adopt policies that will enable Americans to compete and raise their living standards." What is "permanent" about this?

The argument continues:
Whatever its political utility, populism fails as policy. Higher labor standards in developing countries are a worthy goal, but they wouldn't make countries with vast reserves of low-cost labor less competitive. And the experience of high-tariff U.S. industries like textiles and shoes gives little reason to believe new trade barriers would keep U.S. industries competitive. To the contrary, they would lower living standards and damage our companies' ability to compete, by raising input costs, depressing the purchasing power of their local customers, and jeopardizing access to foreign markets just as America's housing boom fades and we need to rely more heavily on exports to generate growth.

Again, the authors are being disingenuous here, probably intentionally so in my judgment. That is because there is much less of a need (economically, not politically speaking) to require huge trade barriers if our trading partners are required by law to pay their workers something north of slave wages. Yes, this will cost US-based corporations more in terms of their labor costs (e.g.: Nike won't see as much profit if their workers in Southeast Asia are paid $3 an hour instead of 10¢ an hour), but it will also decrease the threat of them offshoring hundreds of thousands of manufacturing jobs which inevitably creates downward pressure on US workers' wages as well as job losses. Same thing goes for human rights and environmental standards, not just implied by side-agreements but codified in legislation and subject to the core labor standards issued by the International Labor Organization.

The writers next go on to dismiss those whom they label "social democrats" such as journalists Robert Kuttner and Harold Meyerson (and I suppose this generally describes my views on economic/trade policy as defined by Marshal and Gresser) and claim that:
The U.S. social democrats seem determined to hold progress on trade liberalization hostage to highly ambitious and sometimes unattainable goals--a dramatic expansion of America's welfare state; a miraculous revival of militant trade unionism (emphasis added - by the way, what does the DLC have against labor unions anyway? -ed); global governance mechanisms; and full implementation by low-income countries, enforced by trade sanctions, of labor and environmental standards which took Washington decades to develop. This means growth, efficiency, and trade reforms to help the poor must wait for a social-democratic millennium.

This is a critique that really is scandalous in its cynicism - the authors are basically claiming that insisting our trade legislation would require that our trading partners guarantee the right for workers to unionize (something absolutely essential to protecting their rights),institute better corporate governance practices and enforce labor/environmental standards is some kind of unrealistic, pie-in-the sky scheme that is simply not possible in our current political environment.

What is their supporting evidence for making this sweeping dismissal? They provide none, of course, because no such evidence exists. It's just a convenient fiction told to us by those pundits who don't think it's worth the effort of the Executive and Legislative branches of government to make sure our trade policies help working American families and prevents slave labor from manufacturing goods that are imported to our country.

So what approach then do the authors favor?
[Progressive reformers] reject claims that Americans can be shielded from technological and structural forcesaffecting the whole world, and hope instead to replace the industrial-era safety net with a new social contract that helps working Americans manage the risks of global competition and share in the rewards of growth. They agree with social democrats on a key point: as U.S. businesses and labor provide less security for workers, government must step into the breach and provide more.

I agree with their point that we need replace the industrial-era safety net with a new social contract (see Jacob Hacker's "The Great Risk Shift" for some specific ideas on how to do this), but I disagree with the contention that it's simply unavoidable that employers and labor are going to continue to shirk their responsibilities, and that the public sector has to pick up the slack. What about, for example, passing regulations with some teeth that strengthen the hand of organized labor (e.g.: the Employee Free Choice Act) and require corporations that benefit from being domiciled in the US don't use offshore tax shelters, closing tax loopholes for the super-rich and then using this additional revenue to guarantee a more viable safety net for the middle class?

But the contention I most fundamentally object to is their disagreement that Americans can be shielded from "technological and structural forces". That's because the not-too-subtle implication here is that "neopopulists" and "social democrats" do contend that the best use of trade policy should be to do exactly that. I have no idea where they got this idea from - it's certainly not supported by anything I've read by either Kuttner or Meyerson. In fact, these writers argue for something quite different - that our trade policy shouldn't try to isolate the US from the effects of globalization (which I agree is obviously untenable) but rather that it should ensure a fairer playing field for US workers competing in a global marketplace by pushing for all the numerous, common-sense protections I have been arguing for in this post. Is it impossible for Congress to succeed in doing this? We'll only know if Democratic lawmakers expend some political capital to do, which they haven't done so far, or if they at least give us Faux's "strategic pause" so that more harm can be done.

I think that it's pretty depressing that such high-profile Democratic pundits would peddle such a misleading narrative, wholly unsupported by important things like facts or evidence, to shore up Democratic and progressive support for more free trade deals without any protections.

(6/8): Dean Baker has more on the topic on his blog here.

Friday, May 25, 2007

"Who's afraid of democracy?"

Chris Hayes has a particularly good article in this week's In These Times that puts together a number of observations I've been independently mulling over recently. But Hayes has beat me to the punch, and fortunately he has provided us with his usual excellent writing and clear thinking.

Hayes puts forward a simple theorum: That people are innately socialistic in our instincts regarding economic policy largely because we are hard-wired in our psyches with a belief in the importance of economic fairness. This translates most obviously into society's perennial support for redistributive economic policies, as evidenced by our progressive tax code (although it has become substantially less progressive after six years of Republican control of the Legislative and Executive branches), the continued public support for intergenerational redistributive programs like Social Security as well as Medicare.

In other words, despite the GOP's sustained campaign against the Middle Class in recent years in which they used tax and fiscal policies as their weapon of choice, the American people still instinctively understand the importance of redistributing resources from the wealthy to those who are barely making ends meet amidst the economic inequality and insecurity that permeates our society at the highest levels in recent history.

And then, of course, there is the policy Democrats pushed in their midterm elections last November, as Hayes notes:
This central tension between laissez faire capitalism and the redistributive whims of a democratic electorate isn’t discussed much. But it can poke through the surface during moments of clarity, such as the last election, when minimum wage increases passed in every state—red and blue—where they were on the ballot.

Hayes the takes the discussion to an important but rarely explored direction. He asks whether democracies produce optimal policies for its citizens and whether democracies produce policies that accurately reflect the will of the majority? It's hard to answer these two questions definitively because (1) voters are notoriously ignorant of the policy platforms of the candidates they are choosing between, (2) people tend to vote inconsistently and (3) voters dont even know what they want in terms of economic policies being implemented, much less which policies would work in their favor.

The article is, on its surface, a book review and critique of economist Bryan Caplan's recent The Myth of the Rational Voter: Why Democracies Choose Bad Policies, which basically supports Public Choice Theory, but it touches on many larger, important topics as well. For example, to what extent are the public's views on economic policy reflected in the politicians they elect to represent them in Washington, and how important is it for these political elites to heed to wishes of the less-educated masses they represent? According to Caplan, for instance, democracy fails as a system to produce good economic policies precisely because it reflects the "irrational" will of the majority.

Hayes quotes Caplan as arguing that “If people are rational as consumers and irrational as voters, it is a good idea to rely more on markets and less on politics.”

Hayes goes on to point out that:
Caplan’s willingness to embrace the darkness, however, is what makes this book so important: It articulates in lurid detail the obscene id of Chicago-school, Grover-Norquist-style, free market fundamentalism (a term Caplan spends a chapter rebutting). Given a choice between democracy without free markets or free markets without democracy, many conservatives would gladly choose the latter. Hence Milton Friedman advising Augusto Pinochet in Chile and the Bush administration’s support of a coup in Venezuela. (emphasis added)

In the end, I think it is worth the time to read Hayes' relatively short piece, as well as the introduction to Caplan's book linked to at the beginning of this paragraph. Make up your own mind - although if you're like me it will probably be an opinion formed after quite a bit of time in order to digest all of the implications.

Wednesday, May 23, 2007

A reality check on "second surges", troop withdrawals and the permanent US military presence in Iraq

According to reporting from Hearst Newspapers (published in the San Francisco Chronicle on May 22nd), President Bush may end up ordering the Pentagon to double the number of combat troops in Iraq by the end of the year (or, with disgusting irony, right before the commencement of the Christmas holiday.)

As the Chronicle reports, "The Bush administration is quietly on track to nearly double the number of combat troops in Iraq this year, an analysis of Pentagon deployment orders showed Monday. The little-noticed second surge, designed to reinforce U.S. troops in Iraq, is being executed by sending more combat brigades and extending tours of duty for troops already there. The actions could boost the number of combat soldiers from 52,500 in early January to as many as 98,000 by the end of this year if the Pentagon overlaps arriving and departing combat brigades.

Separately, when additional support troops are included in this second troop increase, the total number of U.S. troops in Iraq could increase from 162,000 now to more than 200,000 -- a record-high number -- by the end of the year."

I am disappointed yet not surprised that this story didn't make the front page of the New York Times or USA Today, nor is it on the cover of Newsweek or Time magazines. The spin out of the White House and pro-war Republican Congressmen's offices is that the surge merely represents a temporary bump in US troop presence in Iraq to allow for the speedy transfer of power and responsibility to the "democratically elected" new government there. No mention is made, for reasons that are by now patently obvious, of the permanent nature of the ongoing occupation of a country that holds rather significant geopolitical significance for the Neocons still ensconsed in Washington's power circles.

Update (6/10): Further supporting the by now widely accepted theory . . . or perhaps it ought to be simply referred to as "reality", of US military planners' long-term designs on Iraq is this dispatch from the Washington Post's Tom Ricks (author of the excellent book on the invasion and occupation of Iraq "Fiasco"). It is entitled "Military Envisions Longer Stay in Iraq" and it is overflowing with background information about the real nature of Washington's "Global War on Terror" and the need for the Bushies to justify preventive war on countries as a first step in occupying them for many years.

Reading between the lines in Rick's article, a careful layperson can discern the effective propaganda techniques being wielded by administration higher-ups, with the reasonable reader fully expected to draw the conclusion that anything other than a "long-term" occupation would be the height of irresponsibility, or, alternatively, it might be downright impossible!

One passage from the WaPo piece that stands out for me due to its black comedy quality is:
One of the guiding principles, according to two officials here, is that the United States should leave Iraq more intelligently than it entered. Military officials, many of whom would be interviewed only on the condition of anonymity, say they are now assessing conditions more realistically, rejecting the "steady progress" mantra of their predecessors and recognizing that short-term political reconciliation in Iraq is unlikely. A reduction of troops, some officials argue, would demonstrate to anti-American factions that the occupation will not last forever while reassuring Iraqi allies that the United States does not intend to abandon the country.

This is a noteworthy sleight-of-hand the anonymous military folks are trying to pull here. First, change history by making the US's illegal invasion of Iraq a "mistake" centered on the incompetence of the Pentagon in implementing its policies (i.e. due to human error) as opposed to, say, the real reasons it was a mistake (i.e. there were no WMD and Hussein didn't pose a threat to the US; planning for the war began in 1998 before Bush was even inaugerated by think tankers at the Project for a New American Century; the intelligence community was pressured by VP Dick Cheney's office to create a plausible-sounding but wholly fictitious case for war, etcetera . . .

One could just look at the declassified information, available for public consumption online, about the Pentagon's plans for 14 "enduring" military bases in Iraq*. This data in black and white tends to cause people who are actually paying attention to reassess what is really meant by Pentagon spokesmen when discussing the ins and outs of the competing troop withdrawal plans.

*For much, much more solidly-sourced information available online on the Pentagon's permanent military bases being planned for Iraq, see here.

Update #2: I have been remiss in neglecting to discuss the politics of this whole mess. So for more on how the results of the May Iraq War Spending Bill (and Bush's threatened presidential veto thereof) fits into the Neoconservative DC esstablishment's dream of permanent occupation of Iraq, see this article from Phyllis Bennis in Z Net here.

Update #3 (7/16): Stephen Lendman has a long post over at his blog on the subject of the Pentagon's planned "permanent military occupation" of Iraq here. While I don't necessarily count myself a fan of all of Stephen's writing, particularly those pertaining to the Israel-Palestine issue, this analysis truly is well-written and excellent overall. Go read the whole thing.

Report: CIA "Black Ops" currently underway in Iran

ABC News deserves credit for publishing this story on their blog this morning, even if the release of the information was probably authorized by the White House as a way to further its intended psychological warfare campaign against the Mullahs in Iran. (See this post from Troubled Times from June of last year, this December 2005 article from USA Today and this April 2006 article by Jim Lobe in for further background on recent US psychological warfare campaigns.)

I guess this story should, in the most purely technical sense, be considered a scoop - even if no one who has been following the current administration's foreign policy in the region should be overly surprised by the revelations given all the recent sabre-rattling. The fact that it is being reported by the mainstream media, regardless of the reason, is however significant.

According to ABC's Brian Ross, intelligence sources indicate that "The CIA has received secret Presidential approval to mount a covert 'black' operation to destabilize the current Iranian government." The fact that this is a "secret" plan is not really so significant, as any sort of authorization the president would give the clandestine spy agency would by necessity have to be undisclosed. That being said, complaints from conservatives that this report is somehow handing state secrets to the Iranians are, I think, ridiculous on their face. I say that because it really strains credulity to think that Iranian intelligence doesn't think that Bush is trying to destabilize their regime.

According to Ross, "Current and former intelligence officers say the approval of the covert action means the Bush administration, for the time being, has decided not to pursue a military option with Iran." This sounds like exactly the kind of disinfo the administration would want the mainstream media to publicize as an off-the-record scoop. And it doesn't make much sense to me as a strategy either. After all, wouldn't such a black ops campaign be more likely to be used as a way to soften up Iranian resistance in advance of a military strike as opposed, say, to being used in lieu of a strike?

And if this ABC piece is indeed part of a wider CIA PsyOps campaign using the supposedly "liberal" media, it is only one small example. As Chris Floyd points out on his blog similiar stories are being fed, it seems, to journalists at the supposedly liberal Guardian across the pond, full of the same scaremongering, weak sourcing and rationales for war as we got from the New York Times back in 2003.

Update: It should go without mentioning that none of this talk about black ops is even remotely new, as this post a few months ago at TomDispatch should make abundantly clear. It's just that until now, the mainstream media hasn't touched these stories with a ten-foot pole, even if journalistic legends like Seymour Hersh were reporting on it for over two and a half years.

"We won't negotiate with terrorists"

"Terror must be stopped. No nation can negotiate with terrorists. For there is no way to make peace with those whose only goal is death."

George W. Bush, White House Press Conference (4/4/02)

Except when we do negotiate with terrorists:
The U.S. military is joining forces with the State Department to prepare a new Iraq strategy that includes negotiating cease-fire and power-sharing agreements with some enemy combatants, U.S. officials said Wednesday.

A "joint campaign plan redesign team" is preparing the diplomatic and military strategy for Iraq, which is expected to be approved by the end of the month. One element of the plan is to try to identify groups of people -- possibly including Sunni extremists and militia groups -- with whom U.S. officials feel they can do business, such as negotiating power-sharing and cease-fire agreements and granting economic aid, the sources said. (Watch how the new strategy aims to create stability )

But those with whom officials feel they cannot do business -- such as determined suicide bombers -- will remain targets of military forces, the sources said. The officials cited an inability to maintain current troop levels into the summer as a reason for the changed course.

"We have been focused too long on defeating the enemy," one official said. "We need to bring them to the negotiating table."

So exactly how do we decide who are "terrorists" and who are just "extremists" and how do we decide who we can do business with? How do we know who we can trust and who we can't? Is it that anyone we are able to successfully broker a power-sharing arrangement with is now, by definition, "not a terrorist"? This doesn't seem to be the best operational definition for prevailing in the "Global War Against Terrorism" over the next few decades.

It's worth noting that last yeat the bipartisan Iraq Study Group recommended cutting deals with the insurgents in Iraq as the only way to end the insurgency (although this misses the crucial fact that the US military occupation is itself fueling the insurgency there) , and that the administration has been privately trying to do this for at least two years. So even though its public stance is cynical hypocrisy of the highest order, it certainly doesn't represent any sort of new strategic thinking. The bottom line is that, as I and many others have noted, this disasterous situation in Iraq is not going to end until Bush leaves the White House in 2009, or the Democrats gain a veto-proof majority in the Senate and grow some balls.

In light of all this, it's hard not to agree with John Edwards' recent assessment during his speech this week at the Council on Foreign Relations that the Global War in Terror is an inaccurate descriptor of what we're involved in and where the administration has placed its goalposts for final victory.

Tuesday, May 22, 2007

Bob Kerrey's "muddled thinking"

Another day, another mendacious editorial from the Wall Street Journal. This time, former Senator Bob Kerrey - a putative "independent" Democrat as well as a self-admitted war criminal - does the honors by reciting lie after lie, half-truth after half-truth in service of defending US war crimes, our 2003 invasion of Iraq and our continued military occupation.

So let's go through Kerrey's editorial and separate out the lies contained herewith.

The first offense is the editorial's title, which in fairness the former Senator may or may not have chosen: "The Left's Iraq Muddle". First off, any time you here a pundit or politician refer to the "Left", you know an effort is underfoot to smear and marginalize a sizable chunk of the American population for not adhering to the Bush administration's line of reasoning. In this case, he is referring to Americans who are exhibiting "muddled" thinking because they don't support the continued occupation of Iraq even though a majority of Americans believe we should set clear timetables for withdrawal, making it amazingly disingenuous to say this is a problem solely with the "Left".

In his opening salvo, Kerrey condemns "the Left" for criticizing the neoconservatives' attempts to impose "democracy" in the Middle East by using military force. He reminds us that "those who say such things seem to forget the good U.S. arms have done in imposing democracy on countries like Japan and Germany, or Bosnia more recently." To compare the Iraq invasion with World War II demonstrates a flagrant disregard for history - or a willingness to distort it in order to score political points.

Kerrey then argues that "The U.S. led an invasion to overthrow Saddam Hussein because Iraq was rightly seen as a threat following Sept. 11, 2001. For two decades we had suffered attacks by radical Islamic groups but were lulled into a false sense of complacency because all previous attacks were "over there." It was our nation and our people who had been identified by Osama bin Laden as the "head of the snake." But suddenly Middle Eastern radicals had demonstrated extraordinary capacity to reach our shores."

His conflation of al Qaeda's 9/11 terrorist attacks with Iraq's supposed "threat" to the US is pretty glaring in its logical inconsistency and lack of supporting evidence. He also states that "Iraq was a larger national security risk after Sept. 11 than it was before", again without backing up this fantastic claim with any evidence.

He complains that "The critics who bother me the most are those who ordinarily would not be on the side of supporting dictatorships, who are arguing today that only military intervention can prevent the genocide of Darfur, or who argued yesterday for military intervention in Bosnia, Somalia and Rwanda to ease the sectarian violence that was tearing those places apart."

It is interesting to note that Kerrey is not so subtly saying that those who didn't support the overthrow of Saddam Hussein are "supporting dictatorships." Why then, does he not point out the fact that the US is currently - by his definition - supporting many dictatorships in the Middle East such as Egypt, Saudi Arabia, Kuwait as well as support for China? To say this is about confronting dictatorship completely ignores the very anti-democrstic principles by which US foreign policy operates.

Next, Kerrey writes that "liberals" who believe we should have done nothing in the face of this supposed threat from Saddam Hussein's Iraq in the aftermath of 9/11 are the reason "Democrats are not trusted with the reins of power." Apparently taking over both chambers of Congress doesn't count as being trusted with policymaking authority.

According to our author:
The key question for Congress is whether or not Iraq has become the primary battleground against the same radical Islamists who declared war on the U.S. in the 1990s and who have carried out a series of terrorist operations including 9/11. The answer is emphatically, "yes."

But as Kerrey later acknowledges, it is only the "primary battleground" with radical Islamists because the US invaded Iraq, not the other way around. The real battleground should really be in Pakistan and Afghanistan, where most of the key al Qaeda leadership is still believed to be operating from.

Sunday, May 20, 2007

Understanding globalization "lock in"

Ever heard of the economic term "lock in"? Know what its relevance is? I have to admit that despite my fairly wide reading up on globalization, I had never heard of it before. . .

Thomas Palley explains what it means, and why it's important to economic development and globalization, on his blog:

"“Lock-in” is a concept developed by economic historians to describe how economies get tied in to using inefficient technologies. It also applies to institutions as economies and societies can get locked into sub-optimal institutional arrangements. This has relevance for globalization where the arrangements governing trade and the global economy may be sub-optimal, posing problems of how to change them. The economics of lock-in helps understand the problem and suggests how to solve it.

Lock-in arises because a technology that is adopted first may gain a competitive advantage that encourages others to adopt it, even though other technologies are superior and would be chosen if all were at the same starting point. An example of lock-in is narrow gauge railroad that is less efficient than broad gauge on which railcars are more stable and can carry greater loads. Once a stretch of narrow gauge has been laid, there is an incentive for additions to be narrow gauge to fit the existing track. Moreover, the incentive increases as the size of the rail network grows.

Lock-in has enormous relevance for globalization, which has seen the creation of new institutions and patterns of economic activity. Trade agreements have created new rules, fostering new patterns of global production and setting the basis for future trade and investment negotiations. Another example of lock-in is removal of international capital controls that has changed financial flows and would be difficult and costly to restore.

Globalization lock-in matters because today’s global economy has been designed with little attention to labor and social issues. This is because the system was largely stitched together in the last quarter of the 20th century, a period of labor weakness and laissez-faire revival. Consequently, arrangements were forged without attention to labor, social, or environmental concerns."

Read the whole article to hear what policies Palley suggests as the best way for dealing with this infrequently discussed problem.

Saturday, May 19, 2007

Mortgage foreclosures

The New York Times has a short article on the growing number of mortgage defaults and home foreclosures, discussing reaction from the Fed, Democratic lawmakers looking to beef up regulations and investment bankers warning that tightening regulations will dry up credit and hurt the market.

Mortgage foreclosures are up 72% nationally: this is a pretty serious problem for the US economy. And frankly, I'd rather see credit tightened even if it leads to a slow-down in the housing market because right now a lot of the prices out there are not based on anything even closely resembling reality.

And by the way, the National Association of Manufacturers is a trade group, not some sort of unbiased think tank. It's research and predictions are highly suspect, for example its chief economist's publication just two years ago of "Why the Real Estate Boom Will Not Bust".

On the other hand, skeptics of the red-hot housing market driven by subprime investors such as Dean Baker (see here as well) and Barry Ritholtz have been way ahead of the curve in predicting the housing market slowdown, but unfortunately their advice has not managed to seep into the American consciousness.

Update (6/28): Dean Baker discusses the "deflating housing bubble" at here. He concludes that:
The real problem [with the housing bubble] was the failure of the Fed to take the housing bubble seriously. It decided that its mandate to pursue “price stability” has nothing to do with asset prices. Alan Greenspan and his successor Ben Bernanke stood by smiling as house prices nationwide rose an average of 70 percent above trend levels.

When the market corrects and the full extent of the damage becomes apparent, redefining the Fed’s responsibilities should be a top priority. The damage from the creation and disappearance of $7 trillion dollars in housing bubble wealth swamps any possible damage that might result from a rise in the core inflation rate from 2 percent to 3 percent.

The home and renters insurance enables one to safeguard his home, like life insurance or the home insurance or even dental insurance and any other insurance deal does.

Friday, May 18, 2007

Why "free" trade deals put property rights above workers' rights

There's an eye-opening piece in this week's New Yorker written by James Surowiecki discussing "free" trade policy and intellectual property rights. Specifically, he is interested in the practice of the US leveraging its trade policies to force its trading partners to rewrite their own laws.

He illustrates his point by using the US's recent free-trade agreement struck with South Korea on April 3 as a case study. He notes that the recent free-trade agreement is concerned - ostensibly - with lowering tariffs, opening markets to competition, and all the other wonderful things free market fundamentalists like to carry on about. But he notes, quite correctly, that a very important but overlooked facet of the deal has nothing to do with "free" trade, or "free" markets whatsoever.

Rather, Surowiecki notes that it requires South Korea to rewrite its rules on intellectual property (IP) - the rules that deal with patents, copyright and legal ownership rights for inventions or ideas. He reports that:
South Korea will now have to adopt the US and EU definition of copyright—extending it to seventy years after the death of the author. South Korea will also have to change its rules on patents, and may have to change its national-health-care policy of reimbursing patients only for certain drugs. All these changes will give current patent and copyright holders stronger protection for longer. Recent free-trade agreements with Peru and Colombia insisted on much the same terms. And CAFTA—a free-trade agreement with countries in Central America and the Caribbean—included not just longer copyright and trademark protection but also a dramatic revision in those countries’ patent policies.

Suddenly, it makes sense why corporate lobbyists representing, say, the pharmaceutical industry, how plowed so much money into Congress in order to ensure these trade deals are crafted the way they are: That is, with comprehensive protections for corporations but without any enforceable protections for workers or the environment.
Understanding the next part is crucial for understanding just how economically inefficient, not to mention morally reprehensible, these type of deals that are supported by members of both major political parties really are:
Intellectual-property rules are clearly necessary to spur innovation: if every invention could be stolen, or every new drug immediately copied, few people would invest in innovation. But too much protection can strangle competition and can limit what economists call “incremental innovation”— innovations that build, in some way, on others. It also encourages companies to use patents as tools to keep competitors from entering new markets. Finally, it limits consumers’ access to valuable new products: without patents, we wouldn’t have many new drugs, but patents also drive prices of new drugs too high for many people in developing countries. The trick is to find the right balance, insuring that entrepreneurs and inventors get sufficient rewards while also maximizing the well-being of consumers.

In other words, there exists a trade-off between protecting Merck and Pfizer's profit-margins and ensuring people in developing nations are able to purchase generic life-saving drugs exported by US corporations, even if this trade-off is purposefully kept hidden by most journalists and politicians when discussing the costs of "free" trade.

The article goes on to cite some studies that indicate a declining utility curve for increasing IP protections, meaning that there are diminishing returns after some point. This is almost certainly true, as basic microeconomic theory would predict, but I still think the key problem of these deals is the unequal protections provided to multi-billion dollar corporations at the expense of workers and consumers in the developing nations trading with us (not to mention the downward pressure on wages and hundreds of thousands of job losses here in the US). Of course, this disparate treatment is not surprising at all, as corporations are able to funnel hundreds of millions of dollars to the pockets of the lawmakers sitting on the financial services committee in Congress, whereas workers in the developing world have practically no power to advocate for legislation that protects their own rights.

Surowiecki instinctively understands just how destructive and unfair the status quo is and has done a great job explaining it to a lay audience and deserves our thanks.

Democrats refuse to fulfill their mandate on Iraq

Chris Floyd is, as usual, right on the money in explaining the sad reality that the new Democratic leadership in Congress is in fact just as culpable as the Bushies for the continuing slow-motion disaster that is the Iraq war.

Floyd refers to the pathetic situation we are currently experiencing as "the bi-partisan business" of slaughter in Iraq, and as sensational as this charge sounds, I really think the shoe fits. Read the whole post and decide whether you agree or not.

Thursday, May 17, 2007

Behind the buy-out craze

Before I shifted my area of focus to economic policy, I worked for several years as a financial journalist covering the global aerospace finance and the airline industries. Additionally, I worked at a consultancy and investor/media relations firm (for a relatively short time). In both of these positions, I learned what I would consider to be a fairly large amount about the complex world of private equity and leveraged buyouts in general. Private equity firms such as the Texas Pacific Group, for example, tended to be significant players in financing airlines in the 1990s and early 21st Century, especially during the industry restructuring that occurred in the aftermath of 9/11. Additionally, the consulting firm I worked at had a clientele base made up of private equity, hedge fund and mezzanine finance firms.

What I learned from these experiences is that these so-called "alternative" investment firms can often play a good role in helping turn around a company's financial performance, especially private equity firms that in exchange for an equity investment take on direct managerial control of operations and add some much-needed discipline and strategic direction. Private equity funds typically control management of the companies in which they invest, and often bring in new management teams that focus on making the company more valuable.

Approximately $135 billion of private equity was invested globally in 2005, up 20% from 2004 because of a rise in buyouts. Buyouts have generated a growing portion of private equity investments by value, and increased their share of investments from a fifth to more than two-thirds between 2000 and 2005. At the same time, the ratio of early stage or venture capital investment has declined during this period.

Prior to this, after reaching a peak in 2000, private equity investments and funds raised fell in the next couple of years due to the slowdown in the global economy and declines in equity markets, particularly in the technology sector. The fall in funds raised between 2001 and 2003 was also due to a large excess created by the end of 2000 of funds raised over funds invested.

Private equity fundraising reached new record levels in 2006, with data from Private Equity Intelligence showing that a total of 684 funds worldwide achieved a final close over the course of 2006, raising an aggregate $432 billion in commitments.

The private equity / buyout industry, with an estimated $500 billion in capital, is behind the creation of mergers and acquisitions that put together are larger than the annual budgets of most of the world’s countries.

Just this week, private equity giant Cerberus Capital Management and Big-Three automaker DaimlerChrysler jointly released news of a tentative sale (i.e. buyout) of the Chrysler Group to Cerberus. According to Bloomberg, if it receives regulatory approval, the deal would make Chrysler the first major U.S. automaker to go private. Daimler Chrysler, Mercedes-Benz, will change its name to Daimler AG and retain a 19.9% percent stake in the new company. The transaction cost Cerberus $7.4 billion but will give it 80.1% ownership.

But there is, perhaps not surprisingly, a significant dark side to private equity and leveraged buy-outs, not the least of which is the almost inevitable mass firings that take place as soon as a fund takes over. But there have been a number of newspaper articles and studies recently that explore the fact that private equity deals can hurts the employees of these target companies even while they simultaneously enrich both the investors and the financiers. Indeed, there are newly relevant questions about the impact of these firms’ business practices on American workers, businesses, communities, and the nation.

Today, the Washington Post had an interesting report on a House Committee on Financial Services hearing on "Private Equity's Effects on Workers and Firms", spurred by news of the Cerberus deal among others. According to the article:
The hearing . . . was planned weeks ago, and the discussion of exactly what, if anything, the government should do was tentative. But the session took on heightened significance after Monday's announcement that private-equity firms were moving into the top ranks of the automobile industry, with the pending buyout of Chrysler by Cerberus Capital Management.

Both critics and supporters of private-equity firms -- which use pools of investment capital to buy and run companies with growth potential and later sell them for a large profit -- acknowledged that there are no reliable data on the industry's overall impact on wages, benefits or jobs.

According to the article, both Democrats and Republicans in the House are split in their views on the subject. For example, both Democrats and Republicans praised the "multimillion-dollar" profits for investors and executives and the fact that some companies became healthier and added jobs as a result of buyouts. But there was also concern expressed about the likely job losses that would occur at corporations that were purchased in the Congressperson's home state.

Democratic Rep. Barney Frank (D-Mass) is taking a strong stand on the controversy, and I think he nails the challenge with this comment: "When a small number of individuals benefit in the tens and sometimes hundreds of millions of dollars, and concurrently workers are laid off, we have a situation which seems to me wrong. What are we going to do about it? It's not clear."

The Post reports that he suggested possible changes in federal tax policy as well as policies to help workers organize unions to help address these issues, both of which seem like good ideas in principle. As one would expect, however, Republicans such as Spencer Bachus (R-Ala) are opposed to regulation out of concern that it would hurt the economy and competitiveness (the same rationale Republicans and libertarians always cite when opposing government oversight and regulation of industry).

NPR has better coverage of the hearing, quoting SEIU president Andy Stern as saying "For all the hundreds of millions of dollars of fees and billions of dollars in profits taken out of these deals at private equity firms, the workers at most of these companies have seen no increases in benefits, no increases in wages."

The NPR article also points out the irony that some of the money fueling private equity takeovers actually comes from union pension funds - complicating the relationship between labor and private equity.

Writing on the topic last month, the Washington Post's Steven Pearlstein noted that Stern has been negotiating with "leading" private equity firms for some sort of commitment on how workers should be protected if their company is bought out in exchange for "political cover".

Pearlstein argues that "Now that 'going private' seems to be all the rage in corporate America, private-equity fund managers probably can't avoid taking a leading role in restoring the frayed social contract between companies and their workers." I would disagree with the statement to the extent that these firms can avoid having to take such responsibility if Congress and organized labor doesn't hold their feet to the fire.

Although it is a complicated situation, and it is clear that these buyouts can sometimes be the only alternative to a company going Chapter 7 or Chapter 11 - and eliminating all of their jobs and shareholder equity in the process - I think Stern is completely correct that the private equity firms need to balance profit maximization with employee protection, especially as these type of deals are proliferating and more and more Americans are at risk of losing their job as a consequence.

Pearlstein notes that some of these protections could include a promise that all employees will be offered health insurance, or a portable pension benefit, along with a generous severance package if they are laid off or including them in a share of the profits if and when the company is sold -- an incentive that private-equity firms have used extensively, and successfully, with the managers of the companies they acquire. Both of these policies make a lot of sense to me, and ultimately would provide a much-needed measure of economic security to the American middle class as opposed to just enriching management and investors. It is definitely a challenging balancing act the federal government must play here in ensuring labor's interests are protected - but it is of great consequence to the broader economy.

Forbes discusses Stern's recent efforts to influence the public policy debate in Washington, and how the private equity industry is similarly beginning its lobbying efforts by creating the Private Equity Council.

Before you make up your mind, be sure to read this very comprehensive report from SEIU called "Behind the Buyouts" released on their website last month. I haven't finished it yet, but when I do I'll either update this post or start a new one covering its arguments.

So again, kudos and the best of luck to Andy Stern and SEIU, and I hope he will be successful in enlisting the support of both Congress and the private equity industry in protecting the interests of workers.

Update: I finished the SEIU's 44-page report, and here are the arguments made for increased government oversight and regulation of private equity.

1. Addressing lack of transparency and conflicts of interest. SEIU argues, and I agree completely, that private equity should have to play by the same set of rules as other financial service providers. First, the industry needs to "provide transparency and disclosure about their businesses, their deals, their income, their plans for the companies they buy and sell, and the risks of the debt they load onto portfolio companies." For example, these firms should be required to disclose things like General Partner income, company-specific restructuring plans, specifics about debt plans and risks associated with that debt.

This is a tricky issue here because one of the reasons the top private equity firms are able to provide their investors (limited partners) with returns above the S&P is because of the secrecy that shrouds their dealmaking, This secrecy arguably acts as an arbitrage point for the industry, and it is unclear whether the industry would be able to compete with publicly-issued equity if the amount of disclosure mandated by the SEC were to be expanded. (this AEI-Brookings study argues the opposite, however) Nevertheless, protecting workers at the companies targeted by private equity firms ought to be protected by the government to the fullest extent possible.

Portfolio company workers should share in a company’s success. After all, a buyout firm or CEO might come up with strategies for success, but only the workers can implement them. We’re talking basic fairness here. A handful of buyout deals have resulted in employee stock options, for example, but this is still the exception rather than the rule. It shouldn’t be.

The SEIU also argues that "the industry should invest in the health, security, and long-term prosperity of America by supporting equitable tax rates and the elimination of loopholes that increase the tax burden on working Americans. The industry should work to build confidence in the securities markets by eliminating conflicts of interest and other potential abuses in their deals." (emphasis added)

I think these recommendations should be far less controversial, especially the part about identifying and eliminating conflicts of interest.

2. Workers should have a voice in the deals and benefit from their outcome. Workers should have a seat at the table when deals are being made. According to SEIU, private equity deals should "create economic opportunities that align the long-term interests of everyone that builds the value of a company, from direct employees and contract workers to senior management." This is hard to argue with, and while it would be best if management/investors and the employees could work out mutually beneficial arrangements with each other, it might be necessary for government to step in to ensure the rights of the latter. Specifically, workers should have paychecks that can support a family, quality, affordable health care coverage, secure retirement benefits and a "voice" at work—meaning the freedom to join a union using majority sign-up without interference from any party.

And finally. . .

3. Community stakeholders should have a voice in the deals and benefit from their outcome. According to SEIU, buyout firms should "play a proactive and constructive role in the communities affected by their deals, community stakeholders should be involved as deals are being made, the private equity buyout industry and community stakeholders should use wealth generated by deals to improve the quality of life, the environment, the health, the safety, and the long-term stability of communities." This is the basic argument for good corporate citizenship, which I think reasonable people would agree applies to private equity firms the same way it applies to publicly-traded corporations.

For more background on private equity, see this special report from the Financial Times published last month.

Update (6/16)
: The Wall Street Journal provides a good update on the front page of their weekend edition (subscription only).

Update (6/27): Writing in The Nation, Doug Henwood looks at the numbers behind private equity - and who the real winners and losers have been. (Hint: Stephen Schwartzman, CEO of the Blackstone Group, is a big winner)

Exploring the impact of Muslim attitudes toward the US

Steven Kull, the director of the University of Maryland's Program on International Public Opinion recently testified to the House Committee on Foreign Affairs, Subcommittee on International Organizations, Human Rights, and Oversight and asks what I would consider to be a pretty good question: Do the negative perceptions much of the Muslim world hold toward the US matter?

According to Kull, "[P]erhaps the most significant finding of our study is that across the four countries, 8 in 10 believe that the US seeks to “weaken and divide the Islamic world.”

He also relates another key insight from his research in public opinion:
Though al Qaeda and America are both seen as largely illegitimate, America is seen as the greater threat. It is as if Muslims are living in a neighborhood where there are two warlords operating. They do not like either one, but one is much more powerful. As long as the weaker one is standing up to the stronger one, it makes sense that they are inclined to play down their dislike for the weaker one.

It's worth checking out the entire testimony here.

Sunday, May 13, 2007

The applied ethics of torture

There's some very disturbing news from the Military Times, which links to a recent survey of US troops' opinions regarding the war. A new survey of US military personnel in Iraq found that 41% percent of soldiers in Iraq and 44% of marines agree that "Torture should be allowed if it will save the life of a Soldier/Marine" and 36% of soldiers and 39% of marines agree that "Torture should be allowed in order to gather important info about insurgents." Additionally, in the opinion of 17% of US soldiers and marines, : "All non-combatants should be treated as insurgents," and thus should be subject to torture in these cases.

Writing in Z Mag, clinical psychologist Stephen Soldz provides some good analysis of the significance of this survey. He argues:
These results illustrate the US military's conflicting attitudes toward banned torture and other cruel, inhuman or degrading treatment. On the one hand, the US military has a long history of teaching and promoting torture around the world, in the various American client states in Latin America and elsewhere. For example, the School of the Americas is well-known for teaching torture techniques and providing detailed manuals for Latin American militaries on how to conduct effective torture.

And it should not be forgotten that many of the most notorious US torture facilities around the world are run by the US military, including Guantanamo, Abu Ghraib, Camp Cropper, and Bagram. at each of these facilities, and at so many others, torture, conducted by both military and others (CIA and private "interrogation" contractors) was routine and encouraged.

On the other hand, there is a history of military opposition to torture and resistance to the Bush administration's more extreme pro-torture policies and interpretations of laws. For example, as the administration moved to include torture as a central element of its Global War On Terror, military lawyers from the Judge Advocate General's Corps (JAG) offices actively opposed these moves, largely on the basis that they were both ineffective at obtaining information and would alienate needed allies -- Muslims around the world -- in combating terror.

As way of background, recently the US military has adopted a new interrogation Army Field Manual, with effectively bans many, but not all, abusive interrogation techniques. Many of the most abusive technique are banned, including: (1)Forcing the detainee to be naked, perform sexual acts, or pose in a sexual manner; (2) Placing hoods or sacks over the head of a detainee; using duct tape over the eyes; (3) Applying beatings, electric shock, burns, or other forms of physical pain. (3) "Waterboarding."; (4) Using military working dogs; (5) Inducing hypothermia or heat injury; (5) Conducting mock executions; (6) Depriving the detainee of necessary food, water, or medical care.

According to Soldz:
Another factor affecting attitudes toward torture concerns the dynamics of occupation. US troops are involved in an occupation of a land whose culture and people are alien to them. When the population of that land resist occupation, becoming "insurgents," these troops have little basis for understanding this rebellion, for to understand would be to realize that their role is that of occupier, making their presence difficult to rationalize. Countries seeking to dominate another country use some combination of the carrot and the stick. But terrorizing the population to be occupied is usually an essential component of the occupation strategy.

Torture is a key element of this control through terror. The US troops in Iraq understand what the brass, with their shocked response to this survey, pretend not to comprehend: that torture goes along with occupation and domination. Perhaps it isn't a logical necessity. But it is rare for an unpopular occupation to not be accompanied by torture, to show the population to be subjugated just who is boss.

Ending the US military's support for torture in practice will most likely require an end to its role as a force to occupy the varied lands of other people. It will also require an understanding that other peoples are the equals of those bearing "the white man's burden." Human rights and empire do not go together.

By the way, it should go without saying that GOP presidential candidates Guiliani and Tancredo were flouting both the updated field manual as well as the Geneva Conventions our country is a signatory to in their rhetorical support for waterboarding.

Update (5/30): Experts tell Congress that Bush's "enhanced interrogation methods" are "outmoded, amateurish and unreliable.". As Matt Yglesias notes:
And of course they are. These are the methods that have historically been deployed by authoritarian regimes looking to generate false confessions (think the Spanish Inquisition or Stalin) for the purpose of cowing the population into submission, they're not real investigative techniques.

Outsourcing the war

Mercenary contractors fightin' a new era, corporate military bankin' off the war on terror. -Immortal Technique

Check out this transcript (and video) of Jeremy Scahill testifying before the House Appropriations Subcommittee on Defense on the impact of private military contractors on the conduct of the Iraq War in The Nation.

He notes that: "[W]e are now in the midst of the most privatized war in the history of our country. This is hardly a new phenomenon, but it is one that has greatly accelerated since the launch of the "global war on terror" and the invasion and occupation of Iraq. Many Americans are under the impression that the US currently has about 145,000 active duty troops on the ground in Iraq. What is seldom mentioned is the fact that there are at least 126,000 private personnel deployed alongside the official armed forces. These private forces effectively double the size of the occupation force, largely without the knowledge of the US taxpayers that foot the bill."

One of the points he makes during his testimony include the fact that unlike soldiers, we still do not know the exact number of private contractors killed or wounded - although he estimates the number hovers around 800 based on data from the Department of Labor. This is an important point because, as he puts it: "These casualties are not included in the official death count and help to mask the human costs of the war. More disturbing is what this means for our democracy: at a time when the administration seems unwilling to subject its war strategy to oversight by the Congress, we face the widespread use of private forces seemingly accountable to no effective system of oversight or law." (emphasis added)

One of the most chilling issues, however, is that the current status of a "privatized" war has both encouraged and enabled the growth and creation of companies who have benefited and stand to gain even more from an escalation of the war. To say this creates a perverse incentive for these multibillion dollar employers, who directly profit from war, to lobby Congress for the means to increase the scope of military conflicts abroad (along with the Bush administration's Orwellian "Pre-emptive war") is, of course, a huge understatement.

To be certain, this increasing privatization of the US armed forces, tethering the profit motive to military operations while the "contractors" are held to a different legal standard that soldiers, is a troubling trend and I'm not sure how Congress can most effectively regulate this burgeoning industry.

Update: Also, be sure to check out Robert Greenwald's excellent film Iraq for Sale. It is "must viewing" for those who want to understand just how dangerous this trend truly is.

Update #2: And while you're at it, check out this article in Alternet by Frida Berrigan about the US leading the world in arms sales and private military personnel.

Saturday, May 12, 2007

The drumbeat of war grows louder

From the New York Times on Friday:
Vice President Dick Cheney used the deck of an American aircraft carrier just 150 miles off Iran’s coast as the backdrop today to warn the country that the United States was prepared to use its naval power to keep Tehran from disrupting off oil routes or “gaining nuclear weapons and dominating this region.”

Little of what Mr. Cheney said in the cavernous hangar bay of the aircraft carrier U.S.S. John C. Stennis, one of two carriers whose strike groups are now in the Persian Gulf, was new. Each individual line had, in some form, been said before, at various points in the four-year-long nuclear standoff with Iran, and during the increasingly tense arguments over whether Iran is aiding the insurgents in Iraq.

But Mr. Cheney stitched all of those warnings together, and the symbolism of sending the administration’s most famous hawk to deliver the speech so close to Iran’s coast was unmistakable.

Asia Times reports on US-EU diplomacy over how to proceed with Iran, with the Europeans trying to find some way of avoiding a growing crisis from developing. As the article bluntly puts it: "With the two key states in the equation standing so far from each other - Iran refusing to give up enrichment and the US seeing zero enrichment as the only acceptable outcome - significant out-of-the box thinking is required from the Europeans to bridge these seemingly incompatible positions."

An interesting start to the summer. . .

Update: Neocon fantasies of attacking Iran persist, as witnessed by this particularly disturbing Norman Podhoretz editorial in Commentary.

The only problem with his argument for bombing Iran's nuclear facilities? The Iranian nuclear facilities are all in bunkers designed to withstand all but nuclear armed penetrators. Bombing Iran would not hinder their nuclear pursuits significantly. It would be a violent act of futility. It would fatally compromise any other pathway to a non-nuclear future for Iran, other than invasion. Which, of course, brings up the real reason for bombing Iran - to make it necessary for the US military to invade and occupy Iran.

NYT review of Hitchens' new book

Writing in the New York Times, Michael Kinsley gives a lukewarm review of Christopher Hitchens' new book "God is Not Great." (On a related note, give a listen to this debate held at the New York Public Library between Hitchens and Rev. Al Sharpton).

My thoughts on Hitchens' book - which I have no intention of reading even though I have read numerous reviews and critiques on it? Well, for starters, I think it's great that the contrarian journalist is focusing his brilliant writing ability on a topic other than defending the invasion and continued occupation of Iraq. This is the subject matter he seems to be spending all of his time on lately, writing a regular column at both Slate and Vanity Fair, and his legacy as an astute and honest observer of current affairs has already been ruined by his continual justification of neoconservative war crimes in the Middle East.

I understand that a lot of his alliance with the neocon Right is motivated by his own personal anger and disillusionment from the fatwa issued by the Iranian mullahs against his personal friend Salman Rushdie due to the latter's publication of The Satanic Verses.

Nevertheless, his frustration has allowed his considerable writing talent to be squandered in service of lunatic war agitators in the Bush administration, helping them sell their utterly unjustifiable foreign policy to the public. So while I disagree with his take on religion, it's nice to see him diverting at least some of his time from his usual trouble-making.

His central thesis is that organized religion has done more harm than good, blaming things such as the crusades, inquisitions and most of the wars in Europe on Christianity, not to even mention the 9/11 terror attacks on Wahabbist Islamic fundamentalists. I would argue that Christ's key teachings (e.g. The Sermon on the Mount) were intentionally manipulated by avaricious followers in order to to consolidate power, much in the same way Marx's philosophy* was distorted by "Marxists after his death.

Can you blame religion, or even organized religion for these travails? I would argue the answer is no because these power-seeking leaders would have found some other way of manipulating their followers into doing their bidding. And after taking a few courses in comparative religion as an undergrad, I have come to believe that there is a lot of beautiful, brilliant philosophy that developed out of Judaism, Christianity, Hinduism and Islam. (I also really respect Buddhism and Taoism, although they generally aren't considered to be quite as "organized" by Western observers)

*It's also worth noting that when Marx dubbed religion as being the "opiate of the masses", he wasn't really using the word "opiate" as a condemnation. In other words, most scholars believe that rather than meaning to say religion brainwashes the masses into unthinking obedience, Marx was simply stating that religion had a palliative quality for adherents - helping to provide a community, support structure and comfort to those dealing with the inevitable tragic circumstances that one encounters in life.

(h/t for the article goes to Yglesias)

Friday, May 11, 2007

Drum reminds us why the Estate Tax shouldn't be repealed

Did Rudy get caught trying to play a cynical game with voters in Iowa? Kevin Drum explains in the Washington Monthly:
As part of a campaign stop planned for Iowa last week, Rudy Giuliani's Des Moines office called Deb and Jerry VonSprecken to see if they'd host an event at their farm. They agreed. After several days of planning and a security check, though, Deb was told to call Giuliani's New York office:

"They wanted to know our assets," she revealed, and added that she and Jerry have a modest 80 acre farm and raise cattle. Later she received a call from Tony Delgado at the Des Monies location.

"Tony said, 'I'm sorry, you aren't worth a million dollars and he is campaigning on the Death Tax right now.' then he said they weren't going to be able to come," Deb continued.

So what really happened? It sounds like Giuliani's gang was playing an old time conservative game: trying to find a family farm that would eventually have to be sold in order to pay inheritance taxes. Of course, they can practically never find one, since inheritance taxes don't even start to kick in until a farm is worth several million dollars, and there aren't very many family farms worth anywhere near that. But that doesn't keep them from trying.

Just in case you didn't know, recent research by the Center for Budget and Policy Priorities confirms that the 2001 and 2003 tax cuts, which Republicans claimed would boost the economy and pay for themselves has, in fact, done neither of these things. At the same time, the tax is also not hurting state economies as conservatives have claimed they would.

The good news? With Democrats in the majority in the House of Representatives and the Senate, proposals to repeal the estate tax will no longer be considered in the next Congress. However, some version of estate tax reform is still possible, according to United for a Fair Economy, and estate tax supporters must still be wary of newly elected Senators who may want to raise the exemption level too high.

CBPP also has a handy website that explains the biggest misconceptions the American people have regarding the Estate Tax and Republicans' cries for it to be repealed.

Update: Much more background on the tax from Dollars & Sense and Robert Reich, if you're so inclined.