I have said relatively little about the conflicts in the Middle East over the last few weeks partly because I was not sure what to say. The events have escalated, rather than quieting down, and as of this morning I count Libya, Tunisia, Egypt, Jordan, Syria, Yemen, and Bahrain as countries still in the throes of some sort of upheaval, with others, including Saudi Arabia, showing the strain as well. President Obama has spoken repeatedly on behalf of some of the protesters and said nothing about others--and he has now involved us in war in Libya, a war carried out from ships at sea and from the air designed, it seems, to protect rebel groups that control certain cities in Eastern Libya, and somehow to weaken the dictatorship of Muhammar Qadaffi and perhaps to bring it to an end. The job I have held for the last 21 years gives me a particular perspective from which to analyze this decision. So does a book I checked out yesterday from my school library.
Admiral Stansfield Turner, later famous as director of the CIA under President Carter, remade the curriculum at the Naval War College beginning in 1972, and in particular started the Strategy and Policy Department which I joined in 1990. The Vietnam War was nearly over. It had devastated the American military, deeply divided the American public, and opened huge rifts between civilians and military, and he wanted to do something about that. To do, he created a curriculum based upon classic texts, including Clausewitz, Sun Tzu, and Thucydides. The syllabus was originally composed of entire books because he felt that naval officers rarely read them. He was trying to give officers an opportunity to reflect and to put current events in context. Almost from that day to this, my department has struggled to keep that philosophy alive while at the same time integrating a succession of buzzwords and contemporary concerns into the curriculum--and we have been largely successful. The question that we ask, week in and week out during two trimesters every year is, what were various nations trying to accomplish with the use of military force, and did they use force in an effective way to do so?
It was largely because of this experience that I was even in 2001 nervous about the long-term effects of invading Afghanistan, and definitely opposed in 2002-3 to the invasion of Iraq. We had to try to capture the Al Queda leadership in Afghanistan, but taking responsibility for that country's future, I could see, would be a huge job. Nor was I convinced that we could establish anything stable in Iraq. My students and colleagues, many of whom have spent years of their lives in those conflicts now, have become increasingly skeptical about them too, and I think quite a few of them are somewhat astonished that we have seen fit to start dropping bombs in yet another Middle Eastern country. Why have we done so?
Yesterday I decided to research that question. It has been widely reported that one of the prime movers for the current policy is Samantha Power, a journalist, holder of a degree from Harvard Law, former professor at the JFK School of Government, and scholar of genocide, whose book, A Problem from Hell, American and the Age of Genocide, won a Pulitzer Prize in 2003. Power worked for Barack Obama when he was a Senator and during his campaign. She had to resign from the campaign in the spring of 2004 after she called Hillary Clinton a "monster" in a press interview--an interesting choice of words, one might think, for some one who has written so much about Hitler, Pol Pot, and various other murderous tyrants. (An interview she did during the campaign suggests that she may have been reacting to attacks on herself by Clinton supporters.) This did not however prevent her from coming into the White House as head of the Office of Multilateral Affairs and Human Rights at the National Security Council. (I had not previously heard of this position and I don't know if it was crated for her.) Ironically, Power, Ambassador to the UN Susan Rice, and Secretary Clinton are generally credited with overcoming the objections of Robert Gates and Power's boss Thomas Donilon and convincing the President to impose the no-fly zone.
I took A Problem from Hell out of the library yesterday. It's a long, detailed book, and I am not claiming to have read it all, but I can claim to have a good sense of what it is and is not about. Power began the book after covering the war in Bosnia because she was shocked at how little the United States government did about the killing of Muslims there. Taking a historical perspective, she then looked into the secondary literature on the Turkish murder of the Armenians in the First World War, the Holocaust, the original definition of genocide and its postwar definition as a crime, the Pol Pot regime in Cambodia, Saddam Hussein's campaign against the Kurds, the broader events in the Balkans in the 1990s, the Rwandan massacre, and finally the Kosovo War. In each case she found that the U.S. government had intervened slowly or not at all, that many elements within it had denied or minimized what was happening, and that lonely advocates for action had generally cried in the wilderness without much result. She obviously regards this as an appalling story which in her opinion should not go on any longer, and I would imagine that she now feels in a position to do something to bring it to an end.
I too have written about some of these episodes--those taking place in Europe in the era of the two world wars--in my book, Politics and War. I was more interested in the political and to some extent intellectual background of mass killings and ethnic cleansing, which I attributed to nationalism and imperialism, the two essential issues in the European wars of the first half of the twentieth century. I do not see, sadly, how anyone can deny that such incidents represent a powerful strain in human nature, one that can be documented since the beginning of recorded history. Thucydides himself provides several examples. But today I am concerned with the issue dominating the front pages--the issue of what, if anything, could be done.
To some one with my background, at least, Power seems to have devoted an astonishingly little amount of time to that question in her book. The whole implication of it is that the United States has allowed genocide to happen and therefore bears the responsibility for a great deal of it. One of the more interesting aspects of the book, actually, is its nearly exclusive focus on the United States, rather than the western world or the United Nations, as the authority that should have been doing more to stop these massacres--although Power is a native of Ireland and a naturalized American, she certainly seems to have adopted American exceptionalism with the zeal of a convert. Eventually, on p. 506-7 of a 516 page text, she spends two pages on the issue of what the United States actually could have done. She attacks the issue, as it were, from a reverse angle: the discussion occurs in the midst of a list of the reasons why the United States government has declined to do more, reasons she is trying to knock down as straw men. First, she says, we cannot know what the United States could have done to stop genocide since it has never tried hard enough to do so. (Much has happened since she published her book, however, and I will return to this issue in a moment.) Secondly, she notes that many perpetrators have been emboldened by the failure of the U.S. and "other western capitals" to do anything about previous instances of genocide, or about what they were doing at the time. Then, however, she lists five instances in which threatened or real U.S. action had effects. And the list is actually quite revealing.
First, Power says, Secretary of State George Schultz's condemnation of Saddam Hussein's use of poison gas against the Kurds and Senator Claiborne Pell's threat to impose sanctions on him brought those atrocities to an end. Then, later, after the first Gulf War, the U.S. successfully established s safe haven for the Kurds in northern Iraq. Thirdly, she says, a telephone call from a U.S. diplomat reportedly saved the lives of some Tutsis staying in a particular hotel in Rwanda. (This may be the incident that later became the basis for the film Hotel Rwanda, starring Don Cheadle.) She credits NATO bombing of Bosnia with ending the war there at long last, and lastly, she credits the Kosovo war with "liberating 1.7 million Albanians from tyrannical Serb rule."
Of these examples, the safe haven in Kurdistan and the Kosovo War are probably the most relevant to the decision to start bombing in Libya. The first of these, however, raises the question of whether we are willing indefinitely to maintain aircraft over Libya to keep Qadaffi's tanks and troops away from rebel-held areas, and the second leaves out the long-term consequences of the Kosovo war: that the minority Serbs, rather than the majority Albanians, are now gradually being ethnically cleansed from Kosovo. Meanwhile, her book came out just before another highly relevant example of what happens when the United States does in fact try to do something about murder and tyranny overseas, the invasion of Iraq.
Between 2003 and 2007, according to authoritative sources, tens of thousands of Iraqis were killed in civil war, about two million left the country, and two million more were internally displaced by ethnic cleansing. That was certainly comparable to the ethnic cleansing that took place in the Balkans in the 1990s, which Power is so convinced that the US and NATO could and should have stopped. But the events in Iraq took place while the United States had an occupation force of over 100,000 troops in the country. That huge intervention, which we certainly do not have the resources to impose again, could not stop the killing. Things quieted down after the surge, but many observers, some from the American military, explain that the violence ebbed in large part because the process of ethnic cleansing had been completed.
The air strikes in Libya may well have stopped, or at least delayed, a massacre in Benghazi. I do not however think it will be possible for NATO air power to enforce an effective partition of Libya indefinitely, nor do we have the slightest idea whether Libya could function on that basis. The President has stated that we will not send troops in and Qadaffi seems to dispose of far more support than the Presidents of Egypt or Tunisia did. The real question now is whether we can arrange some kind of cease-fire talks that will stop the fighting and perhaps encourage some kind of political settlement--with or without Qadaffi.
Turmoil in the Muslim world, meanwhile, is obviously destined to increase, from the Mediterranean to the Pakistan-India frontier. We can neither stop it or control it, and attempts to do so militarily will probably be counterproductive. We must continue to stand, as the United States did in much more dangerous circumstances in 1940-1, for civilization and the rule of law. But we shall have to ask ourselves whether the more critical work, in that respect, needs to be done here at home, rather than in distant lands with different cultures, many with very large populations, who shall have to find their own way through history whether we like it or not.
Update: Monday evening
The President's speech is rather interesting. It leaves the outcome of the Libyan operation entirely unclear. I certainly believe that the President has no intention of sending in troops and every intention of turning the operation over to others. He is proud of having done what was not done in Bosnia, or Rwanda, and proud that it worked. (To be sure, Libya's almost unique geography made that possible--Qaddafi's forces were stopped because they all essentially had to move along one road.) Samantha Power's influence is very clear both as to the policy and the speech.
Frankly, the episode reminds me a bit of another famous Nomad who saved lives, Oskar Schindler. He had no strategy either--he just took advantage of a chance to do some good. That is how Obama has sold this operation. I am sure that he and Power also hope that it will have a deterrent effect on other dictators, but frankly, I am very skeptical about that. I was rather struck by his speech's reference to Iran, and I wonder what will happen if protests break out once again in that country.
I have always judged actions by their consequences, and so far this action has had good ones. We can only hope that that continues.
Saturday, March 26, 2011
Saturday, March 19, 2011
In the last crisis
In connection with my current research on the U.S. entry into the Second World War, I picked up a weighty volume of Gallup polls from 1936 to 1948. The results regarding foreign policy are full of surprises, but I will save most of them for the book. The opinions revealed about domestic policy are extremely revealing about the profound changes in American opinion that have taken place in the last 75 years.
By the years 1937-9 the glory days of the New Deal were pretty much over. Roosevelt's first initiative of his second term--his plan to enlarge, or pack, the Supreme Court--turned the public (which immediately opposed the plan, albeit by a relatively narrow margin) and the Congress decisively against him, and only one significant piece of domestic legislation, regulating wages and hours, passed Congress in 1937-39. Yet the philosophy of the New Deal commanded broad support. In March 1937 53% of respondents favored a Constitutional amendment "granting Congress greater power to regulate industry and agriculture." (For most of this period Gallup simply eliminated respondents who had no opinion from his results.) A poll in April 1937 explicitly favored progressive income tax rates, albeit rather low ones, ranging from 1% for an income fo $3000 to 10% for an income of $100,000. In July of that year 63% of respondents thought Congress should remain in session rather than adjourn "to consider new Deal legislation on wages and hours, housing, farm tenancy, and the Supreme Court." 69% agreed that government regulation of stock exchanges had helped investors. In 1938 59% supported the pending wages and hours bill. Large majorities thought the government should cut taxes on companies that distributed some of their profits to their workers and advocated allowing workers to elect a member of the board of directors. Roosevelt had not, however, converted the country to the idea of deficit spending, about which he remained deeply ambivalent. Despite the new recession,more than 60% of respondents repeatedly opposed increased government spending as a solution, and FDR's decision to adopt it anyway in the nest year may have contributed to the big Democratic losses in the 1938 Congressional elections. In addition, while 75% of the nation favored labor unions generally, big majorities opposed the sit-down strikes that eventually began the organization of the auto industry in early 1937, and majorities disliked the militant C.I.O and the closed shop and favored more regulation of unions. The country, meanwhile, both supported a larger Army and Navy in the late 1930s (although not to fight in a European war), and was more than willing to pay higher taxes to support it.
The country also showed remarkable confidence. Unemployment was beginning to rise again in the spring of 1937 but two-thirds of respondents thought that "the unemployment problem can be solved." It also trusted, by and large, its leadership. FDR's approval rating never fell below 55% in this period, and a similar majority said that Congress was doing a good job.
Despite the false picture that has no been painted by Boomer historians, racist attitudes did not dominate the United States as a whole in the late 1930s. When Hugo Black of Alabama was revealed to have been a member of the Ku Klux Klan after his appointment to the Supreme Court, 59% of respondents called for his resignation if the accusation proved true. It did, but after Black's radio address disclaiming any continuing connection with the organization, a majority swung over to his side. A substantial majority of Americans supported anti-lynching legislation. 67% of respondents praised Eleanor Roosevelt's resignation from the Daughters of the American Revolution after that organization refused to rent Constitution Hall to the great black singer Marian Anderson. Sexist attitudes, however, did. Eleanor Roosevelt's approval ratings were very high, but in early 1937 large majorities of both men and women said they would not vote for a woman for President, and Frances Perkins, the Secretary of Labor, was nearly the most unpopular member of the cabinet. Only 22% of respondents (and 25% of women) approved of married women with employed husbands "earning money in business or industry" themselves.
Most of today's social issues were not yet on the radar in the late 1930s, but polls revealed very different attitudes on certain questions that those today. In April 1938 84% of respondents agreed that "all owners of pistols and revolvers should be required to register with the Government." In the midst of a desperate recession, a bare majority opposed the use of state lotteries to raise money, and larger majority opposed the use of games of chance by churches to raise money. Large majorities, on the other hand, rejected a return to Prohibition. And in a chilling reminder that attitudes towards human life remained quite different, in the spring of 1939 46% of respondents favored "mercy deaths under Government supervision for hopeless invalids"--including a bare majority of respondents 21 to 29 years of age, that is, the heart of the GI or "greatest" generation.
One interesting set of results commands particular attention. Roosevelt and the New Deal did practice class warfare--albeit with limited objectives--and the public knew it. In the spring of 1939 the President was generally approved b y 38% of upper income people, 54% of middle, 74% of low, and 82% of "reliefers," those receiving public assistance. Huge majorities of the upper and middle income groups opposed a third term for the President; huge majorities of the two poorer groups supported one. In 1940 professionals professed a Republican rather than a Democratic affiliation by 44% to 27%, as did businessmen by 48% to 29% (a full 19% of the country declared themselves independents.) All other occupational groups, however, favored the Democrats.
The American people in the late 1930s were far worse off than they are now and lived far more difficult lives, but they had a much greater belief in their leaders and their institutions than they do now--and with good reason. They had a much stronger sense of fiscal responsibility, both personally and as a nation, but they believed in a strong government role in the economy and they believed in labor unions. Interestingly enough, the New Deal's public works programs topped the lists of both the best and worst things that Roosevelt had done. Outside the South white Americans were clearly far less racist than commonly supposed, but most Americans shared the belief that women's place was in the home. Most of my friends would agree that we have gained in some areas and lost in others since then, but sadly, I must conclude that overall, our political system has lost far more ground than it has gained--and it shows.
By the years 1937-9 the glory days of the New Deal were pretty much over. Roosevelt's first initiative of his second term--his plan to enlarge, or pack, the Supreme Court--turned the public (which immediately opposed the plan, albeit by a relatively narrow margin) and the Congress decisively against him, and only one significant piece of domestic legislation, regulating wages and hours, passed Congress in 1937-39. Yet the philosophy of the New Deal commanded broad support. In March 1937 53% of respondents favored a Constitutional amendment "granting Congress greater power to regulate industry and agriculture." (For most of this period Gallup simply eliminated respondents who had no opinion from his results.) A poll in April 1937 explicitly favored progressive income tax rates, albeit rather low ones, ranging from 1% for an income fo $3000 to 10% for an income of $100,000. In July of that year 63% of respondents thought Congress should remain in session rather than adjourn "to consider new Deal legislation on wages and hours, housing, farm tenancy, and the Supreme Court." 69% agreed that government regulation of stock exchanges had helped investors. In 1938 59% supported the pending wages and hours bill. Large majorities thought the government should cut taxes on companies that distributed some of their profits to their workers and advocated allowing workers to elect a member of the board of directors. Roosevelt had not, however, converted the country to the idea of deficit spending, about which he remained deeply ambivalent. Despite the new recession,more than 60% of respondents repeatedly opposed increased government spending as a solution, and FDR's decision to adopt it anyway in the nest year may have contributed to the big Democratic losses in the 1938 Congressional elections. In addition, while 75% of the nation favored labor unions generally, big majorities opposed the sit-down strikes that eventually began the organization of the auto industry in early 1937, and majorities disliked the militant C.I.O and the closed shop and favored more regulation of unions. The country, meanwhile, both supported a larger Army and Navy in the late 1930s (although not to fight in a European war), and was more than willing to pay higher taxes to support it.
The country also showed remarkable confidence. Unemployment was beginning to rise again in the spring of 1937 but two-thirds of respondents thought that "the unemployment problem can be solved." It also trusted, by and large, its leadership. FDR's approval rating never fell below 55% in this period, and a similar majority said that Congress was doing a good job.
Despite the false picture that has no been painted by Boomer historians, racist attitudes did not dominate the United States as a whole in the late 1930s. When Hugo Black of Alabama was revealed to have been a member of the Ku Klux Klan after his appointment to the Supreme Court, 59% of respondents called for his resignation if the accusation proved true. It did, but after Black's radio address disclaiming any continuing connection with the organization, a majority swung over to his side. A substantial majority of Americans supported anti-lynching legislation. 67% of respondents praised Eleanor Roosevelt's resignation from the Daughters of the American Revolution after that organization refused to rent Constitution Hall to the great black singer Marian Anderson. Sexist attitudes, however, did. Eleanor Roosevelt's approval ratings were very high, but in early 1937 large majorities of both men and women said they would not vote for a woman for President, and Frances Perkins, the Secretary of Labor, was nearly the most unpopular member of the cabinet. Only 22% of respondents (and 25% of women) approved of married women with employed husbands "earning money in business or industry" themselves.
Most of today's social issues were not yet on the radar in the late 1930s, but polls revealed very different attitudes on certain questions that those today. In April 1938 84% of respondents agreed that "all owners of pistols and revolvers should be required to register with the Government." In the midst of a desperate recession, a bare majority opposed the use of state lotteries to raise money, and larger majority opposed the use of games of chance by churches to raise money. Large majorities, on the other hand, rejected a return to Prohibition. And in a chilling reminder that attitudes towards human life remained quite different, in the spring of 1939 46% of respondents favored "mercy deaths under Government supervision for hopeless invalids"--including a bare majority of respondents 21 to 29 years of age, that is, the heart of the GI or "greatest" generation.
One interesting set of results commands particular attention. Roosevelt and the New Deal did practice class warfare--albeit with limited objectives--and the public knew it. In the spring of 1939 the President was generally approved b y 38% of upper income people, 54% of middle, 74% of low, and 82% of "reliefers," those receiving public assistance. Huge majorities of the upper and middle income groups opposed a third term for the President; huge majorities of the two poorer groups supported one. In 1940 professionals professed a Republican rather than a Democratic affiliation by 44% to 27%, as did businessmen by 48% to 29% (a full 19% of the country declared themselves independents.) All other occupational groups, however, favored the Democrats.
The American people in the late 1930s were far worse off than they are now and lived far more difficult lives, but they had a much greater belief in their leaders and their institutions than they do now--and with good reason. They had a much stronger sense of fiscal responsibility, both personally and as a nation, but they believed in a strong government role in the economy and they believed in labor unions. Interestingly enough, the New Deal's public works programs topped the lists of both the best and worst things that Roosevelt had done. Outside the South white Americans were clearly far less racist than commonly supposed, but most Americans shared the belief that women's place was in the home. Most of my friends would agree that we have gained in some areas and lost in others since then, but sadly, I must conclude that overall, our political system has lost far more ground than it has gained--and it shows.
Sunday, March 13, 2011
Revolution abroad, entropy at home
The great crisis of 1914-45 (1914-21 or so in Eastern Europe, 1933-45 in Western Europe, East Asia and the United States) pitted competing authorities against one another. Beginning in 1917 in Eastern Europe, centuries-old empires gave way to Communist revolution and, after a failed attempt to introduce democracy, military and authoritarian rule in most of the region. In Western and Southern Europe several totalitarian regimes took power, and in Japan, an effective dictatorship of Navy and Army officers terrorized the civilian government. The new governments of Japan, Germany and Italy unleashed a world war. It becomes clearer and clearer that we will not face anything similar in our lifetime. Instead of competing authorities, our problem is a collapse of authority.
Although we are once again distracted by a natural and man-made catastrophe--the earthquake and tsunami in Japan, which has brought about a meltdown at a nuclear plant--the situation in the Middle East has much greater long-term implications. Like the Communist regime in Eastern Europe, Middle Eastern regimes are collapsing more or less on schedule. The post-colonial Tunisian and Egyptian regimes dated from the early 1950s, and Egypt experienced an Awakening (largely thwarted by the government after Anwar Sadat's assassination) in the 1970s. Now they are 60 years old, the age at which old regimes begin to totter. They are not, however completely dead: although their leaders have been forced out, their militaries and governments continue to function, rather like Russia in the first half of 1917, and their future remains completely uncertain. Qadaffi's regime in Libya, however, is almost twenty years younger, and he can still draw on a cadre of middle-aged subordinates who were only children when he took power. After appearing to teeter on the edge of collapse, he now seems to have recovered the initiative, and the West is faced with pressure to intervene. News reports today suggest that the highly touted no-fly zone may well prove ineffective, since Qadaffi is not primarily relying upon air power as he roles back the rebels. The American foreign policy elite, however, is still in the grip of the idea that it should not allow evil to continue to exist in the world, and the pressure on the Obama Administration will grow. Secretary Gates has emerged as the somewhat unlikely hero of the drama, swearing off any further large-scale military interventions in Asia (or presumably Africa) at West Point, and trying at last to push for more reasonable foreign policy objectives.
Trouble continues, meanwhile, in Bahrain and Saudi Arabia. In Bahrain a Sunni monarchy rules a Shi'ite majority; in Saudi Arabia the Shi'ite minority is restive and the whole people may be chafing under dictatorship. Bahrain hosts the U.S. naval presence in the area and Saudi Arabia is of course the world's leading oil producer. The Saudis are a completely traditional society that has never known western institutions or western rule, and I have never succeeded in identifying any generational rhythm in their politics. Something similar could have been said of Russia before 1917. We do not know where this will go.
In 1933-45, the governments of Germany, Japan, the Soviet Union, Great Britain (after 1940), and the United States became much stronger to deal with foreign and domestic problems. Now the government of the United States is getting steadily weaker. The new Republican House majority is determined to do away with much of the federal government as we have come to know it, including the Corporation for Public Broadcasting, the Legal Services Corporation (which for decades now as provided poorer Americans with the only access to the courts that they have), and much of Head Start. They are also trying to destroy Planned Parenthood, a purely ideological move. Those cuts are already part of the House Budget proposal. Michelle Bachmann has just introduced a bill to end the regulation of light bulbs as well, allowing to continue relying on 100-watt incandescent bulbs rather than save energy with the new generation that we now use in my house. So far the Republicans have not, of course, done anything about the real sources of our financial problems, our income tax rate (too low since 2001), the wars in Iraq and Afghanistan, the economic downturn, and the exploding cost of health care. Indeed, they rode into office promising to repeal the Administration's attempt to get health costs under control, and the Supreme Court may eventually collaborate in that effort.
In the last few months, jousting with some (but not all) of the posters from Generation X on fourthturning.com, I have come to understand that there is a powerful generational component to what is happening in the United States. The Boom generation rebelled against the institutions created by its parents and grandparents, but assumed that all would be well as soon as they got in charge of institutions themselves. (The result, of course, has been the opposite, in the economy, in universities, and in politics.) Generation X, however, was born in the era of collapsing authority, the 1960s and 1970s. It is not much of an exaggeration to say that they have never seen the federal government accomplish a major task successfully. Many of their childhoods were marked by the collapse of their parents' marriages and that helped give them a lifelong distrust of institutions. They care fiercely about their own families and will do anything to give their children the security their own childhoods lacked, but they have no faith in political parties or politicians. This is not new. Previous Nomad generations showed the same pattern. The Gilded generation (born about 1822-41) brought government in the United States to a low point late in the nineteenth century, and the Lost generation (born 1884-1903) generally disliked FDR and even voted for Barry Goldwater in 1964, the only generation to do so. The Lost, however, lost the great political battles of their age to a coalition of the older Missionaries, led by FDR, and the younger GIs, who provided the votes for him. It seems clear that there will be no similar coalition between a left-wing Boomer President and the young Millennials this time. Governor Walker and the Republican legislators who have just rolled back workers' rights in Wisconsin belong to Gen X, and so do many (I don't know how many) of the new Republican members of Congress. We have reached the point where few if any new Baby Boomers will be entering elective office any more.
President Obama, meanwhile, continues to put the best face possible on everything that is happening and shies away from any direct confrontation with the Republicans. In a rare press conference on Friday, he bragged that domestic oil production was at its highest level since 2003, while looking forward to the promotion of new energy sources, and insisted that the housing market would slowly recover. He committed himself once again to the idea that Qadaffi should leave Libya but was very cautious about how the United States might bring this about. Regarding the ongoing budget negotiations, he pointed out correctly that even the maximum proposed Republican cuts, which have now been rejected by the Senate, would not make a significant dent in the budget deficit, but he asked only for a "conversation" on what we could do about Medicare and Medicaid, rather than make any proposals of his own. He cited just two programs--Pell Grants for college students and Head Start for children--in which he said he would not accept cuts, and he said nothing about planned parenthood and nothing in support of NPR. I was struck that not a single major newspaper, as far as I can see, printed the text of the press conference, and even more amazed that the White House web site has not posted the transcript. I honestly have begun to think that the Presidential handlers have decided that presidential exposure is bad for his poll numbers.
I am disturbed that earthquakes in Asia and revolts in the Middle East are forcing our own domestic crisis off the front pages. The outcome of the Republican attack on public employee unions remains uncertain. Governor Walker and many of the Republican legislators will be the subject of recall petitions and some polls suggest they have overplayed their hand, but they may yet succeed, and similar battles continue in many states. There is no real counterbalance in our political life to the Republican attack on government. Slowly but surely, we are being forced, finally, to let more of the rest of the world take care of itself. The Afghan government--the one in the rest of the world on which we are spending by far the most money--evidently does not even want us there. But sadly, it does not seem that we have developed the will to take care of ourselves.
Although we are once again distracted by a natural and man-made catastrophe--the earthquake and tsunami in Japan, which has brought about a meltdown at a nuclear plant--the situation in the Middle East has much greater long-term implications. Like the Communist regime in Eastern Europe, Middle Eastern regimes are collapsing more or less on schedule. The post-colonial Tunisian and Egyptian regimes dated from the early 1950s, and Egypt experienced an Awakening (largely thwarted by the government after Anwar Sadat's assassination) in the 1970s. Now they are 60 years old, the age at which old regimes begin to totter. They are not, however completely dead: although their leaders have been forced out, their militaries and governments continue to function, rather like Russia in the first half of 1917, and their future remains completely uncertain. Qadaffi's regime in Libya, however, is almost twenty years younger, and he can still draw on a cadre of middle-aged subordinates who were only children when he took power. After appearing to teeter on the edge of collapse, he now seems to have recovered the initiative, and the West is faced with pressure to intervene. News reports today suggest that the highly touted no-fly zone may well prove ineffective, since Qadaffi is not primarily relying upon air power as he roles back the rebels. The American foreign policy elite, however, is still in the grip of the idea that it should not allow evil to continue to exist in the world, and the pressure on the Obama Administration will grow. Secretary Gates has emerged as the somewhat unlikely hero of the drama, swearing off any further large-scale military interventions in Asia (or presumably Africa) at West Point, and trying at last to push for more reasonable foreign policy objectives.
Trouble continues, meanwhile, in Bahrain and Saudi Arabia. In Bahrain a Sunni monarchy rules a Shi'ite majority; in Saudi Arabia the Shi'ite minority is restive and the whole people may be chafing under dictatorship. Bahrain hosts the U.S. naval presence in the area and Saudi Arabia is of course the world's leading oil producer. The Saudis are a completely traditional society that has never known western institutions or western rule, and I have never succeeded in identifying any generational rhythm in their politics. Something similar could have been said of Russia before 1917. We do not know where this will go.
In 1933-45, the governments of Germany, Japan, the Soviet Union, Great Britain (after 1940), and the United States became much stronger to deal with foreign and domestic problems. Now the government of the United States is getting steadily weaker. The new Republican House majority is determined to do away with much of the federal government as we have come to know it, including the Corporation for Public Broadcasting, the Legal Services Corporation (which for decades now as provided poorer Americans with the only access to the courts that they have), and much of Head Start. They are also trying to destroy Planned Parenthood, a purely ideological move. Those cuts are already part of the House Budget proposal. Michelle Bachmann has just introduced a bill to end the regulation of light bulbs as well, allowing to continue relying on 100-watt incandescent bulbs rather than save energy with the new generation that we now use in my house. So far the Republicans have not, of course, done anything about the real sources of our financial problems, our income tax rate (too low since 2001), the wars in Iraq and Afghanistan, the economic downturn, and the exploding cost of health care. Indeed, they rode into office promising to repeal the Administration's attempt to get health costs under control, and the Supreme Court may eventually collaborate in that effort.
In the last few months, jousting with some (but not all) of the posters from Generation X on fourthturning.com, I have come to understand that there is a powerful generational component to what is happening in the United States. The Boom generation rebelled against the institutions created by its parents and grandparents, but assumed that all would be well as soon as they got in charge of institutions themselves. (The result, of course, has been the opposite, in the economy, in universities, and in politics.) Generation X, however, was born in the era of collapsing authority, the 1960s and 1970s. It is not much of an exaggeration to say that they have never seen the federal government accomplish a major task successfully. Many of their childhoods were marked by the collapse of their parents' marriages and that helped give them a lifelong distrust of institutions. They care fiercely about their own families and will do anything to give their children the security their own childhoods lacked, but they have no faith in political parties or politicians. This is not new. Previous Nomad generations showed the same pattern. The Gilded generation (born about 1822-41) brought government in the United States to a low point late in the nineteenth century, and the Lost generation (born 1884-1903) generally disliked FDR and even voted for Barry Goldwater in 1964, the only generation to do so. The Lost, however, lost the great political battles of their age to a coalition of the older Missionaries, led by FDR, and the younger GIs, who provided the votes for him. It seems clear that there will be no similar coalition between a left-wing Boomer President and the young Millennials this time. Governor Walker and the Republican legislators who have just rolled back workers' rights in Wisconsin belong to Gen X, and so do many (I don't know how many) of the new Republican members of Congress. We have reached the point where few if any new Baby Boomers will be entering elective office any more.
President Obama, meanwhile, continues to put the best face possible on everything that is happening and shies away from any direct confrontation with the Republicans. In a rare press conference on Friday, he bragged that domestic oil production was at its highest level since 2003, while looking forward to the promotion of new energy sources, and insisted that the housing market would slowly recover. He committed himself once again to the idea that Qadaffi should leave Libya but was very cautious about how the United States might bring this about. Regarding the ongoing budget negotiations, he pointed out correctly that even the maximum proposed Republican cuts, which have now been rejected by the Senate, would not make a significant dent in the budget deficit, but he asked only for a "conversation" on what we could do about Medicare and Medicaid, rather than make any proposals of his own. He cited just two programs--Pell Grants for college students and Head Start for children--in which he said he would not accept cuts, and he said nothing about planned parenthood and nothing in support of NPR. I was struck that not a single major newspaper, as far as I can see, printed the text of the press conference, and even more amazed that the White House web site has not posted the transcript. I honestly have begun to think that the Presidential handlers have decided that presidential exposure is bad for his poll numbers.
I am disturbed that earthquakes in Asia and revolts in the Middle East are forcing our own domestic crisis off the front pages. The outcome of the Republican attack on public employee unions remains uncertain. Governor Walker and many of the Republican legislators will be the subject of recall petitions and some polls suggest they have overplayed their hand, but they may yet succeed, and similar battles continue in many states. There is no real counterbalance in our political life to the Republican attack on government. Slowly but surely, we are being forced, finally, to let more of the rest of the world take care of itself. The Afghan government--the one in the rest of the world on which we are spending by far the most money--evidently does not even want us there. But sadly, it does not seem that we have developed the will to take care of ourselves.
Saturday, March 05, 2011
The financial mess
For at least three years the country has been struggling with our financial collapse and its aftermath. Congress has passed laws, two Administrations arranged bail-outs, many books have been written (several reviewed here), and I have done many posts about the situation. And thus I am rather astonished that suddenly, over the last 48 hours, I finally had a revelation--I think--about exactly how our new, post-Clinton financial system operates, why it has made untold millions for men and women who are contributing very little to the rest of society, and why the Obama Administration made no serious effort to reform it. I do not have time to research the issue thoroughly myself, and my favorite financial expert friends are not readily available (I will refer each of them to this post for comment.) But I honestly think that I have figured it out.
As most of us have learned, the 1933 Glass-Steagall Act separated depository banking and commercial banking on the one hand from investment banking on the other. Investment banking was a relatively small part of the banking system even in the 1960s--I paid close attention to my Economics 1 class in 1965-6, and I don't recall it ever even being mentioned. And crucially, the Federal Reserve had nothing to do with investment banking at all. It lent money to depository banks and commercial banks, which in turn lent it out to customers--customers in the business world who needed money to finance their operations, and consumers, who wanted, for example, to take out a mortgage on their house. Those were relatively low-profit investments which had to be watched carefully. Meanwhile, as far as I can tell, investment banks had to put together deals financed by other people's money.
As we all know, that kind of loan is now a relatively small part, it seems, of our banking industry, especially, of course, for Citibank, Goldman Sachs, and the other giants. Instead, they invest enormous amounts of money in securities of all kinds--many of which, of course, turned out during the crash to be worthless--as well as in commodities, hedge funds, and heaven knows what else. And--and this is the critical point--since the repeal of Glass-Steagall, they can, as I understand it, now borrow money from the Federal Reserve, whose rates have been at historically low levels for most the last decade--coincidentally (?) the period following the repeal of Glass-Steagall. And that is how the banking world has become almost entirely disconnected from the rest of the economy. It's essentially a game of monopoly in which loans at 1% interest take the place the $200 you collect for passing Go. In such a system, it's easy to bid up the price of both stocks and commodities like oil, even in hard economic times like these--and that is what has happened since 2009. And a rise of just 5% in the price of such assets obviously translates into huge profits and bonuses.
One can read in the business pages, and confirm from any small businessman one happens to know, that today's banks are refusing to lend money to commercial customers. Why should they when safer, more profitable alternatives are available? The wisdom of Glass-Steagall has become painfully obvious: commercial and consumer lending is hard work, requiring a lot of careful analysis and not guaranteeing any huge profits--but it absolutely essential to a functioning economy. Glass-Steagall forced thousands of institutions to undertake it, because they were forbidden from doing anything else. In the Depression both Hoover and Roosevelt actually created some new financial institutions such as the Reconstruction Finance Corporation to make loans that banks would not make. That was what we needed in 2009, but no one apparently suggested to President Obama that he go that route.
I do not have the expertise to parse out the real implications of our new system. We now know that it can lead to catastrophic financial failure, but we don't know if it can lead to anything else. Suddenly, however, it seems to me that the focus on bailouts was misplaced. The Fed should not be blamed mainly for saving the system, which had to be done (albeit not necessarily on such generous terms for the banks.) It should be blamed for its new function of financing a continuous speculative orgy that serves no useful social purpose.
On a completely different front, it has occurred to me recently that we are now seeing the effects of the shrinking of print media over the last half-century. I remember in the 1970s when newspapers, apparently for economic reasons, went from 8 columns to six, which meant 25% fewer stories on the front page. Meanwhile, of course, budgets have been cut, newspapers have been dying, and Sunday sections have shrunk. I feel I have seen the impact of this lately, especially since the outbreak of revolts all over the Middle East, which are soaking up so much news space that the crises in Washington, in Wisconsin and in other states are getting much too litte coverage even in papers like the New York Times. We are faced with a really critical budget deal, but it is hard to find much of anything written about the talks that are going on. We will find in years to come whether either the public or our leadership is still sufficiently well informed to handle the problems we face.
As most of us have learned, the 1933 Glass-Steagall Act separated depository banking and commercial banking on the one hand from investment banking on the other. Investment banking was a relatively small part of the banking system even in the 1960s--I paid close attention to my Economics 1 class in 1965-6, and I don't recall it ever even being mentioned. And crucially, the Federal Reserve had nothing to do with investment banking at all. It lent money to depository banks and commercial banks, which in turn lent it out to customers--customers in the business world who needed money to finance their operations, and consumers, who wanted, for example, to take out a mortgage on their house. Those were relatively low-profit investments which had to be watched carefully. Meanwhile, as far as I can tell, investment banks had to put together deals financed by other people's money.
As we all know, that kind of loan is now a relatively small part, it seems, of our banking industry, especially, of course, for Citibank, Goldman Sachs, and the other giants. Instead, they invest enormous amounts of money in securities of all kinds--many of which, of course, turned out during the crash to be worthless--as well as in commodities, hedge funds, and heaven knows what else. And--and this is the critical point--since the repeal of Glass-Steagall, they can, as I understand it, now borrow money from the Federal Reserve, whose rates have been at historically low levels for most the last decade--coincidentally (?) the period following the repeal of Glass-Steagall. And that is how the banking world has become almost entirely disconnected from the rest of the economy. It's essentially a game of monopoly in which loans at 1% interest take the place the $200 you collect for passing Go. In such a system, it's easy to bid up the price of both stocks and commodities like oil, even in hard economic times like these--and that is what has happened since 2009. And a rise of just 5% in the price of such assets obviously translates into huge profits and bonuses.
One can read in the business pages, and confirm from any small businessman one happens to know, that today's banks are refusing to lend money to commercial customers. Why should they when safer, more profitable alternatives are available? The wisdom of Glass-Steagall has become painfully obvious: commercial and consumer lending is hard work, requiring a lot of careful analysis and not guaranteeing any huge profits--but it absolutely essential to a functioning economy. Glass-Steagall forced thousands of institutions to undertake it, because they were forbidden from doing anything else. In the Depression both Hoover and Roosevelt actually created some new financial institutions such as the Reconstruction Finance Corporation to make loans that banks would not make. That was what we needed in 2009, but no one apparently suggested to President Obama that he go that route.
I do not have the expertise to parse out the real implications of our new system. We now know that it can lead to catastrophic financial failure, but we don't know if it can lead to anything else. Suddenly, however, it seems to me that the focus on bailouts was misplaced. The Fed should not be blamed mainly for saving the system, which had to be done (albeit not necessarily on such generous terms for the banks.) It should be blamed for its new function of financing a continuous speculative orgy that serves no useful social purpose.
On a completely different front, it has occurred to me recently that we are now seeing the effects of the shrinking of print media over the last half-century. I remember in the 1970s when newspapers, apparently for economic reasons, went from 8 columns to six, which meant 25% fewer stories on the front page. Meanwhile, of course, budgets have been cut, newspapers have been dying, and Sunday sections have shrunk. I feel I have seen the impact of this lately, especially since the outbreak of revolts all over the Middle East, which are soaking up so much news space that the crises in Washington, in Wisconsin and in other states are getting much too litte coverage even in papers like the New York Times. We are faced with a really critical budget deal, but it is hard to find much of anything written about the talks that are going on. We will find in years to come whether either the public or our leadership is still sufficiently well informed to handle the problems we face.
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