Angus Maddison, The World Economy: A Millennial Perspective (Paris: OECD, 2001), Chapter 1, "Introduction and Summary," pp. 17-25

Introduction and Summary

The Contours of World Development

Over the past millennium, world population rose 22-fold. Per capita income increased 13-fold, world GDP nearly 300-fold. This contrasts sharply with the preceding millennium, when world population grew by only a sixth, and there was no advance in per capita income.

From the year 1000 to 1820 the advance in per capita income was a slow crawl - the world average rose about 50 per cent. Most of the growth went to accommodate a fourfo!d increase in population.

Since 1820, world development has been much more dynamic. Per capita income rose more than eightfold, population more than fivefold.

Per capita income growth is not the only indicator of welfare. Over the long run, there has been a dramatic increase in life expectation. In the year 1000, the average infant could expect to live about 24 years. A third would die in the first year of life, hunger and epidemic disease would ravage the survivors. There was an almost imperceptible rise up to 1820, mainly in Western Europe. Most of the improvement has occurred since then. Now the average infant can expect to survive 66 years.

The growth process was uneven in space as well as time. The rise in life expectation and income has been most rapid in Western Europe, North America, Australasia and Japan. By 1820, this group had forged ahead to an income level twice that in the rest of the world. By 1998, the gap was 7:1. Between the United States (the present world leader) and Africa (the poorest region) the gap is now 20:1. This gap is still widening. Divergence is dominant but not inexorable. In the past half century, resurgent Asian countries have demonstrated that an important degree of catch-up is feasible. Nevertheless world economic growth has slowed substantially since 1973, and the Asian advance has been offset by stagnation or retrogression elsewhere.

The Purpose of this Study

The purpose of this book is to quantify these long term changes in world income and population in a comprehensive way; identify the forces which explain the success of the rich countries; explore the obstacles which hindered advance in regions which lagged behind; scrutinise the interaction between the rich countries and the rest to assess the degree to which their backwardness may have been due to Western policy.

There is nothing new about long-term surveys of economic performance. Adam Smith had a very broad perspective in his pioneering work in 1 776. Others have had an equally ambitious vision. There has been spectacular progress in recent years in historical demography. What is new in this study is systematic quantification of comparative economic performance.

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In the past, quantitative research in economic history has been heavily concentrated on the nineteenth and twentieth centuries when growth was fastest. To go back earlier involves use of weaker evidence, greater reliance on clues and conjecture. Nevertheless it is a meaningful, useful and necessary exercise because differences in the pace and pattern of change in major parts of the world economy have deep roots in the past.

Quantification clarifies issues which qualitative analysis leaves fuzzy. It is more readily contestable and likely to be contested. It sharpens scholarly discussion, sparks off rival hypotheses, and contributes to the dynamics of the research process. It can only do this if the quantitative evidence and the nature of proxy procedures is described transparently so that the dissenting reader can augment or reject parts of the evidence or introduce alternative hypotheses. The analysis of Chapters 1, 2 and 3 is underpinned by six appendices which are intended to supply the necessary degree of transparency.

Explaining Economic Performance

Advances in population and income over the past millennium have been sustained by three interactive processes:

a) Conquest or settlement of relatively empty areas which had fertile land, new biological resources, or a potential to accommodate transfers of population, crops and livestock;

b) international trade and capital movements;

c) technological and institutional innovation.

a) Conquest and Settlement

One important instance of this process was Chinese settlement of the relatively empty and swampy lands south of the Yangtse, and introduction of new quick-ripening strains of rice from Vietnam suitable for multi-cropping. This process occurred between the eighth and thirteenth centuries, during which population growth accelerated, per capita income rose by a third, and the distribution of population and economic activity were transformed. In the eighth century only a quarter of the Chinese population lived south of the Yangtse; in the thirteenth, more than three-quarters. The new technology involved higher labour inputs, so productivity rose less than per capita income.

An even more dramatic case was the European encounter with the Americas. The existence of this continent was unknown to Europeans before the 1492 voyage of Columbus. The discovery opened up an enormous area, for the most part thinly populated. Mexico and Peru were the most advanced and densely settled, but they were easily conquered and three quarters of their population was wiped out by diseases which the Europeans inadvertently introduced. The new continent offered crops unknown elsewhere--maize, potatoes, sweet potatoes, manioc, chilis, tomatoes, groundnuts, pineapples, cocoa and tobacco. These were introduced in Europe, Africa and Asia, and enhanced their production potential and capacity to sustain population growth. There was a reciprocal transfer to the Americas, which greatly augmented its potential. The new crops were wheat, rice, sugar cane, vines, salad greens, olives, bananas and coffee. The new animals for food were cattle, pigs, chickens, sheep and goats, as well as horses, oxen, asses and donkeys for transport.

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The major initial attractions of the Americas were the rich silver resources of Mexico and Peru, and development of plantation agriculture with imports of slave labour from Africa. The neo-European economies of North America and the southern cone of Latin America developed later. The population of the Americas did not recover its 1500 level until the first half of the eighteenth century The full potential of the Americas began to be realised in the nineteenth century with massive European immigration and the western movement of the production frontier made possible by railways.

The present variation in economic performance within the Americas--between the United States, Latin America and the Caribbean--is partly due to variations in resource endowment, but there are institutional and societal echoes from the past. In North America and Brazil the relatively small indigenous population was marginalised or exterminated, in former Spanish colonies the indigenous population remained as an underclass, and in all the areas where slavery was important their descendants have also remained an underprivileged group. Quite apart from this, there were important differences in the colonial period between Iberian institutions and those of North America. These continued to have an impact on subsequent growth performance.

b) International Trade and Capital Movements

International trade was important in the economic ascension of Western Europe, and much less significant in the history of Asia or Africa.

Venice played a key role from 1000 to 1500 in opening up trade within Europe (to Flanders, France, Germany and the Balkans) and in the Mediterranean. It opened trade in Chinese products via the caravan routes to ports in the Black Sea. It traded in Indian and other Asian products via Syria and Alexandria. Trade was important in bringing high value spices and silks to Europe, but it also helped the transfer of technology from Asia, Egypt and Byzantium (silk and cotton textile production, glassblowing, cultivation of rice in Italy, cane sugar production and processing in the Venetian colonies of Crete and Cyprus). To a significant degree the maritime expansion of Venice depended on improved techniques of shipbuilding in its Arsenal, use of the compass and other improvements in navigation. Institutional innovations--the development of banking, accountancy foreign exchange and credit markets, creation of a solvent system of public finance, creation of a competent diplomatic service were all instrumental in establishing Venice as the lead economy of that epoch. Venice played an important part in fostering the intellectual development of Western Europe. It created manuscript libraries and pioneered in book publishing. Its glass industry was the first to make spectacles on a large scale. It played a leading role in the Renaissance by making Greek works known in the West. The University of Padua was a major centre of European learning, with Galileo as one of its distinguished professors.

Venetian contacts with Asia were eventually blocked by the fall of Byzantium, the rise of the Ottoman Empire, the collapse of the crusader states in the Levant and the Mameluke regime in Egypt. In the second half of the fifteenth century, a much more ambitious interaction between Europe and the rest of the world had started in Portugal.

Portugal played the main role in opening up European trade, navigation and settlement in the Atlantic islands, in developing trade routes around Africa, into the Indian Ocean, to China and Japan. It became the major shipper of spices to Europe for the whole of the sixteenth

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century, usurping this role from Venice. Its navigators discovered Brazil. Its diplomacy was astute enough to persuade Spain to endorse its territorial claim there, and to let it have a monopoly of trade with the Moluccan spice islands and Indonesia. Although Spain had a bigger empire, its only significant base outside the Americas was the Philippines. Its two most famous navigators were Columbus who was a Genoese with Portuguese training, and Magellan who was Portuguese.

Portugal had major advantages in developing its overseas commerce and empire. There was a clear strategic benefit in being located on the South Atlantic coast of Europe near to the exit of the Mediterranean. Deep-sea fishermen provided an important part of the Portuguese food supply and developed an unrivalled knowledge of Atlantic winds, weather and tides. The value of these skills was greatly enhanced by crown sponsorship of Atlantic exploration, research on navigation, training of pilots, and documentation of maritime experience in the form of route maps with compass bearings (rutters) and cartography. Portuguese shipbuilders in Lisbon and Oporto adapted the design of their ships in the light of increasing knowledge of Atlantic sailing conditions. The biggest changes were in rigging. At first they concentrated on lateen sails, then added a mix of square sails and lateen for deeper penetration into the South Atlantic, with further changes for the much longer route round the Cape. Another element in Portuguese success was the ability to absorb "new Christians" - Jewish merchants and scholars who had played a significant role in Iberia during Muslim rule. They were driven out of Spain, but many took refuge and increased the size of the community in Portugal. They were required to undergo proforma conversion and were subject to a degree of persecution, but they provided important skills in developing Portuguese business interests in Africa, Brazil and Asia, in scientific development, as intermediaries in trade with the Muslim world and in attracting Genoese and Catalan capital to Portuguese business ventures.

Portugal was responsible for transferring cane sugar production and processing technology into the Atlantic islands of Madeira and São Tome, and later to Brazil. It inaugurated the slave trade to provide a labour force for the industry in the New World. It carried about half of the slaves who were shipped to the Americas from Africa between 1 500 and 1870. In the fifteenth century sugar was a very rare and expensive commodity in Europe; by the end of the eighteenth century it was an item of popular consumption, having grown much more in volume than trade in any other tropical product.

At the time Portugal was pioneering these worldwide linkages, trade relations between different parts of northern Europe were intensified by the phenomenal development of Dutch maritime activity. In 1570, the carrying capacity of Dutch merchant shipping was about the same as the combined fleets of England, France and Germany. Per head of population it was 25 times as big as in these three northern countries.

Development of shipping and shipbuilding, the transformation of Dutch agriculture into horticulture, the creation of a large canal network, use of power derived from windmills and peat made the Netherlands the most dynamic European economy from 1400 to the middle of the seventeenth century. It pushed international specialisation much further than any other country. Shipping and commercial services provided a large part of its income. It imported cereals and live cattle, exported herring and dairy products. In 1700 only 40 per cent of the labour force were in agriculture.

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Until 1580 the Netherlands was part of a bigger political entity. It included Flanders and Brabant - the most prosperous industrial area in Europe and a centre for banking, finance and international commerce which was a northern counterpart to Venice. The whole area was under Burgundian control until the late fifteenth century, then fell into the hands of the Habsburgs who were also rulers of Spain. The Dutch revolted against their predatory empire because of its excessive fiscal demands, political and religious repression. They created a modern nation state, which protected property rights of merchants and entrepreneurs, promoted secular education and practised religious tolerance.

Most of the financial and entrepreneurial elite and many of the most skilled artisans of Flanders and Brabant emigrated to the new republic. The Dutch blockaded the river Scheldt and the port of Antwerp for more than 200 years, and destroyed the Iberian monopoly of trade with Africa, Asia and the Americas.

Dutch experience from 1580 to the end of the Napoleonic wars provides a dramatic demonstration of the way in which Western Europe interacted with the world economy in that epoch.

The initial economic success of the Dutch Republic, and its maritime and commercial supremacy, depended to a substantial extent on success in war and beggar-your-neighbour commercial policy in competition with Portugal and Spain. By the eighteenth century it had lost this supremacy, because two new rivals, England and France, had greatly increased their maritime strength, and used the same techniques to push the Dutch out of the markets they sought to dominate. The volume of Dutch foreign trade dropped 20 per cent from 1 720 to 1820. During this period, UK exports rose more than sevenfold in volume, and French by two and threequarters. From 1 700 to 1820, Dutch per capita income fell by a sixth, British rose by half and French by a quarter.

Britain had faster growth in per capita income from the 1 680s to 1820 than any other European country. This was due to improvement of its banking, financial and fiscal institutions and agriculture on lines which the Dutch had pioneered, and to a surge in industrial productivity at the end of the period. It also derived great benefits from its rise to commercial hegemony by adroit use of a beggar- your-neighbour strategy.

Sixty years of armed conflict and the restrictive Navigation Acts pushed competitors out of the markets it sought to monopolise. It took over the leading role in shipping slaves from Africa to the Caribbean and created an overseas empire with a population of about 100 million by 1820.

Other European powers were losers in the British struggle for supremacy. By the end of the Napoleonic wars, the Dutch had lost all their Asian territories except Indonesia. The French were reduced to a token colonial presence in Asia, and lost their major asset in the Caribbean. Shortly after the war, Brazil established its independence from Portugal. Spain lost its huge colonial empire in Latin America, retaining only Cuba, Puerto Rico and the Philippines. Britain took over what the French and Dutch had lost in Asia and Africa, extended its control over India, and established a privileged commercial presence in Latin America.

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Other losers included the former rulers of India, whose power and income were usurped in substantial part by the servants of the British East India Company. Under their rule, from 1757 to 1857, Indian per capita income fell, but British gains were substantial.

Between 1820 and 1913, British per capita income grew faster than at any time in the past - three times as fast as in 1 700-1820. The basic reason for improved performance was the acceleration of technical progress, accompanied by rapid growth of the physical capital stock and improvement in the education and skills of the labour force, but changes in commercial policy also made a substantial contribution. In 1846 protective duties on agricultural imports were removed and in 1849 the Navigation Acts were terminated. By 1860, all trade and tariff restrictions had been removed unilaterally. In 1860 there were reciprocal treaties for freer trade with France and other European countries. These had most-favoured nation clauses which meant that bilateral liberalisation applied equally to all countries.

Free trade was imposed in India and other British colonies, and the same was true in Britain's informal empire. China, Persia, Thailand and the Ottoman Empire were not colonies, but were obliged to maintain low tariffs by treaties which reduced their sovereignty in commercial matters, and granted extraterritorial rights to foreigners. This regime of free trade imperialism favoured British exports, but was less damaging to the interests of the colonies than in the eighteenth century, when Jamaica could only trade with Britain and its colonies, Guadeloupe only with France.

The British policy of free trade and its willingness to import a large part of its food had positive effects on the world economy. They reinforced and diffused the impact of technical progress. The favourable impact was biggest in North America, the southern cone of Latin America and Australasia which had rich natural resources and received a substantial inflow of capital, but there was also some positive effect in India which was the biggest and poorest part of the Empire.

Innovations in communications played a major part in linking national capital markets and facilitating international capital movements. The United Kingdom already had an important role in international finance, thanks to the soundness of its public credit and monetary system, the size of its capital market and public debt, and the maintenance of a gold standard. The existence of the empire created a system of property rights which appeared to be as securely protected as those available to investors in British securities. It was a wealthy country operating close to the frontiers of technology, so its rentiers were attracted to foreign investment even when the extra margin of profit was small.

From the 1870s onward, there was a massive outflow of British capital for overseas investment. The United Kingdom directed half its savings abroad. French, German and Dutch investment was also substantial.

The old liberal order was shattered by two world wars and the collapse of capital flows, migration and trade in the beggar-your-neighbour years of the 1930s. Between 1913 and 1950, the world economy grew much more slowly than in 1870-1913, world trade grew much less than world income, and the degree of inequality between regions increased substantially, the setback being biggest in Asia.

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By 1950 colonialism was in an advanced state of disintegration. With one or two exceptions, the exit from empire was more or less complete by the 1 960s. The British imperial order was finished, as were those of Belgium, France, the Netherlands and Japan. In the West, the United States had emerged as the hegemonial power competing with the Soviet bloc for leverage in the newly independent countries of Asia and Africa.

The world economy grew very much faster from 1950 to 1973 than it had ever done before. It was a golden age of unparalleled prosperity. World per capita GDP rose nearly 3 per cent a year (a rate which implies a doubling every 25 years). World GDP rose by nearly 5 per cent a year and world trade by nearly 8 per cent a year. This dynamism affected all regions. The acceleration was greatest in Europe and Asia. There was also a degree of convergence between regions, though a good part of this was a narrowing of the gap between the United States and the other advanced capitalist countries (Western Europe and Japan).

There were several reasons for unusually favourable performance in the golden age. In the first place, the advanced capitalist countries created a new kind of liberal international order with explicit and rational codes of behaviour, and institutions for co-operation (OEEC, OECD, IMF, World Bank and the GATT) which had not existed before. There was a very serious East-West split from 1948 onwards, but the split reinforced the harmony of interest between capitalist economies, so the beggar- your-neighbour behaviour of pre-war years did not recur. The United States provided a substantial flow of aid for Europe when it was most needed, fostering procedures for articulate co-operation and liberal trading policies. Until the 1970s it also provided the world with a strong anchor for international monetary stability. North-South relations were transformed from the colonial tutelage of pre-war years to a situation where more emphasis was placed on action to stimulate development. The huge expansion of trade in the advanced capitalist economies transmitted a dynamic influence throughout the world economy.

The second new element of strength was the character of domestic policies which were self- consciously devoted to promotion of high levels of demand and employment in the advanced countries. Growth was not only faster than ever before, but the business cycle virtually disappeared. Investment rose to unprecedented levels and expectations became euphoric. Until the 1970s, there was also much milder inflationary pressure than could have been expected in conditions of secular boom.

The third element in this virtuous circle situation was the potential for growth on the supply side. Throughout Europe and Asia there was still substantial scope for "normal" elements of "recovery" from the years of depression and war. Additionally and more importantly, was the continued acceleration of technical progress in the lead country. Furthermore, the United States played a diffusionist role in the golden age in sharp contrast to its role in the interwar years.

Since the golden age, the world picture has changed a great deal. Per capita growth has been less than half as fast. There has been much greater divergence in the performance of different regions. In Western Europe and Japan, per capita growth fell well below that in the golden age, but was appreciably better than in 1870-1913. In the countries of "resurgent Asia", which have half the world's population, the success was quite extraordinary. Their per capita growth was faster after 1973 than in the golden age, and more than ten times as fast as in the old liberal order.

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If the world consisted only of these two groups, the pattern of world development could be interpreted as a clear demonstration of the possibilities for convergence. By success in mobilising and allocating resources efficiently and improving their human and physical capital to assimilate and adapt appropriate technology, the countries of resurgent Asia achieved significant catch-up on the advanced capitalist group.

However, there is another group (168 countries, with about a third of the world's population) where the deterioration in performance since the golden age has been alarming. In Africa there has been no advance in per capita income in the past quarter century. In Eastern Europe and the former USSR, average per capita income in 1998 was about threequarters of that in 1973. In Latin America and in many Asian countries, income gains have been a fraction of what they were in the golden age. The economies of this heterogeneous group of "faltering economies" have been falling behind instead of catching up. Most of them have not been able to adapt successfully to an international economic order which has changed considerably from that in the golden age.

The way in which postwar order now operates is analysed in detail in Chapter 3. The structure of the analysis is based on Table 3-5 which summarises the comparative performance of the major regions.

c) Technological and Institutional Innovation

From the year 1000 to 1820, advances in technology were much slower than they have been since, but they were nevertheless a significant component of the growth process. Without improvements in agriculture, the increase in world population could not have been sustained. Without improvements in maritime technology and commercial institutions the opening up of the world economy could not have been achieved. Technical advance in important areas was dependent on fundamental improvements in scientific method, experimental testing, systematic accumulation and publication of new knowledge. The long centuries of effort provided intellectual and institutional foundations for the much more rapid advances achieved in the nineteenth and twentieth centuries.

This process of cumulative advance is clearly demonstrated in the history of maritime technology and navigation. In the year 1000, European ships and navigation were no better than in the Roman Empire. The advance started when Venice created its public shipyard, the Arsenal, in 1104 to build its oared galleys and improve ship design. The introduction of the compass and the sandglass for measuring time at sea helped to double the productivity of ships. They could navigate in bad weather and make two return journeys a year from Venice to Alexandria instead of one. The Portuguese preparations for the passage to India were a major research project involving years of experimentation in shipping technology, improvement of navigational instruments and charts, applied astronomy, developing knowledge of winds, currents and alternative routes. The Dutch created a new type of factory ship for processing the herring catch at sea. They developed mass production of a cheap general purpose cargo vessel (the fluyt). The British government financed and encouraged research into astronomy, terrestrial magnetism, production of the first reliable maritime chronometer and nautical almanacs. They also demonstrated the efficacy of sauerkraut and citrus juice in preventing scurvy.

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By the end of the eighteenth century ships could carry ten times the cargo of a fourteenth century Venetian galley, with a much smaller crew. The safety of long distance sea travel was also greatly improved. In their first voyages to Asia, da Gama and Cabral lost half their crew and more than half of their ships. Magellan lost more than 90 per cent of his crew on the first circumnavigation of the globe. Cook's successful circumnavigation 240 years later approximated modern standards of maritime safety.

Until the fifteenth century European progress in many fields was dependent on transfers of technology from Asia or the Arab world. In 1405-33, Chinese superiority in shipping technology was evident in seven major expeditions to the "Western Oceans" (see Table 2-11). Chinese ships were much bigger than those of the Portuguese, more seaworthy and more comfortable, with watertight compartments, many more cabins, and a capacity to navigate over large distances to Africa. Thereafter, China turned its back on the world economy, and its maritime technology decayed.

By the end of the seventeenth century, the technological leadership of Europe in shipping and armaments was apparent. There had also been important institutional advances. Banking, credit, foreign exchange markets, financial and fiscal management, accountancy insurance and corporate governance (by the Dutch and British East India Companies) were more sophisticated than those in Asia, and were essential components of European success in opening up the world economy.

Within Western Europe the diffusion of technology was fairly rapid, and the technological distance between nations was not particularly wide in spite of the frequency of wars. Links were fostered by the growth of humanist scholarship, the creation of universities and the invention of printing.

In the sixteenth and seventeenth centuries, there was a revolutionary change in the quality of western science with close interaction of savants and scientists such as Copernicus, Erasmus, Bacon, Galileo, Hobbes, Descartes, Petty, Leibnitz, Huyghens, Halley and Newton. Many of them were in close contact with colleagues in other countries, or spent years abroad. This type of co-operation was institutionalised by the creation of scientific academies which encouraged discussion and research, and published their proceedings. Much of this work had practical relevance, and many of the leading figures were concerned with matters of public policy.

Diffusion of these advances outside Europe was relatively limited. There were Jesuit scholars in Peking for nearly two centuries, some of them like Ricci, Schall and Verbiest had intimate contact with ruling circles, but there was little curiosity amongst the Chinese elite about intellectual and scientific development in the West. Japanese exposure to western knowledge was more limited than Chinese, but its impact went deeper. The Portuguese and the Jesuits were in Japan for nearly a century, and there was considerable interest in European ships, maps, navigation and guns. After the Portuguese were expelled the only contact Japan had with western learning was with those Dutch East India Company officials who were scientists (Kaempfer, Thunberg and von Siebold). Although these contacts were limited, they helped destroy Japanese respect for "things Chinese" and accentuate their curiosity about "things Western" (see Appendix B).

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The East India Company officers who controlled India from 1757 to 1857 had a strong streak of Benthamite radicalism, and a strong urge to modify Indian legal and property institutions. After the Indian Mutiny of 1857 and establishment of direct imperial control, these radical westernising ambitions were dropped. In Indonesia, there were somewhat similar ambitions in the period of British administration during the Napoleonic wars, but Westernisation was abandoned after the Diponogoro revolt in the 1830s.

The only effective overseas transmission of European technology and science by the end of the eighteenth century was to the 13 British colonies in North America. In 1776 they had nine universities for 2.5 million people and an intellectual elite (e.g. Benjamin Franklin and Thomas Jefferson) fully familiar with the activities of their European contemporaries. In the Spanish colonies, Brazil and the Caribbean there were more than 17 million people, but only two universities (in Mexico City and Guadalajara) which concentrated on theology and law.

The reasons for the accelerated growth of technical progress since 1820 are analysed in considerable detail in my earlier study, Monitoring the World Economy (1995), particularly in Chapter 2 and pp. 71-3, and are not treated at any length in this volume. However, it is clear that technical progress has slowed down. It was a good deal faster from 1913 to 1973 than it has been since. The slowdown in the past quarter century is one of the reasons for the deceleration of world economic growth. "New economy" pundits find the notion of decelerating technical progress unacceptable and cite anecdotal or microeconomic evidence to argue otherwise. However, the impact of their technological revolution has not been apparent in the macroeconomic statistics until very recently, and I do not share their euphoric expectations.

Joseph E. Stiglitz (Columbia University, USA)

Copyright: Project Syndicate, 2008

The world economy has had several good years. Global growth has been strong, and the divide between the developing and developed world has narrowed, with India and China leading the way, experiencing GDP growth of 11.1% and 9.7% in 2006 and 11.5% and 8.9% in 2007, respectively. Even Africa has been doing well, with growth in excess of 5% in 2006 and 2007.

But the good times may be ending. There have been worries for years about the global imbalances caused by America’s huge overseas borrowing. America, in turn, said that the world should be thankful: by living beyond its means, it helped keep the global economy going, especially given high savings rates in Asia, which accumulated hundreds of billions of dollars in reserves. But it was always recognized that America’s growth under President George W. Bush was not sustainable. Now the day of reckoning looms.

America’s ill-conceived war in Iraq helped fuel a quadrupling of oil prices since 2003. In the 1970’s, oil shocks led to inflation in some countries, and to recession elsewhere, as governments raised interest rates to combat rising prices. And some economies faced the worst of both worlds: stagflation.

Until now, three critical factors helped the world weather soaring oil prices. First, China, with its enormous productivity increases – based on resting on high levels of investment, including

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investments in education and technology – exported its deflation. Second, the United States took advantage of this by lowering interest rates to unprecedented levels, inducing a housing bubble, with mortgages available to anyone not on a life-support system. Finally, workers all over the world took it on the chin, accepting lower real wages and a smaller share of GDP. That game is up. China is now facing inflationary pressures. What’s more, if the US convinces China to let its currency appreciate, the cost

Neoliberals have insisted that the new technologies of communications and transportation make it both inevitable and desirable that the world economy be tightly integrated through expanded trade and capital flows and the acceptance of the Anglo-American model of free market capitalism. A wide variety of movements and theorists around the world have attacked this vision of globalization from different political perspectives–some resisting on the basis of ethnic, religious, national, or regional identities, and others upholding alternative

---------------------------------------------------------------------------------------------------------------Reprinted from the book ” Science, Technology and State in K. M. Yusuf (Ed) Unipolar World & The Muslim States, Pakistan Forum, Islamabad, Pakistan, Nov. 2004.

Dr. Anis Alam

Science, Technology and State

Introduction

Science is all about humanity’s attempt to understand the working of the world in all its details. Technology, on the other hand, seeks to find practical ways of turning scientific knowledge into utilitarian processes and devices1. Science was generally considered to be pursuit of truth, an intellectual exercise, and a preserve of great minds like Pythagoras, Aristotle, Aryabhata, Copernicus, Galileo, Newton and the likes of them. The state did not concern itself with support and development of science and technology. However, kings, princes sometimes liked to support famous scholars, philosophers, artists in attendance more as decorations than anything else. There are exceptions but generally the above observation will hold its ground. Till very recently, science had very little direct effect on the way we lived, produced, reproduced, entertained, communicated and traveled. The pursuit of science was a preserve of gentlemen of leisure. It has been argued that science had little direct input in the industrial revolution of1760s2. However by the 1850s science had become essential for production. From then onwards technology has become a direct application of scientific knowledge3. Electrical and chemical industries that have profoundly altered our living and working originated in the second half of the 19th century as a direct result of technological application of the 19th century physics and chemistry. This has had profound implications for national power and prestige. Before this transformation took place, any one who could mobilize enough muscle power of men and animals could gain political power. Human history is full of the exploits of men like Alexander, Darius, Augustus, Genghis Khan, Mahmud of Ghazna, Shahabuddin of Ghaur, and Babar. From the middle of the 19th century, it has been science and technology emerging out of its application that has become the source of power, prestige and prosperity.

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Before the advent of the Industrial revolution in 1760 in England and emergence of quite a few industrialized countries in the 19th century, the world was ruled by few major powers that were dominant in their own regions. China dominating East Asia, had under her influence states far in the west (Sinkiang), south central Asia (Tibet), north (Mongolia). In South Asia the Mughels ruled from their capital in Delhi. The Safavids ruled in Persia keeping central Asian states under their influence. The Ottoman Turks ruled over an empire extending through Southern Europe, the Middle East and North Africa. France, England, Spanish and Austrian Hapsburgs and Russia dominated Europe4. However, all these countries shared a common economy dominated by agriculture and related activities, notwithstanding the fact that vast amounts of varied artisan and handicraft products for local consumption and for trade were also being produced. The technologies that were in use were simple by today’s standards. Carpenter’s saw, chisel, bow-drill, Potter’s wheel, smith’s bellows and furnace, and oil-presser’s levers, gears, rotor, were in use. The source of power was muscle power of animals and humans. In addition watermills and windmills were also being used wherever favourable conditions existed. Transport was by wheeled carts driven by bullocks, horses or camels. Sailboats and ships were also in use. Weapons included bow and arrow, javelin, sword and daggers. Defense against these was mounted through shield, moats, and forts. In later centuries heavy artillery fixed and mounted also came in increasing use. Gunpowder had already been introduced through Chinese as was paper, horse collar, shoes and stirrups. Tools made of iron; brass, copper, wood and stone were in use.

China and South Asia dominated the international trade that had become really global after the entry of Europeans and the incorporation of Americas with the older worlds of Asia and Africa in the beginning of the 16th century. By the middle of the 18th century, West Europeans especially the Portuguese, the Dutch, the French the English had been trading with South, South East and Far East Asia for over two hundred years. But they had nothing of their own to pay for purchases of goods from the East except the silver and gold they looted from the Americas5.

However things had started to change from early 16th century, when Developmental States started to emerge in the era of the global spread of capitalism. A Development State (DS) puts economic development as the top priority of governmental policy and is able to design effective instruments to promote such a goal. The instruments would include the forging of new formal instruments, the weaving of formal and informal network of collaboration among the citizens and officials and the utilization of new opportunities for trade and profitable production6. The first DS was Holland. Seven provinces around the mouth of river Rhine renounced their allegiance to the Spanish king and formed the United Province that came to be known as Netherlands. From the very beginning capitalist interest dominated the state. During the next fifty years Netherlands, a country of about 1.5 million people in 1600 became the top seafaring nation in Europe and the world with an empire that dotted the globe from Indonesia to the Caribbean. Capitalism is, by its nature imperialist. The new Dutch Capitalist state competed for hegemony in global trade with the already established maritime powers, the Portuguese and the Spanish and displaced them as the dominant sea faring power during most of the 17th and early 18th century. She established colonies in the Far East and along the African Coast as well as in Americas. Dutch merchants made vast fortunes that have been celebrated in the paintings of Rembrandt, Vermeer.

The second Development State to emerge was England. Mercantile capitalist rule was established in England in the second half of the 17th century through the so-called

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English Revolution (1642-1658). By the end of the 17th century Britain was the leading power in Europe. Soon after she ousted the Spanish and the French from North America and the Caribbean and emerged as an important nation in global trade. The profits earned in the global trade and ruthless exploitation of the old and recently acquired colonies in the late 18th century (Bengal in 1757) generated the capital that helped her to launch the first ever Industrial Revolution in the world7.

Paul Bairoch estimates that in 1750s, China and South Asia produced 57.3 percent of the world production. The share of Europe was just around 20 percent. However, as a result of the Industrial Revolution and the rapid adoption of new technology based on new source of energy (coal), steam engine and steel, Britain soon outstripped all others in economic development. She raised her share of the world Manufacturing output from 1.9 percent in 1750 to 22.9 percent in 1880. During the same period South Asia’s share declined from a high of 24.5 percent under indigenous control to 2.8 percent under British colonial occupation8. This was largely because of collapse of textile industry in Bengal in the second half of the 18th century under ruthless colonial practices and policies. Technology also played its part. As a result of the development of new technology of mechanization in industrial revolution, productivity in British spinning industry increased by a phenomenal factor of 300 to 4009.

The basis of the Britain supremacy throughout the 19th century was her mastery of new industrial technology based on coal, steam engine and steel production. The new technology of iron production gave Britain a head start over other European challengers like France and Germany. French government assisted a number of their entrepreneurs to duplicate the production of carbon rich iron that the British were producing but all their attempts failed. The French were however more successful in using scientific research especially in chemistry to produce organic products like soda, sugar and other natural products whose supplies were cut due to British blockade of French ports during the Napoleonic wars. Supremacy in chemical research and industrial chemicals stayed with the French for the next thirty years. German Chemists learned their chemistry in France in the first half of the 19th century. One of these students was Justus von Liebig, who on his return to Germany lay the foundations of organic chemistry and especially agricultural chemistry. After the defeat of France in the Napoleonic wars, the challenge of France to British hegemony receded. However a new challenger appeared in the form of the newly unified German nation state under Bismarck that used her superior educational institutions and organized research to overcome backwardness in industrial manufactures. Britain the leading manufacturer of textile and steel in the world continued to use raw material from her colonies and disregarded the vast potential of scientific research to find replacement and uses of the waste products of steel making. Coal tar is produced in huge quantities during steel production and was considered a waste.

The earliest efforts of the chemists had been to get rid of coal tar by boiling it off. However, since it boiled in stages and at different temperatures, the result was a variety of tars, which could be turned into useful products through chemical processing. The first synthetic dye was produced in 1856, from aniline a coal tar derivative; it could colour fabrics and hold its colour against washing, time and sunlight. Germany was the first to use chemists in a big way and achieve a lead in industrial chemistry. By the end of 19th century six largest German chemical works employed more than 650 chemists and engineers, while the entire British coal tar industry had no more than thirty or forty10. By 1900 Germany had overtaken

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Britain in steel production. In 1913, before the war started German steel production was double that of Britain. By then the total industrial potential of Germany was 137.3 compared to 127.2 for Britain. Relative share of Germany in world manufactures had also surpassed that of Britain (14.8 to 13.6) 11.

Far away from Europe, another giant was awakening to challenge European leadership of the Industrial world. USA was quick to learn from German experience. US industrialists employed German scientists for sorting out problems in their newly founded steel, chemicals and electrical industries.

Rise of the USA and Germany and the Scientific and Technical Revolution

Britain had achieved her economic and political position on the basis of the industrial revolution that was ushered by entrepreneurs trying to overcome shortages of traditional sources of power and manpower. They were technologists, rather than scientists; men like Savery, Newcomen, Watt, and Wilkonson who developed the steam engine as the new source of power for the industrial revolution as was Darby who developed the first successful coke smelt iron and Hargreaves, Arkwright and Crompton who developed the machinery for the mechanization of textile industry. In Industrial revolution science was incidental to production. However, the rise of the next generation of industrial countries, Germany and USA was rooted in the exploitation of the physical and chemical sciences whose basis had been laid down by the 1860s. The new automotive, electrical and chemical industries were based on physics and chemistry. It was Charles A. Parson a professor of physics, who invented the high-speed steam turbine that revolutionized sea transport. Science from being incidental to production became the basis for it. US and German industrialists were the first to realize the importance of scientific research. In USA, Carnegie put a German chemist to work at the start of the 1870s and was able to standardize the manufacture of pig iron. General Electric enlisted the German physicist C. P. Steinmetz, chiefly to design alternating current equipment. Thomas Edison set up the first research organization for the specific purpose of systematic invention, in 1876. The first government laboratories were established by the Department of Agriculture under an act of the US Congress, in 1886. Arthur D. Little began his independent research laboratory in 1886. These were the forerunners of the corporate research organizations: Eastman Kodak (1893), B. F. Goodrich (1895), and most important General Electric (1900). General Motors did a great deal of its research through Charles F. Kettering’s Dayton Engineering Laboratories Company (DELCO), organized in 1909 and acquired by GM in 1919. At the same time the Corporation also set up other laboratories, such as the one organized for it by Arthur D. Little Company in 1911 to do material testing and analysis. Bell Telephone set up its research laboratories in 1904. Westinghouse Research laboratories were started in 1917. By 1920 there were perhaps three hundred such corporate laboratories and by 1940, over 2200. By then, corporations with a tangible net worth of over $100 million averaged research staff of 170, and those with a net worth exceeding a billion dollar averaged research staff of 1,250. The Bell Telephone Laboratories employing over 5,000 was the largest research organization in the world12.

New monopolies based on the exploitation of physics and chemistry that were created by inventors and scientists have survived into the new millennium. From an almost insignificant share in global production in 1800, USA had raised her share to nearly 23.6 percent by 1900. The Relative share of US in world manufacturing rose from 14.7 percent in1880 to 23.6 in 1900, to 32 in 1913 and to 39.3 percent in 1928 compared to UK’s share

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that declined continually from 22.9 in 1880, to 9.4 percent in 1928. The rise has been on the basis of new technologies of production (Taylor’s assembly line continuous production) and new sources of power, oil, electricity, and gas13, new technologies of internal combustion engine, electrical appliances, telegraph and chemical dyes. US had emerged as the new innovators of technologies.

Struggle for Hegemony among the old and the new industrial powers

Although Germany was defeated in the first war among the old and new industrial powers, she resumed her challenge soon after. By 1927 it had surpassed 1913 production targets by over 22 percent. Before the second war started in 1939, Germany’s index of manufacturing production had nearly reached 150 from 100 in 191314. By then Germany was spending nearly one third of national income on state sponsored projects, mostly arms production. Rapid progress in weapons technology were being made as a result of intense application of science and technology to military development was transforming weapons systems in all the services. Fighter aircrafts that could carry multiple heavy machine guns and canon, cockpit armour and self sealing fuel tanks were flying at speeds of up to 400 mph. Bomber aircrafts capable of carrying large bomb loads could fly to destinations two thousand miles away. Battleships, aircraft carriers were much faster, larger, well shielded and better equipped to deal with enemy planes and torpedoes. Tanks were faster, heavier, better armed and better armoured. Furthermore all these weapons systems were armed with much more efficient, fast electrical communication and navigational systems.

The war (1939-45) took a heavy toll of men and materials. Germany was defeated. USA emerged as the undisputed leader of the capitalist world. Although hundred of thousands of American soldiers died, USA herself was saved the material destruction that the other combatants suffered. In fact US industries that were not utilizing their full productive capacities before the war, not only worked to capacity but also increased it. In contrast to the United States undisturbed boom, Russia lost 7.5 million of her soldiers as well as 6-8 million civilians. According to an estimate 20-25 million Soviet citizens died premature deaths between 1941-4515. Material damage done in the German-occupied territories was so large as to be beyond normal imaginings. Soviet Union had out-produced Greater Germany in the armaments battle as well outfighting it at the front; but it had done so by an incredible single-minded concentration upon military-industrial production and by drastic decreases in every other sector-consumer goods, retail trade and agricultural supplies. The Russia of 1945 was a military giant, but economically poor16. Lacking any assistance from outside, she was forced to resort to enforced economic growth from its own resources. As before the emphasis was upon producer goods (heavy industry, coal, electricity, cement) and transport to the detriment of consumer goods and agriculture.

The War and the Micro-electronic Revolution

During the war (1939-45) a qualitative change occurred. Alerted by scientists of the possibility of the development of atomic bomb by Germany, USA mobilized the largest number of scientists and engineers to develop the most awesome and destructive weapons the world had ever seen- the atomic bomb. The effort cost over $ two billion but gave USA the monopoly of the atomic bomb for nearly four years. It started an arms race unprecedented in

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human history. USA had emerged as the undisputed leader of the capitalist world. However she had to contend with USSR, which had emerged as the other dominant power after the war and was providing an alternative path to capitalist road to development. Despite stiff opposition from the scientists who had developed the atomic bomb, not to continue further development of atomic weapons, USA used the monopoly of these diabolic weapons to reinforce her dominance of the world, continued to pursue the development of more and more lethal atomic weapons. USSR was forced to respond to US challenge. Her scientists developed their own atom bomb in 1949, four years after USA used her atomic bomb on Hiroshima. USA attempted to maintain her superiority by developing an even more lethal and destructive Hydrogen bomb in 1951. USSR responded with one of her own hydrogen bomb. An intense arm race between USA and USSR continued till 1989, ending only with the collapse of the Soviet Union. Between 1948 to 1970 USA spent $1109.5 billion dollars on defense, while USSR spent an almost similar, $ 939 billion during the same period. Expenditures on defense by other capitalist nations, UK, France, Japan and Germany were minuscule in comparison, $87, 88.5, 60.9 and 11.4 billion respectively17.

Weapons research and development takes about 10 % of the world military expenditures. Till the end of 1980s, USA and USSR appear to control about 80 % of all military research, giving them a near monopoly of offensive and defensive weapons systems (bombs, laser guided missiles, long range bombers, fighter planes, surveillance planes, unmanned, and AWCAS. Each devoting to weapons research twice as much public money as they spend on all research for civilian needs. Because of the enormous resources that it commands, both in money and skilled personnel, research for military applications has been the dominant force in the development of new technology in the last seventy years. Giving a continuous momentum to the arm race, weapons research has made the pace of military development essentially independent of the existing threat to the nation. In the superpowers competition each side considers it essential to develop and produce whatever technology is possible, on the grounds that the adversary will surely do so. The inevitable response of the adversary confirms the accuracy of the expectation, and justifies a new round in the competition. Research is the instrument through which ”antagonistic co-operation” between the two leading adversaries a never ending escalation of the arming. The quality spiral, which is essentially begins with the two giants, in a short time is without geographic limits.18

What has been described above is best illustrated by the continuous development of more and more lethal atomic weapons and their delivery systems by the two superpowers from 1945 onwards. USSR responded to US atomic bomb with her own in atomic bomb four years later in 1949. Her scientists developed their own atom bomb in 1949, four years after USA used her atomic bomb on Hiroshima. USA attempted to maintain her superiority by developing an even more lethal and destructive Hydrogen bomb in 1952. USSR responded with one of her own hydrogen bomb within a year 1n 1953. In 1948 US developed a long-range intercontinental bomber to carry atomic bomb. USSR responded by developing one of her own in 1956. In the next stage it was USSR turn to introduce a new weapon system, an intercontinental ballistic missile (ICBM) capable of carrying an atomic bomb in 1957. USA developed one of her own ICBM a year later. in 1958. In 1957, USSR sent a satellite Sputnik into space. USA responded by sending one of her own satellite in the next year. USA further upstaged USSR by introducing photoreconnaissance satellites in 1959, to be countered by USSR own system in 1962. USA also introduced Submarine Launched Ballistic

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Missile (SLBM) in 1960, which USSR countered with their own SLBM in 1968. In 1966 US introduced Multiple Warhead (MRV) carrying ICBMs. USSR took just two years to respond with one of their own MRV carrying ICBM system. To counter US supremacy USSR developed an antiballistic missile (ABM) system around Moscow in 1968. USA responded with1970 Multiple Independently Targeted Warhead (MIRV) system that USSR could reply to only five years later in 1975. USA continued to develop more effective offensive atomic weapons systems; long range Cruise Missile (1982), Neutron bomb (1983), new strategic bomber (1985) that were all countered with similar system by the USSR with some time lag. During the term of Ronald Reagan, (1982-88) USA embarked upon an extremely ambitious and expensive anti satellite rocket system, the so-called star war programme. In the early 1990s, USA also developed a most expensive nuclear bomb carrying “Stealth” or B2A spirit, long-range bomber, which cost a hefty $2.7 billion per plane, if the Research and development costs are included. This bomber, which can evade detection by radar, has been used by US against the totally defenseless Afghanistan and weakling Iraq, that didn’t have even an effective working defense radar system. Over the years, about 116 weapons systems were built to deliver a total of 70,000 warheads and bombs. The air force had 42 types of nuclear weapons, the navy and marines, 34, and the army21. Twenty-five other programmes were developed but cancelled before production began. Between 1945 to 1995, USA fielded 4,000 nuclear capable bomber aircraft of ten distinct types. About 67,500 nuclear tipped missiles of 50 types were procured. These included 3,160 intercontinental ballistic missiles (ICBMs), and 2,975 seas launched ballistic missiles (SLBMs). Between1945 to 1985 the range to which bombs could be delivered increased 262 fold. The area of destruction over which a bomb could spread destruction increased 250 times. Lethality of the weapons increased 200 times. This vast improvement in the effectiveness of the armament was achieved by massive investment in scientific research and development. An amount of 8 to 9 thousand billion dollars has been spent to create a nuclear arsenal19.

The success of the Manhattan project also demonstrated to all governments the importance and usefulness of scientific research and development for national power, prestige and wealth. Since the Second World War USA has continuously spent more than any other country on science and technology. As a result the scientific leadership in the world passed from Western Europe to USA. On the average USA spends more than 2.8 percent of her gross national product (GNP) on scientific R & D (1). This has enabled USA to emerge as the leader in the production of new scientific and technological products. Research and development activities produce new knowledge and new products and services. Let us take a few examples. Transistor was discovered just after the Second World War in Bell Laboratory owned by the giant American Telegraph and Telephone (AT&T). Within twenty years it became an indispensable part of every electronic device. Microprocessor were developed in 1971, soon they were at the core all automated devices. Computer was developed in the mid 40s. Personal computers appeared in 1975. Now these computers are found in every office and household in developed countries. Lasers were developed in mid 50s. Now they are found in divers devices including the compact disk player. USSR launched her first satellite in 1957. Within six years the first communication satellite COMSAT went up. Now satellite help in communication as well as remote sensing in a routine manner. Dish antenna on rooftops everywhere is a striking example of the wide use of satellite communication. The

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helical structure of DNA was discovered in 1956. Now this discovery has led to a multi billion dollars biotechnology industry. Numerous examples from other branches of science can also be given. Internet was introduced in the early 1990s. It has become a household item in most of the developed countries, even penetrating in the houses and offices of the affluent in the developing world.

As the 21st century begins, the USA continues to occupy a position of eminence as producer of new science and technology. In the year 2002, research and development (R&D) expenditure is expected to reach $291.663. Of this the Federal government contributed $81.004, while the industry contributed $193.420. The Universities, Colleges and other non-profit institutions contributed another $17.24 billion. Of this amount Universities and Colleges spent 37.491 billion, while Federal government institutions spent another $21.566 billion. R&D performing industries increased their net US sales from 4,925.124 billions in 1999 to 5,249.573 in 2000. The increased sales were accompanied by a reduction in the number of employees from 18.221 million to 17.663 million. In 1999, US economy employed a total of 10,479,800 science and engineering (S&E) graduates (57% Bachelor’s degree, while 2.9 million had Master’s degree and 722 thousands had a doctorate. Of the over ten million 3,540,800 were employed in science and engineering professions. Of these 484,100 had Doctorates, 1,032,100 had Master’s and the rest Bachelor’s degree20.

US is the biggest producer of five knowledge intensive services, which contributed a total of over $ 3,484 billion to her GDP in 199820.

In the year 2003 USA GDP had grown to $10,397.7 billion dollars from just $865.2 billion in 1929, in chained 2000 dollars. She was also the largest exporter of goods and services in the world22.

By the end of the last century, USA had the largest stock of scientists and engineers of over ten million, in the whole world. This number has been reached through exponential growth from around 100 in 1800 AD. It grew to 16,000 in 1860 AD and 128,000 in 1905 AD, 1,024,000 in 1950AD, 2,048,000 in 1965 and 4,096,000 in 1980.

In 1999. US scientists and engineers filed 270,187 patent applications. They also published 163,526 scientific articles out of a world total of 528,643. US inventors received technology payments (patent and license fees, royalties etc.,) of $38,030.0 billions. In that year USA had a positive technology balance of payment of $21,924.0 billion. US have over a quarter (25.12 %) of the OECD export market in high technology manufacturing products23. In fact over the years US companies have transferred a considerable part of their manufacturing activities overseas, while concentrating on high technology manufacturing, aerospace, microelectronics, telecommunication, special materials, pharmaceuticals and bio-technological products and sophisticated weapons systems.

US overwhelming Military Might

Since her success in developing the first atomic bomb in 1945, US has continued to produce and deploy the most advanced weapon system. She has devoted the major part of her R&D efforts to military purposes. She also spends huge amounts on defense. She spent a

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staggering amount of $3,900 billion, over forty five years (1940-1995), just on the development of nuclear weapons, their delivery, command and control systems. During 2002 her military expenditure was $335.7 billion, that was 43 % of the world total military expenditure of $ 784 billion (SIPRI). USA military expenditure exceeds the combined military expenditures of other next fourteen biggest spenders; Japan, UK, France, China, Germany, Saudi Arabia, Italy, Iran, South Korea, India, Russia, Turkey, Brazil, and Israel24.

The defense industry in US employees 2.2 million people, that is about 2% of the civilian workforce. In the fiscal year 1999, the Department of Defense awarded $118 billion to contractors for goods and services. US continue to dominate the global arms sales. In the year 2000, US sold $18.9 billion worth of arms.

The administration of President George Bush is requesting $399.1 billion for the military in fiscal year 2004 ($379.9 billion for the military and $19.3billion for the nuclear weapons). Of the total, 72.7 billions are for procurement of weapons systems, and 61.8 billion for research and development of new weapons systems.

The administration plans to spend $2700 billion on the military over the next six years25.

Arrogance of the Sole SuperpowerIt is generally thought that after the collapse of the Soviet Union in 1989, USA has

grown arrogant and is targeting the Muslims everywhere as exemplified by her total support of Israel and her aggression against the Taleban government of Afghanistan and 2003 invasion and occupation of Iraq. The truth is that USA has been consistent in her policies from the very beginning of her emergence as an independent country in 1776. USA started as a union of just ten states on the Eastern Coast and a population of less than four million. It has aggressively expanded westwards, herding Native American into reservations far from their natural habitats. She defeated older established French, Dutch, Spanish and Mexican colonists in the rest of North America to create the present continent wide USA in the mid 1850. After consolidating their rule in North America, the leaders of the USA turned their attention southwards. They intervened repeatedly in various countries of Central and South America to advance the corporate interests of their capitalists. Zoltan Grossman has compiled a list of U.S. military intervention since 1890. “The United States military has been intervening in other countries for a long time. In 1898, it seized the Philippines, Cuba, and Puerto Rico from Spain, and in 1917-18 became embroiled in World War I in Europe. In the first half of the 20th century it repeatedly sent Marines to "protectorates" such as Nicaragua, Honduras, Panama, Haiti, and the Dominican Republic. All these interventions directly served corporate interests, and many resulted in massive losses of civilians, rebels, and soldiers26.” Another US writer William Blum has summarized the actions of US governments from the end of World War II to the present. US government has attempted to “overthrow more than forty foreign governments, has invaded some twenty sovereign nations, has worked to crush more than 30 populist movements which were fighting against dictatorial regimes, has provided indispensable support to a small army of brutal dictatorships: Mobuto of Zaire, Pinochet of Chile, Duvalier of Haiti, Somoza of Nicaragua, the Greek Junta, Marcos of Philippines, Rhee of Korea, the Shah of Iran, 40 years of military dictators in Guatemala,

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Suharto of Indonesia, the Brazilian junta, Trujillo of the Dominican Republic, Talebans of Afghanistan and others27.” 

Grossman further observes, “ Although nearly all the post-World War II interventions were carried out in the name of "freedom" and "democracy," nearly all of them in fact defended dictatorships controlled by pro-U.S. elites. Whether in Vietnam, Central America, or the Persian Gulf, the U.S. was not defending "freedom" but an ideological agenda (such as defending capitalism) or an economic agenda (such as protecting oil company investments). 

In fact US role in world is very much similar to the one demonstrated by Britain during most of the 19th and second half of the 20th century. She intervened directly or indirectly wherever; the interests of British capital were threatened. The only difference now is that USA now intervenes everywhere to impose values of global capital, free movement of capital, minimum regulations by nation states. As such capitalists of every country favour US policies even when they are against the interests of the majority of their people. Under US leadership, the interests of the capitalists are well served. This is testified by the fact that while the global economy has either stagnated or grown slowly since 1970s, Corporate profits and assets of the world richest have multiplied many times over. In the United States, the real weekly earnings of production and supervisory workers (in 1992 dollars) fell from $315 in 1973 to 264 in 1989. After a decade of economic expansion, it reached 271 in 1999, which remained lower than the average real wage in 1962. The income gap between the richest 20 percent and the poorest 20 percent in the world rose from30: 1 in 1960 to 60:1 in 1990 and 74:1 in 1999. On the other hand, 200 richest people, according to 1999 Human Development Report, “more than doubled their net worth in four years to 1998, to over a $ 1 trillion”.

US hegemony is on the decline as her economic power is steady declining since the 1970s28. Since 1950 US share in the world gross product has declined to 21 percent from nearly 50 percent in 1950. US share of world manufacturing also declined from 60 percent in 1950 to 25 percent in 1999. Non –US companies dominated major industries in 2002, accounting for nine of the ten largest electronics and electrical equipment manufacturers; eight out of ten largest motor vehicle makers and electric and gas utilities; seven of the ten largest petroleum refiners; six of ten telecommunication companies; four of six chemical producers, five of ten pharmaceutical firms, four of seven airlines and nineteen of 25 largest banks. The share of US in foreign direct investment in other countries has declined to 21 percent from a high of 47 percent in 1960. In 2002 US for the first time paid to the foreigners more investment income from their holding in US than it received from its own investment abroad. The United States of America just cannot sustain her present level of consumption for very long, as it has to borrow constantly to balance its current account deficit. In 2002,the USA borrowed $503 billion from abroad, a record 4.8 percent of GDP. When foreigners receive dollars from transactions with U.S. residents (individuals, companies, governments), they can use them to buy American assets (U.S. Treasury bonds, corporate bonds and stocks, companies, and real estate). This is how the United States turned into a debtor nation in 1986; foreign-owned assets in the United States are now worth $2.5 trillion more than U.S.-owned assets abroad. By mid-2003, foreigners owned 41 percent of U.S. Treasury marketable debt, 24 percent of all U.S. corporate bonds, and 13 percent of corporate stock. U.S. companies are

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continuing to invest abroad, but unlike the British Empire in the decades before the First World War, the United States is unable to finance those investments from its current account29.

The world is witnessing the twilight era of the hegemonic power. New economic powers are going to emerge on the scene in the next fifty years. However the aggressive and arrogance of USA in the intervening years can only be countered by uniting with global movement against the rule of the capital and establishment of a humane, sustainable development and participatory democracy round the world. Till then US will try to make up for its declining economic power by the might of its military and sophisticated arms. References

1. Ian McNeil (Ed), An Encyclopedia of the History of Technology, Vol.1, p. 3, Routledge, London, (1996).

2. David S. Landes, The Unbound Prometheus: Technological Change and Industrial Development in Europe from 1750 to the Present, Cambridge University Press (1969)

3. Harry Braverman, Labour and Monopoly Capitalism: The Degradation of Work in The Twentieth Century, p.69, Monthly Review Press, NY (1974)

4. Andre Gunder Frank, ReORIENT: Global Economy in the Asian Age, University of California Press, (1998).

5. A. M. Bagchi, Journal of World System Research, 2, (2000), p-398-442.

6. Hamza Alavi, Colonialism and the Rise of Capitalism, (1999)

7. Paul Bairoch, “International Industrialization Levels from 1750 to 1980”, Journal of European Economics History, 11, (1982).

8. Paul Kennedy, Rise and Fall of Great Powers, p. 148, Random House, NY, (1987).

9. Harry Braverman, ibid, p. 162.

10. Paul Kennedy, ibid. tables, 15 & 17, p. 200, 201.

11. Harry Braverman, ibid, p. 164.

12. Paul Kennedy, ibid, tables, 18, p. 202

13. League of Nations, World Economic Survey, Table III, p. 134, Geneva (1945), cited in Paul Kennedy, Rise of Fall of Great Powers,

14. G. Hosking, A History of the Soviet Union. p. 296, London, (1985), cited in Paul Kennedy, Rise of Fall of Great Powers, p. 362

15. Nove, Economic History of the USSR, p.285, cited in Paul Kennedy, Rise of Fall of Great Powers, p. 362.

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16. Paul Kennedy. Ibid, p.362

17. Paul Kennedy. Ibid, table. 37. P.384

18. Ruth Leger Sivard, World Military and Social Expenditures, 1985,

19. Bulletin of Atomic Scientists, Nov/Dec. 1995.

20. Main Science And Technology Indicators, OECD, 2002 (Geneva)

21. Science and Engineering Indictors, National Science Foundation, Washington, (2001).

22. Op. cit.

23. Op. cit

24. SIPRI Yearbook, 2002

25. Fiscal Year 2004 Discretionary Budget Request, USA government, 2004.

26. Zoltan Grossman, A History of US Military Interventions: From Wounded Knee to Afghanistan, ZNET.

27. William Blum, Rouge State: A Guide to the World’s Only Super Power,

28. Mingqi Li, After Neo Liberalism: Empire, Social Democracy or Socialism, Monthly Review, January 2004.

29. Richard B. Du Boff, US Hegemony: Continuing Decline, Enduring Danger, Monthly Review, 2003

Dr. Anis Alam

FIFTY YEARS: AN APPRAISAL OF DEVELOPMENT IN PAKISTAN

Ghulam Kibria, (DAWN: Nov. 3, 1996) has looked at the first fifty years of Pakistan and is not happy at what he sees. On every level, he sees deterioration. However, if one accepts that Pakistanis are ordinary mortals trying to survive in a given geographical area as best as they possibly can then what has been happening in Pakistan over the last fifty years is definitely not a disaster. A lot of progress has been made. Actually compared to the rate of development during colonial times Pakistan has done fairly well. From a predominantly agrarian society Pakistan has been transformed into a industrial / service / agricultural complex. Almost one third of whose people now live in urban areas.

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This transformation has taken place under the framework of a capitalist economy. As such its benefits have also accrued to the members of that class and its associated groups. What ever benefits have filtered down to the masses have been incidental to the enrichment of the propertied classes, merchants, industrialists, property owners, businessman, civil and military bureaucrats and landowners.

The problems we encounter all around us are problems of a overpopulated, traditional society, that still tries to function in the last years of 20th century with intellectuals tools fashioned in days gone long bye. There has been half hearted attempts by the state to develop the know how of the populace. The results are also reflective of that half baked schemes.

While accepting from the very beginning that the political leadership has not been the best but that was what was available because of historical reasons. Pakistan was obtained without much struggle. In fact the areas that emerged as Pakistan did not see much of a political movement for an independent Pakistan till just a decade before independence was achieved. Muslim league soon degenerated into the handmaiden of the civil and military beaurucracy after the departure of Jinah and Liaqat Ali Khan. Other political parties were not allowed to develop. In their absence the traditional power wielders; the landowners and other propertied classes , continued to rule under the watchful eyes of the non elected institutions. They have been amply rewarded. Pakistanis may be the least literate and least cared for people in the world but her landowners, traders, industrialists, top and middle level civil and military beaurucrates have prospered much to the envy of their counterparts elsewhere.

When Pakistan emerged as an independent country in south Asia in 1947 after the departure of the British colonial power. The areas which made up Pakistan were predominantly agrarian. There was very little industry as most of the industry in colonial India was concentrated in the coastal cities Calcutta, Madras and Bombay. All these cities were situated in India. Pakistan produced two important cash crops, cotton and jute. Most of the export earnings for Pakistan came from these two crops till jute producing eastern half ceded from Pakistan to become Bangla Desh in December 1971.

At the time of her independence the contribution of large scale manufacturing to the gross national product (GNP) was less than two percent. New government of Pakistan instituted trade / fiscal / industrial policies which helped in creating a industrialist class. Pakistan Government created through its own resources a Pakistan Industrial Development Corporation (PIDC) in 1951. This corporation established new industrial concerns and once they started making profits, sold them cheaply to private entrepreneurs. By 1962 PIDC had established and then handed over sixteen large industrial concerns manufacturing jute, cotton products , paper, sugar and chemicals to ten leading industrial houses.

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The rate of growth of manufacturing industry during the first half of the 50's was an impressive 24 percent. Even in the second half of the 50's the rate remained an impressive 9 percent. However by the end of the decade large scale manufacturing sector had increased fourfold. Along with this impressive growth emerged great concentration of industrial assets and monopoly houses. In 1958 military dictatorship was imposed on Pakistan by the then Army Chief Ayub Khan. His rule lasted over ten years. Trade union activities were banned and industrialist were given free hand to expand and prosper. Between the ten year period 1959-60 1969-70 large scale manufacturing sector grew at an average rate of 12.5 percent. By then twenty two families controlled 87 percent of banking and insurance, and 66 percent of the industrial assets in the country.

Repressive pro capitalist and anti democratic military rule provoked a massive people's movement in 1968 resulting in the overthrow of Ayub military dictatorship. Elections were held in 1970. Reluctance on the part of the military government to transfer power to elected representatives led to a civil war in 1971 and finally to the break-up of Pakistan into two part. The Eastern wing became an independent country called Bangla Desh. Uncertain political conditions kept the growth of large scale manufacturing sector to a minimum of only 0.1 percent during the period 1969-72. But this period saw massive increase in the number of unionised workers.

In 1972 the new government of Pakistan Peoples Party (PPP) nationalised banks and large scale manufacturing units producing engineering goods, industrial chemicals, ghee, cement, oil refineries and fertiliser factories. But the impact of nationalisation measures was more psychological as private investment dried up. But this was more than made up through massive investment in the public sector. The average growth rate for industry during the five year PPP's rule remained a healthy seven percent. This is the finding of the World Bank wizard, Shahid Javed Burki as revealed in his books on Pakistani economy? Actually What Bhutto did was nothing extraordinary for the milieu he was living in. On the other side of the border the Indian Prime Minister Indra Gandhi was doing the same. She nationalised all banks and other financial institutions during the same period. If one looks at the investment process, one finds that they major part of investment comes from the loans the investors take from banks and other financial institutions. During Bhutto era these borrowings were mostly by the state for public sector development. That the state sector degenerated into a over managed, over staffed economically inefficient mess, is another story. However, Pakistan did create a infra structure for heavy industry in the state sector. The Karachi Ship Yard, Heavy mechanical complex at Taxila, and Landhi, various facilities with the defence establishment have played an important part in creating capabilities. The failure have mostly to do with bureaucratised management and poor quality middle level management and workforce and ill trained and little educated workers.

However in 1977 another military take-over and hanging of elected prime minister failed to restore confidence of private investor. Eighties have seen a massive influx of new

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entrepreneurs nurtured by military government and black money including drug money. This period has seen few projects in large scale manufacturing but a huge number of small manufacturing units dealing in textiles, carpets, leather, ghee and others have been set up.

However labour has lost its drive for more rights. There is large scale retrenchment of workers from industrial concerns which have been denationalised in recent years. Decade of military rule has fragmented the labour movement on ethnic and sectarian lines. Large scale penetration of labour movement by sectarian and ethnic organisation often under an organised plan by the military government has weakened the labour movement.

Pakistan industrialisation has passed through several phases. The first phase lasting nearly ten years witnessed the creation of a industrialist class. Large number of industrial concerns mostly manufacturing consumer goods: textiles, light engineering goods, cement, leather goods, edible oil and ghee, chemicals etc. Second phase lasting through the sixties witnessed a laissez-faire approach to industrialisation with little consideration for social welfare. Seventies witnessed massive state investment in heavy industry, heavy engineering, steel, fertilisers, petrochemicals and machine tools. But in the 90's the trend has again been reversed to laissez faire. Government policies are pro investment, antiregulation and generally indifferent to labour welfare.

Industrialisation in Pakistan has proceeded at a steady pace, increasing its share in gross national product from just under two percent to 20 percent in 1965 and to 24 percent in 1988. Industry has grown at an average rate of 6.4 percent between 1965 to 1980 and at a rate of 7.2 between 1980 to 1988.

If one looks at Pakistan from the point of view of her upper classes, things look fine. They have grown enormously rich. They live lavishly. They have connections not only in White Hall but also in White House. Their sons and daughters serve as professionals in World Bank, IMF and hosts of other international organisations. Every year they send their sons and daughters in thousands (over ten thousands every year ) to finest institutions of learning in America and Europe. They have successfully used the Pakistani passport to launch the careers of their offspring anywhere they could flourish. They spend their summers in temperate climates and return to spend the sunny winters in Pakistan. Pakistan has been good and continues to be good to them.

Looked at from the point of view of the professionals the same picture emerges. Ill educated, untrained professionals have managed to occupy positions in academia, research organisations, commerce, industry, civil and military beaurucracy management. Pakistani have excelled as individuals. As scientists (Prof. Abdus Salam, the Nobel Laureate), engineers, doctors, sports men ( cricket, squash, snooker, bridge) they are known the world over. The drug and arm smugglers are as good as to be found anywhere in the world. It is as nation that they do not fare so well. The reasons are numerous. But the main reason is that

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ordinary people, the peasants, the workers, petty traders, artisans, unemployed and the under employed are not organised. Their interests and well being is not on the agenda of the main political parties. Unless they are organised and their aspirations and desires for a just and prosperous life in this world are articulated we will continue to have more of the same. Intellectuals and ideas are most important but by themselves they are useless. They have to be adopted by political parties and social groups and put into practice. In that respect a lot of progress has been made in the last fifty years. Now every party accepts that education, health, water, energy, transport, communication and entertainment has to be provided to all the people. The people have to ensure that political parties deliver on their promises. If democracy is allowed to work by the non elected institutions to function unhindered Pakistani people will eventually achieve the society they have dreamed since long. Let us not despair.

(REPRINTED FROM DAWN NOV. 1996)

The idea of PakistanBy Shahid Javed BurkiDAWN-16th Sept. 2008

THERE cannot be any doubt that Pakistan is experiencing a difficult period. The crisis through which the country is passing in its sixth decade as an independent state is perhaps the most difficult it has seen in its exceptionally turbulent history.

The economy is in a state of freefall. It is hard to tell when and where it will stabilise. The political situation is defined by problems that show personal ambition prevailing over national interests.

It is hard to tell where this conflict will take the country. There is a war raging in the country’s northwest between the government’s forces and those who have an entirely different way of looking at the way Pakistani society and state should evolve.

The state’s response is understandably restrained. It does not wish to harm those who are caught for reasons of geography in the middle of this conflict. The other side, motivated by an ideology in which it places total faith, is not inhibited. On the international front, ‘contempt’ and ‘extreme unease’ are perhaps the best way to describe how the world sees Pakistan. How it would react to the development taking place in Pakistan is hard to predict especially when the reins of power will be transferred soon in Washington from one group of leaders to another.

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As a student of Pakistan’s history — the evolution of its economy, its politics and its society — I have written extensively on this subject. I don’t recall a period that equals the present. Not even 1971 when the country was split into two. In its original form, Pakistan was perhaps a non-sustainable political creation. It was an artifact that responded to a particular situation that developed under the long British rule.

There is no reason why the two ‘wings’ of the country should have stayed together. The very fact that they were called ‘wings’ suggested that the country’s body existed somewhere else. They had more differences than commonalities. It was economics that made the two wings go their separate ways. The body to which these two wings were attached was Islam but that did not prove to be a strong cohesive force. But what about what is left of Pakistan after 1971, a union of fairly disparate people who are still searching for some common ground?

I was invited to participate in a workshop on Pakistan’s future in Washington a few weeks ago. An anthropologist of Indian origin raised the question about the ‘idea of Pakistan’, which was the theme of a recent book by Stephen Cohen of the Brookings Institution in Washington. According to him, the idea centred on the belief that a separate political entity was needed to protect the separateness of the Muslim community in British India. This was the basis of Mohammad Ali Jinnah’s two-nation theory according to which British India was inhabited not by one Indian nation but two, one Hindu, the other Muslim.

This notion was countered by what Anil Khilnani of Johns Hopkins’ School of Advanced International Studies (SAIS) calls the ‘idea of India’. According to this, the concept of nationhood in an extremely diverse South Asian populace should be based on shared history rather than shared culture or religion. Given these differences, the participant in the workshop posed a legitimate question: had the idea of Pakistan failed? She implied that the idea of India had succeeded.

Since the question was directed at me — one of the three Pakistani participants at the workshop — I responded by asking another question. I asked if states need an idea — whether we could find an ‘idea of Nigeria’, an ‘idea of South Africa’, an idea of ‘Malaysia’. My counter question as an answer drew a sceptical response. It was suggested that it was fair to raise that question for the states that were founded on the basis of ‘ideas’ rather than on that of colonial heritage.

Nigeria, South Africa, Malaysia — the three examples I had used — were all products of colonial history. The same is true for a number of countries in the Middle East. Iraq, Jordan, Lebanon, Syria and Saudi Arabia are all the products of colonial history. They are not the consequence of ‘ideas’. Saudi Arabia may be an exception since its statehood does promote an ideology.

Given the current state of affairs in Pakistan, given some of the observations made in the opening paragraphs of this article, it is legitimate to ask the question: what is now the idea of Pakistan. Institutional economics — a relatively new discipline pioneered by Douglass North, the Nobel Prize-winning economist — postulates that a great deal of human activity is governed by what it calls belief systems. These systems are the product of historical accumulation. They are not static but, instead, are exceptionally dynamic. How would I apply this reasoning to the case of Pakistan?

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The creation of Pakistan was indeed based on an idea — Jinnah’s two-nation theory — but many years have elapsed since that postulate was first put forward. The concept that Pakistan was needed to preserve the separate identity of the Muslim community of British India, may not have worked to keep together the two wings of the country that were attached to the body of Hindu India. But history produces its own imperatives.

Jinnah’s two-nation theory is now 70 years old. It resulted in the partition of British India and the creation of two separate political entities. One of those split into two and what was once British India is now three separate states with their own histories and their own imperatives. Two of them — Bangladesh and Pakistan — are still searching for answers that would help them forge the meaning of nationhood. How should Pakistan define itself at this critical juncture in its history?

Notwithstanding the bloody campaign launched by some stateless groups, religion can’t be the basis of Pakistan’s nationhood. There are too many different interpretations of what can be called an Islamic state for Pakistan to risk its future on that concept.

For the same reason, ethnicity can’t be the defining concept. We have to be pragmatic: we need to define the Pakistani identity and the Pakistani idea on the basis of geography rather than on the basis of culture and religion. What is Pakistan today is a piece of real estate occupied by more than 2.5 per cent of world’s population that must find a way of pursuing economic, political and social objectives that serve the entire citizenry. This is the only way forward

NEWSLINE August 2008

CAN PAKISTAN SURVIVE? YES, IF… Taming the military, the feudal elite and Islamic militancy is essential to keep the country together. by I. A. Rehman Tariq Ali was not the first one to pose the question, “Can Pakistan survive?” when he chose it as the title of his study more than 35 years ago. Since Pakistan came into being after a non-traditional process, fears of its mortality have been a part of its people’s psyche. Successive governments have kept this fear alive by using it to blackmail the people into surrendering to their inefficient and oppressive rule. However, anxieties about Pakistan’s life have never been so severe and widespread as they are today because ordinary citizens can see their country being caught in a battle that could prove fatal. The question of survival is not equally relevant to all the three components of Pakistan’s identity – the land, the people, and the state. There can be no fear of the demise of the land of Pakistan. It has survived the ravages of time since antiquity and it will survive whatever may befall the state of Pakistan. Even if some parts of this land, or even the whole of it, get covered by water, it will only be submerged but will not disappear. Similarly, the people

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will survive as they have survived countless convulsions over thousands of years. It is only the state of Pakistan that can be subject to the laws of life and death.

The Pakistan state has been vulnerable all along because it was born with several serious internal contradictions that required extraordinary political engineering. First, it adopted the

ideal of a modern, democratic and apparently secular polity, although the demand for its creation had been based on the religious identity of the subcontinent’s Muslims. Secondly, it upheld a federal structure in theory and followed the colonial model of a unitary state in practice. Thirdly, it assumed that a democratic system could flourish in a society steeped in feudal culture. Fourthly, a larger part of its population was in the disadvantaged eastern wing while the mantle of power was assumed by the privileged western wing with a smaller population. And, fifthly, the events attending the birth of Pakistan and the global environment during its formative years led it to develop an obsession with security to the neglect of many other requisites of a democratic state of contented citizens. The accumulated failures of the controllers of Pakistan’s destiny in the different phases of its life have generated an unprecedented sense of despair among the people today. But before trying to figure out what the future holds for Pakistan it may be useful to examine how grave and complex the challenges stemming from the contradictions mentioned have become. The first critical issue faced by Pakistan, even before the clerics’ volte face in claiming parentage of the state whose idea they had maliciously denounced and stubbornly opposed, was the Bengali citizens’ assertion of their linguistic and cultural identity. The matter was messed up thoroughly and one thing led to another. The gulf between the two wings grew wider as the state’s federal premises were consistently repudiated and the democratic rights of the majority population were arrogantly rejected. Eventually East Bengal was forced out of the Pakistan state, but the contradiction between the imperatives of the federation and the rulers’ preference for despotic centralism (not even benevolent centralism) has remained unresolved. No lesson has been learnt from the follies that caused Pakistan’s break-up in 1971; indeed the state’s attitude toward less powerful units has become haughtier and even more irrational. Today, three out of the four units of the federation of Pakistan are more alienated from the centre than ever before. The institutions that could have cemented the bonds of federal unity – the parliament, the Council of Common Interest, the National Finance Commission and the defence forces – have all become sources of cleavage and conflict. Nobody can be blamed for declining to accept bets on the survival of a federal state whose constituents keep pulling in different directions.

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However, the issue of the federating units’ rights has been superseded in seriousness by the rise of religious pretenders to power. While the founding father did argue that Pakistan was not meant to be a laboratory of faith, they undermined, wittingly or unwittingly, every secular strand of national unity. Their successors rose to power by flouting democratic authority and relied on religious rhetoric to legitimise their regimes. Being unfamiliar themselves with the liberal tradition of Islam, they allowed the conservative clerics to dominate the religious discourse. Each new constitutional text enlarged the political space for the forces of theocracy. General Zia-ul-Haq’s decision to pervert the concept of jihad and install the conservative tribals as dispensers of sovereign rights made it possible for them to first claim a right to impose their writ in their mountainous hideouts and finally to seize Pakistan or a part of it for themselves. At the moment, Pakistan’s armed forces alone appear to have the capacity to thwart them but no one can say as to how long this cover will be available to the beleaguered state.

The state’s weakness in facing the threat from the north, which ironically used to be invoked for quite a long time, by Muslims and non-Muslims alike, to frighten the rulers of the sub-continent, has been compounded by its failure to resolve the democratic forces’ contradiction with the feudal social structures on the one hand and the praetorian adventurers on the other. The political actors responsible for guiding the short and largely painless struggle for Pakistan had extremely limited exposure to democratic ideas. Many of them viewed the creation of a new state through democratic-sounding devices as a means of perpetuating their feudal privileges. The feudals that had been trained as the colonial power’s auxiliary force had little difficulty in guaranteeing their victories in electoral contests. So useful was feudal culture in depriving the masses of their right to power that even non-feudals that were catapulted into seats of power ran the state and its economy in the style of feudals. Pakistan remains a feudal state which is prepared to compromise with any claimant to share in power except the disadvantaged citizenry. By refusing to liquidate feudalism, Pakistan has condemned itself to the status of anachronism. At the same time, the security apparatus created and maintained by the people by sacrificing their rights to education, health and material well-being became autonomous within a few years of independence. By the end of the fifties it had not only become free of the government’s administrative and financial controls, it moved into the state’s driving seat and has refused to leave it except for short vacations. The repeated assaults by the armed forces have made it impossible for political parties to acquire maturity of

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mind or become proficient in statecraft. This deficiency of the civilian establishment has reinforced the military camp’s belief in its monopoly over wisdom and patriotism. It always considered itself independent of the state in defence matters, now it chooses to help the civil government beat off threats to national integrity only on its own terms and in a manner of its own choosing. Does the foregoing narrative of the Pakistan state’s plight leave any room for hope of its survival? Yes, it is possible to sustain hope for two reasons.

First, states are known to survive for long even when afflicted with dreaded diseases, only they become irrelevant to their hapless citizens until external or internal forces, or a combination of both, appear on the scene to save the state for a particular interest or replace it with a new state or with more than one state. Fortunately, that moment does not seem to have arrived as yet. One of the reasons is the discovery by powerful neighbours of their stake in the integrity of the Pakistan state. Except for some purblind tacticians masquerading as military strategists, Iran, India, Central Asia and China have ample reason to be wary of the rise of an aggressively Sunni, tribal jihadi state over Pakhtun territories in Afghanistan and Pakistan. Even the Pakhtuns, except perhaps for the mercenaries among them, may not wish to be thrown back more than a few decades. Secondly, the state of disarray and anarchy that is causing people acute distress is not due to lack of the Pakistan state’s potential for survival. It is largely due to non-utilisation of the national resources and instruments of recovery and the possibility of their proper employment cannot be ruled out.

A dispassionate analysis of the problems Pakistan is facing will show that all of them, except for the siege by the jihadis, can be resolved if the various parties involved can convince themselves that it will be impossible to protect their group interests in the event of the state’s getting weaker or completely dysfunctional. A serious and sincerely mounted effort to remove the federating units’ grievances can still restore the federation to health. What needs to be done is largely known. The provinces deserve maximum autonomy, a fair NFC award, an effective Council of Common Interest, stoppage of all military operations that are objected to by the populations concerned, and abandonment of what are perceived as plans and measures to grab land and other natural resources. The federation will become stronger and more viable if the provinces are allowed due freedom to develop themselves and to enjoy their due share in the running of the centre as well. Once it is realised that the state cannot overcome the diverse challenges confronting it without the trust and active support of the people, it may not be impossible to bridge the many intra-state divisions. At the moment, there is a sharp division within the ruling coalition – the coalition parties and the rest of the political actors cannot see a common national goal, and the chasm between the civilian horde and the military establishment is posing the single greatest threat to national security. Whatever it may take, the ongoing fight between the various elements of the state must be stopped. Success in this endeavour

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will enable the state to harness its potential for rejuvenation. However, unity of purpose among its organs alone will not enable the state to win public backing. That will be possible only through the mobilisation of the masses by the political parties. At the moment, the political parties are totally out of action. Meetings of parliamentary parties, if held at all, are meaningless get- togethers and there is little communication and consultation with the rank and file. An open and continuous dialogue between the state and the people is one of the foremost requisites for the state’s survival and progress. An effective mobilisation of the people is also necessary to end the confusion in the ruling elite on the most effective response to tribal militancy operating under the cover of faith. A greater part of the population rejects the militants’ thesis and is convinced that their accession to power will entail indescribable misery to the people, generation after generation. But those holding this view are doing nothing to avert disaster. Those on the other side seem to believe that the militants are not in the wrong and that they can ride the tiger. Unless these people can amend their thinking, they are only arranging a feast for the tiger. The state’s survival hinges on evolving a rational response to the tribal onslaught. All this may invite a comment that what has been offered is a wish list and not a practical way to salvation. This will not be wholly true because no situation is ever beyond correction if people take matters into their hands. Pakistan can survive if there are enough people around who decide to ensure that it does survive.

The future divide

By Ayesha Siddiqa

SOMEONE once asked his friend what he would do if a tiger entered his room. The friend replied that whatever had to be done would be done by the tiger, so why ask him.

This joke fits in well with the current state of US-Pakistan relations. The media was first excited by Gen Kayani’s statement about the army not tolerating American intrusions into Pakistan’s territory and then by President Zardari’s visit to the UK and his forthcoming one to the US.

There are many who believe that Islamabad’s forthright reaction to the US attacks on the tribal areas will stop the incursions. The question is that will these statements and visits have any effect? And will it end the war?

The answer is a simple no. Washington will not be impressed by Islamabad’s reaction for the following reasons.

First, US policymakers know that given Islamabad’s dependence on Washington there is

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nothing much it can do other than issue statements. The few demonstrations in Peshawar or other parts of the country constitute minimal cost which is not to be borne by the US but by the new government in Pakistan. Other than this, there is no evidence of any intense reaction.

The Pakistani government is begging for more weapon systems such as the upgraded F-16s, and there is not even any boycott of symbols of the American economy including well-known eateries. The queues for American visas have not diminished either.

Second, the American government knows that Pakistan’s so-called liberal elite and many among the Pakistani expatriate community would be happy with the removal of the Taliban or other militants. If the Pakistan Army can’t do it then let the US forces achieve the objective. Moreover, eliminating this threat would fundamentally readjust the military’s power vis-à-vis the civilian establishment because it would essentially mean roping in the intelligence agencies as well. This means that Pakistani society is divided and will not be able to pose an extensive threat to American attacks.

Third, Pakistan’s poor are so depressed by their poverty that despite their unhappiness with the attacks there is nothing much they would be able to do that would cost the US heavily.

Finally, considering that Washington has played a significant role in restoring democracy in Pakistan, the new government will not do anything excessive to counter the American position. The NRO is owed to American assistance. Therefore, it took Mr Zardari quite a while to issue a statement condemning the attacks.

From Washington’s perspective, it is simply protecting American security interests. Even if the Americans are told that they were responsible for creating the threat of militancy, this harping on the origins of the threat would not solve matters from their standpoint. The American-cum-Pakistani liberal point of view is that since negotiations will strengthen the militants, who use peace as an opportunity to demand the implementation of the Sharia, war is the only way to contain matters.

The American war, however, will further weaken Pakistan because it will clearly divide state forces and society. There is a division within the establishment regarding the threat and how it must be handled. Resultantly, we are now caught in a quandary regarding the future of the threat. Should we handle it ourselves or let the American forces do so for us?

Washington had been threatening Islamabad with direct intervention but was being pushed back up until now with the argument that such an action would destabilise Pakistan. Having helped remove Pervez Musharraf, who had lost credibility internally, Washington now believes it can conduct a military operation directly, leaving the political government to bear the cost. After all, there is hardly any evidence of a direct cost to American security in launching a military operation.

Having returned to democracy after nine years, society will remain divided on the issue of pushing the elected government to take serious measures to stop Washington. The calculation is that patronage politics will work quite well to minimise the reaction. People will be too concerned about putting food on their tables than doing anything serious to stop American action. So, Gordon Brown can happily put the responsibility in the lap of both Afghanistan and Pakistan whose leaders are still too weak to sort out the problem.

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Recently, a senior Pakistani bureaucrat told me the good news that Pakistan was now moving towards a stable future. His assessment was that a decision had been made by the country’s ruling elite that Pakistan has to be stabilised through the partial restoration of democracy and the judiciary and the elimination of militants and extremists.

Such a calculation is linked to another assessment that the more capable upper middle and middle classes of the country want a liberal social system that would be a complete departure from the one introduced by Gen Ziaul Haq. Such an assessment perceives the middle class as being liberal and progressive.

However, this in itself is an erroneous calculation that does not consider the fact that we all tend to forget about a large proportion of the middle class that is highly conservative in its world view. The middle class in Pakistan is not confined to graduates who have qualified from abroad or those working in the NGO sector or making their millions working as consultants for multilateral aid donors. It also comprises the trader-merchant class and similar groups that show a very conservative mindset.

What does one make of the numerous affluent shopkeepers in Islamabad and other cities and towns who fund jihad in the quest for spiritual forgiveness or those who fund militants and madressahs because, according to them, orthodox Islam is the only way to negotiate power in a politically stagnant society?

These people might not jeopardise their interests in the short term as they continue to put faith in militancy and religious extremism. But it does mean that the threat of militancy is not likely to dissipate in the medium to long term and that what we will get is a more divided society. There are those who support American action or keep silent and others turn more adamant in their dislike of the US and the West in general.

In short, Washington’s direct intervention is likely to prolong the conflict and deepen its roots in Pakistani state and society. There is enough poverty and underdevelopment in this country to provide fresh recruits for future jihad. Tolerance, of course, would be one of the primary casualties of military action. This is a conflict that might not end with dialogue or war. It is difficult to turn back the clock.

The writer is an independent strategic and political analyst.

ayesha.ibd@gmail.com

DAWN-19th Sept. 2008

The fruit of hypocrisy

By Joseph Stiglitz

HOUSES of cards, chickens coming home to roost — pick your cliche. The new low in the financial crisis, which has prompted comparisons with the 1929 Wall Street crash, is the fruit

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of a pattern of dishonesty on the part of financial institutions, and incompetence on the part of policymakers.

We had become accustomed to the hypocrisy. The banks reject any suggestion they should face regulation, rebuff any move towards anti-trust measures — yet when trouble strikes, all of a sudden they demand state intervention: they must be bailed out; they are too big, too important to be allowed to fail.

Eventually, however, we were always going to learn how big the safety net was. And a sign of the limits of the US Federal Reserve and treasury’s willingness to rescue comes with the collapse of the investment bank Lehman Brothers, one of the most famous Wall Street names.

The big question always centres on systemic risk: to what extent does the collapse of an institution imperil the financial system as a whole? Wall Street has always been quick to overstate systemic risk — take, for example, the 1994 Mexican financial crisis — but loath to allow examination of their own dealings. Last week the US treasury secretary, Henry Paulson, judged there was sufficient systemic risk to warrant a government rescue of mortgage giants Fannie Mae and Freddie Mac; but there was not sufficient systemic risk seen in Lehman.

The present financial crisis springs from a catastrophic collapse in confidence. The banks were laying huge bets with each other over loans and assets. Complex transactions were designed to move risk and disguise the sliding value of assets. In this game there are winners and losers. And it’s not a zero-sum game, it’s a negative-sum game: as people wake up to the smoke and mirrors in the financial system, as people grow averse to risk, losses occur; the market as a whole plummets and everyone loses.

Financial markets hinge on trust, and that trust has eroded. Lehman’s collapse marks at the very least a powerful symbol of a new low in confidence, and the reverberations will continue.

The crisis in trust extends beyond banks. In the global context, there is dwindling confidence in US policymakers. At July’s G8 meeting in Hokkaido the US delivered assurances that things were turning around at last. The weeks since have done nothing but confirm any global mistrust of government experts.

How seriously, then, should we take comparisons with the crash of 1929? Most economists believe we have the monetary and fiscal instruments and understanding to avoid collapse on that scale. And yet the IMF and the US treasury, together with central banks and finance ministers from many other countries, are capable of supporting the sort of “rescue” policies that led Indonesia to economic disaster in 1998.

Moreover, it is difficult to have faith in the policy wherewithal of a government that oversaw the utter mismanagement of the war in Iraq and the response to Hurricane Katrina. If any administration can turn this crisis into another depression, it is the Bush administration.

America’s financial system failed in its two crucial responsibilities: managing risk and allocating capital. The industry as a whole has not been doing what it should be doing — for instance creating products that help Americans manage critical risks, such as staying in their

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homes when interest rates rise or house prices fall — and it must now face change in its regulatory structures. Regrettably, many of the worst elements of the US financial system — toxic mortgages and the practices that led to them — were exported to the rest of the world.

It was all done in the name of innovation, and any regulatory initiative was fought away with claims that it would suppress that innovation. They were innovating, all right, but not in ways that made the economy stronger. Some of America’s best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system. Unfortunately, they were far too successful, and we are all — homeowners, workers, investors, taxpayers — paying the price.

The writer is recipient of the 2001 Nobel prize in economics.

— The Guardian, London

Gloomy About GlobalizationBy Robert Skidelsky

Making Globalization Workby Joseph E. StiglitzNorton, 358 pp., $26.95; $15.95 (paper)

1.

Making Globalization Work is the third of Joseph Stiglitz's popular, and populist, books.[1] Like Jeffrey Sachs, Stiglitz is an economist turned preacher, one of a new breed of secular evangelists produced by the fall of communism. Stiglitz wants to stop rich countries from exploiting poor countries without damaging the springs of wealth-creation. In that sense he is a classic social democrat. His missionary fervor, though, is very American. "Saving the Planet," one of this new book's chapter headings, could have been its title.

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Stiglitz is in favor of globalization—which he defines as "the closer economic integration of the countries of the world." He criticizes the ways it has been done. The "rules of the game," he writes, have been largely set by US corporate interests. Trade agreements have made the poorest worse off and condemned thousands to death through AIDS. Multinational corporations have stripped poor countries of their natural resources and left environmental devastation. Western banks have burdened poor countries with unsustainable debt.

Much of this is well said. Although it is not new, it bears repeating. But the main problem at present is not how to make globalization fairer for poor countries. It is how to make it less volatile; and to remove the threat it poses for poor and middle-income people in rich countries—those voters who have the power to derail it. Anti-globalization sentiment is a rich-country phenomenon. It is rather bizarre, therefore, to write a book about making globalization work that pays so little attention to the concerns of people in rich countries.

This is the more regrettable because Stiglitz's technical work, for which he got a Nobel Prize in economics, is about market failures typical of developed economies. The "Shapiro-Stiglitz" model explains why wages cannot be sufficiently flexible to maintain continuous full employment—an insight that could have been profitably applied to the effects of low-wage competition from East Asia. But, as in his other writings on globalization, Stiglitz has been primarily influenced by his experience as chief economist of the World Bank in the 1990s. This convinced him that Washington-inspired policies to promote economic development in poor countries were, in fact, hindering it. He was particularly outraged by the response of the International Monetary Fund during the East Asian meltdown in 1997–1998, which, he said, through its poorly conceived bailout efforts, turned slowdowns into recessions, and recessions into depressions. His public criticisms are said to have led to his removal from the World Bank in 2000 at the behest of then US Treasury Secretary Lawrence Summers. This book expands on his earlier criticism of Western development policies and proposes social-democratic alternatives.

2.

In Stiglitz's view, postwar trade regimes—GATT, WTO, NAFTA—have been heavily weighted in favor of the rich countries—by which he means primarily the United States, Europe, and Japan. These countries have used their greater knowledge and economic power to out-bargain poor countries. The rich countries have forced liberalization of trade—first in

37

industrial goods, then in skilled services—on poor countries, while retaining their own agricultural subsidies, and non-tariff barriers (in the form of environmental standards) that punish poor-country exporters. There is no lack of evidence for these claims.

Stiglitz proposes a new principle for international trade agreements: reciprocity among equals, but differentiation between countries in different stages of development. Rich countries, he argues, should open up their markets to poor ones without demanding reciprocal access to poor countries and without imposing their own labor or environmental standards on those countries. Poor countries should be allowed to keep tariffs. Rich countries, whether in Europe or North America, should phase out agricultural subsidies. They should encourage the immigration of unskilled labor. They should refrain from making bilateral trade agreements, which allow special interests to operate in the dark. True enough, he concedes, all this might lead to job losses in rich countries, but these should be compensated by "better adjustment assistance, stronger safety nets, and better macro-economic management" as well as "more investment in technology and education." In view of the political obstacles to such a compensatory program, this is a remarkably cavalier treatment of the biggest worry facing rich-country workers, to which I shall return.

Stiglitz vigorously attacks TRIPs—"trade-related aspects of intellectual property rights." TRIPs, he argues, have "imposed on the entire world the dominant intellectual property regime in the United States and Europe, as it is today." New drugs could save millions of lives in poor countries, but they are unaffordable because they are protected by patents that allow the drug companies to charge monopoly prices for a period of twenty years or more. By including patent protection in the World Trade Organization, he writes, American and European negotiators signed a "death warrant for thousands of people in the poorest countries of the world." Pharmaceutical companies should be forced to sell life-preserving drugs to poor countries at near cost—or face compulsory licensing of generic drugs that can be produced by, and traded between, developing countries. Stiglitz also wants to give poor countries reverse protection against what he calls drug companies' "bio-piracy"—exploitation of the traditional plant-based medicines of poor countries without paying for them.

Stiglitz raises the interesting question of whether, or how much, patent protection is needed as a spur to innovation, and in what fields. There is a case for arguing that such protection rewards trivial innovations, and slows down more fundamental ones by erecting barriers to entry into the

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market. It is also true that AIDS has shrunk life expectancy in southern African countries like Botswana, Kenya, Zimbabwe, Malawi, and South Africa. However, Stiglitz is wrong to single out TRIPs as the main obstacle to the use of antiretroviral drugs. As he recognizes, Brazil, another AIDS-ravaged country, simply disregarded the TRIPs regime and started manufacturing antiretroviral drugs on its own. In South Africa, by contrast, Health Minister Manto Tshabalala-Msimang denounced the drug nevirapine—used to prevent the transmission of HIV from mother to child—as "poison" to South Africa's women.[2]

Stiglitz claims that rich countries also rob the poor of their natural resources. Resource exploitation is the quickest way for a country to grow, provided the resources aren't stolen. However, natural resources are exhaustible, so unless an economy expands beyond its natural resource base, its capital runs down even as its income grows. Governments can mitigate this outcome by various technical devices such as the establishment of "sovereign wealth funds" that "save" part of the resources for future generations. But such remedies, Stiglitz argues, are made more difficult because multinational companies combine with corrupt domestic dictators to rob the populations of resource-rich countries of the wealth that could be theirs.

The cluster of remedies Stiglitz proposes—many of them familiar—are designed to ensure that poor countries with abundant natural resources get "full value" for the resources extracted. He advocates, among other reforms, "green" accounting methods that allow for depletion and environmental "externalities" (such as pollution of the air and water), full disclosure of royalty payments, and certification of origin to prevent trade in resources like diamonds from Sierra Leone from being used to finance violent domestic conflicts. Foreign aid to poor countries should be reduced by the amount of the internal "theft" of resources by governments or foreign corporations. These measures recognize the importance of changing the incentives of home governments in their dealings with multinational corporations. Stiglitz ignores, however, the problem of the incentives faced by such governments in dealing with their own populations. What method of choosing rulers minimizes the tendency to corruption?

Stiglitz's preferred mechanism for slowing down CO2 emissions is a carbon tax. All countries should impose a tax on carbon emissions at rates reflecting the emissions they generate. The tax would be set high enough to yield the reductions envisaged by the Kyoto agreement of 1997, without having to set national targets. This is sensible enough,

39

given the premise that climate change is mainly the result of CO2 emissions.

The chapter on debt is the best in the book. Stiglitz writes:

Developing countries borrow too much—or are lent too much—and in ways which force them to bear most or all of the risk of subsequent increases in interest rates, fluctuations in the exchange rate, or decreases in income.

As a result developing countries are often burdened with debt they can't service. Stiglitz's solution is in two parts: these countries "should borrow less—much less—than they have in the past"; and the world has to agree on an "orderly way of restructuring and reducing debt."

Stiglitz's approach to debt reform has become mainstream wisdom, though action lags some way behind. There is widespread agreement that assistance to poor countries should mainly be in the form of grants, not loans, since loans are unlikely to be repaid; that highly indebted poor countries should borrow very conservatively in their own currencies; that taxes and restrictions may need to be placed on the short-term capital flows by which foreign investors seek quick returns and may equally quickly pull out their money. As of July 2005, twenty-eight highly indebted poor countries had been given $56 billion in debt relief. At Gleneagles in June 2005, the G8 agreed to offer 100 percent relief for the poorest eighteen countries, fourteen in Africa.

There is increasing agreement that countries should not be made to repay "odious debt"—debt incurred by previously corrupt or repressive rulers which generally went straight into their bank accounts—and growing support for debt restructuring by means of a "super Chapter 11," or international bankruptcy code. What rightly gives conservatives pause is the new international bureaucracies required to administer these rules. Stiglitz proposes the establishment of an "International Credit Court" to decide how much "odious debt" countries need to repay as well as an International Bankruptcy Agency to restructure sovereign debt. For someone so alert to the possibility that producers will capture governmental institutions, Stiglitz is surprisingly optimistic about the potential of these bodies to right the wrongs he describes.

Stiglitz next turns to the global monetary system. Here the big problem has been accumulation of foreign exchange reserves—mainly dollars—by developing countries. Between 2001 and 2005, Japan, China, South Korea, Singapore, Malaysia, Thailand, Indonesia, and the Philippines

40

doubled their total reserves from $1 trillion to $2.3 trillion, with China as the superstar. China's per capita income is less than $1,500 a year, of which the equivalent of $799 is held in reserves. For developing countries as a whole, foreign exchange reserves rose from 6–8 percent of GDP during the 1970s and 1980s to 30 percent of GDP by 2004. By the end of 2006, developing country reserves were expected to reach $3.35 trillion.

Developing countries hold such high reserves of foreign exchange to insure themselves against destabilizing runs on their domestic currencies and to avoid the intrusive IMF supervision that befell the countries caught in the East Asian crisis of 1997–1998. East Asian countries also keep their own currencies undervalued to promote their countries' exports. Countries use their reserves to buy American Treasury bills. This enables the US to consume more than it produces, to the tune of nearly 7 percent of its GDP.

However, accumulation of reserves earns less interest income for central banks than alternative uses of such funds, and exposes them to large capital losses should the reserve currency depreciate against the home currency—as has been the case with the US dollar. Stiglitz rightly emphasizes the staggering "opportunity costs"—the alternative opportunities foregone—to developing countries of maintaining such high reserves. US Treasury bills earn only 1–2 percent as against the 10–15 percent that could be earned in high-return domestic projects.

To overcome these flaws, Stiglitz reworks a proposal put forward in the 1960s for the IMF to issue a new international reserve currency called "special drawing rights" (SDR), which he calls "global greenbacks." The creation of a special reserve currency, he argues, would make it less necessary for countries to accumulate dollar reserves, and "would do more to make globalization work than any other [initiative]." It is not obvious why this should be so. It may help the heavily indebted sub-Saharan African countries—though at the risk of making them SDR addicts—but it would do nothing to prevent excessive reserve accumulation by countries like China, Japan, and Russia.

Although Stiglitz also mentions with approval John Maynard Keynes's 1941 proposal to penalize excessive reserve accumulation, he does not follow it up. Keynes's proposed Clearing Bank would have required countries whose trading accounts were persistently in surplus to revalue their currencies as well as to pay interest on their "excess" deposits. The object of these measures was to give incentives to creditor countries to spend their surpluses, not hoard them.[3] This suggestion, which was

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never adopted, cuts more directly at the root of excessive reserve accumulation than simply expanding the volume of "global greenbacks."

The book concludes with hints of new solutions. Stiglitz wants to "minimize the damage" corporations do to society and "maximize their net contribution," and to this end he proposes five measures: strengthen corporate social responsibility, prevent monopolies or cartels, increase the scope of liability for environmental damage, make possible class action suits at a global level, and create WTO rules against unfair competition and bribery.

Beyond this, all global institutions need to be democratized. In rich countries (although not recently in the US) governments have intervened to redress inequality of power and wealth; but these same countries have unleashed an almost unregulated free market on the rest of the world. Stiglitz recognizes that poor government in poor countries is partly responsible for keeping them poor; but he also argues that corporate interests are largely to blame for poor government. By weakening the nation-state, they weaken the ability of governments to respond to the problems they create. What is needed, Stiglitz argues, is democratic global institutions analogous to those that exist in national jurisdictions. "Governance—problems in the way decisions get made in the international arena—are at the heart of the failures of globalization."

Stiglitz proposes ten procedural and ten substantive commandments to be the basis of a new "global contract." The first ten are aimed at increasing the representation and power of poor and small countries in global organizations. The next ten would enshrine a great many commitments by developed countries to developing ones, including support for democracy:

I remain hopeful that the world will sooner or later—and hopefully sooner—turn to the task of creating a fairer, pro-development trade regime. Demands for this by those in the developing world will only grow louder with time.The conscience and self-interest of the developed world will eventually respond.

3.

What view is one to take of these arguments? I have pointed out some of Stiglitz's useful analyses and proposals; the mystery to me is how such a fine economist could write such an unsatisfying book. Its main flaws seem to me to be the following:

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First, Stiglitz greatly underestimates the extent to which globalization, imperfect as it is, is helping people in poor countries. Already, it has lifted hundreds of millions of people out of poverty. Stiglitz finds a world "replete with failures." Typical is his remark that although 250 million Indians have improved their standard of living "immensely" in the last two decades, 800 million haven't—a good example of his failure to give progress its due. Or: "The sad truth...is that outside of China, poverty in the developing world has increased over the past two decades." The World Bank puts it differently: "By the frugal $1 a day standard we find that there were 1.1 billion poor in 2001—about 400m fewer than 20 years previously." Stiglitz believes that the increase in poverty outside China qualifies the progress made in poverty reduction. But 400 million fewer people living in extreme poverty is a happy, not a sad, truth, whether it happens in China or anywhere else.

He also underplays the gain achieved outside China. It is true that the number of very poor outside China rose slightly. Stiglitz cites the figure of 877 million in the developing world in 2001 living on less than $1 a day, an increase of 3 percent over 1981. What he fails to mention is that the total population of these countries increased by 20 percent over this period, so that while there is a slightly higher number of very poor people in the developing world today, they represent, proportionally, a decline from 32 percent to 21 percent of the overall population.

Stiglitz also ignores the fact that the number of those living on between $1 and $2 a day rose about as much as the number of people living on under $1 a day fell. Nor does he mention the World Bank estimate that if global poverty continues to fall at the rate it did between 1981 and 2001, the reduction will almost certainly be sufficient to meet the UN Millennium Development Goal of halving the proportion of people living on less than $1 a day by 2015.[4] A different observer might see the glass half full rather than half empty.

Where Stiglitz accepts that progress has happened, he denies that it can be attributed to the current way globalization is occurring. His method is to show that countries that rejected the free-market mantra known as the "Washington consensus" did better than countries that followed it. For example, East Asian governments, such as Japan, Taiwan, and South Korea, invested in industries with high growth potential, encouraged their populations to save, limited imports that undercut their agriculture and manufacturing, and (in the case of China and India) restricted short-term capital flows.

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Such interventions may or may not have contributed to their "miracles." But surely much more important were the acts of domestic liberalization of the economy: for China the decollectivization of agriculture and introduction of the "household responsibility system" in the late 1970s; for India, the deregulation of much production, investment, and foreign trade in the 1990s. Above all, the "export-led growth" of East Asia depended crucially on the opening up of foreign, especially Western, markets through bilateral deals and successive rounds of tariff reductions.

Globalization, however imperfect, does often work for the poor. Despite its universal message, Stiglitz's book is mainly about making it work for sub-Saharan Africa, where the problem is in large part endemically bad government. As we have recently seen, even "successful" African states like Kenya and Nigeria can collapse into chaos at a moment's notice.

Second, Stiglitz underestimates the extent to which poor countries are responsible for sustaining their own poverty. He shirks the key question: Why, over time, did some countries get rich and others stay poor? His implicit, quasi-Marxist answer is that it was because the rich exploited the poor. An alternative, and to my mind superior, approach, pioneered by Douglass North, is that countries now rich developed institutions superior to those of countries that stayed poor, and that the gap in economic development between different parts of the world had already emerged by the eighteenth century.[5]

As North tells it, economic growth requires the equalization of the private and social rate of return—entrepreneurs have to be able to receive the benefit which their enterprise confers on society if enterprise is to take place. This requires governments to create and maintain private-property rights. The establishment of a robust private-property regime was the outstanding institutional contribution to the West's economic development.

Stiglitz wants to do the reverse for poor countries. The emphasis of his book is on the damage multinational corporations do, and he wants them to reduce this damage by forcing them to pay for it, that is, by limiting their property rights in poor countries. This is a defensible position if one believes that the social value of entrepreneurship has declined. This may be the case in already developed countries, though if one looks at the revolutionary effects wrought by the development of cell phones and Internet corporations like Google, one may doubt it. But the one place it is surely not true is in the developing world, which requires more entrepreneurship, not less. Although Stiglitz recognizes the importance

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of good domestic institutions for economic success, the focus of his book is too resolutely on the external sources of failure. This fuels the natural tendency of the unsuccessful to claim they are victims of the successful.

Third, Stiglitz ignores the harm globalization does to developed countries. This is, above all, a threat to the jobs and wages of their workers, so far largely to the unskilled, but spreading to the skilled as well. Average real wages in America have been stagnant for twenty or more years, even as the economy has boomed. Stiglitz recognizes that globalization is pulling up unskilled wages in China and depressing them in the US and that the depressing effect is faster than the pulling-up effect. He rejects protectionism, but, as we have seen, all he can offer is continued retraining and improvements in skills to fit American workers for life in a competitive global economy. But this is an inadequate answer. Practically all kinds of employment that do not require physical presence can now be offshored. According to Alan Blinder, this amounts to 22–29 percent of all US jobs.[6] There can be too much competition.

Fourth, Stiglitz underestimates the danger of financial instability. We are currently living through a graphic demonstration of the volatility of an economic system dominated by financial markets. Globalization both increases the likelihood of financial crises and reduces the ability of governments to deal with them. Following the East Asian crisis of 1997– 1998 and the Argentinian default of 2002, it became conventional to say that financial shocks were confined to developing countries with their "immature" financial markets, but that in the West we had discovered the secret of markets that don't crash.

This so-called wisdom is now being turned on its head. Lawrence Summers is one of a growing number of economists who believe that the sub-prime credit crisis is more likely than not to drag America—and much of the rest of the world, which depends on American consumption—into recession.[7] Financial instability has a good claim to be the chief flaw in the system of global capitalism, and far more potentially destructive of it than most of the dangers highlighted in Stiglitz's book.

Finally, Stiglitz ignores the malign nexus between global current account imbalances—as exemplified by the huge American trade deficit—free capital movements, and the loss of American jobs. It is not just a matter of free trade exposing American companies to the healthy blast of competition from lower-paid labor in East Asia. It is the fact that today's exchange-rate arrangements allow huge current account imbalances to persist. This creates a problem of "super-competitiveness"—competition

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driven by wages kept artificially low, as in China today—by an undervalued exchange rate.

This could not have happened in the past. Under the classic gold-standard regime, a deficit country like the United States would have been forced to curtail its living standard in order to regain competitiveness. In the present nonsystem, it can live for years beyond its means, at the sacrifice of its competitiveness. This is because the dollar is the world's main reserve currency. America is in the happy position of being able to write IOUs for purchases of goods and services that destroy American jobs.

The system suits both sides. Americans get to consume hundreds of millions of dollars more a year than they earn, while East Asian workers supply them with $700 billion worth of goods and services they would otherwise have produced themselves. Since this irrational arrangement is the only means human wisdom has so far devised to avoid a global depression, it is understandable that there should be a conspiracy of policymakers to keep it going. But it cannot go on and on.

First, there is the same flaw that brought down the Bretton Woods system in 1971, namely that the growing indebtedness of the reserve currency country causes the holders of that currency to lose confidence in it. This has started to happen. Since 2000 the dollar has depreciated by 70 percent against a trade-weighted basket of currencies. "Managed" depreciation could easily become a collapse.

Second, there is bound to be a protectionist backlash as soon as Ross Perot's "sucking sound" of outsourcing becomes too deafening. If trade is to be left safely free, there has to be an agreement on exchange-rate rules between the dominant powers, including rules about capital movements. If that agreement is absent, it will not be allowed to stay free. The lack of attention to these interlinked problems in a book on how to make globalization work is its most palpable flaw.

It is hard to say how far Stiglitz was diverted from this line of inquiry by his theoretical commitments, since most of the theoretical action takes place off-page. Stiglitz's Nobel Prize was for work on the economics of risk and information. Markets subject to "asymmetric information"—a situation in which information is unequally distributed between parties to a transaction—and other imperfections do not function as perfect competition models suggest, and need to be "corrected."

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However valid in its own terms, this is the perspective of a microeconomist, whereas the main problems of globalization, I suggest, lie in its uncontrolled macroeconomy. I find more congenial, and more relevant, the relatively permissive attitude with regard to the so-called market failures displayed by the great twentieth-century economists Keynes and Friedrich Hayek and their greater concern with the problem of securing macroeconomic stability, differently though they set about it. They understood that uncertainty and the disappointment of expectation were inherent, not contingent, features of economic life. In Keynes's economics, a loss of confidence, whatever its causes, leads to an increase in "liquidity preference," or flight from investment into money. As Keynes put it, the price of parting with money goes up. This is happening today. The credit crunch in the United States and the excess accumulation of reserves in East Asia are signs of an increase in liquidity preference. The need is not to search for new and ingenious ways to make markets marginally more efficient, but to provide a macroeconomic environment that reduces the chances of the financial shocks that cause the flight into money.

A year ago, few outside a small circle of experts had even heard of the collateralized debt instruments (CDIs) or the structured investment vehicles (SIVs) whose defaults have recently been dragging down the American economy. It is a perfect example of how a financial storm can suddenly come up out of nowhere, destroying all those sophisticated, pseudo-scientific techniques of "averaging" risk by which rational people try to convince themselves that the world is more predictable than it can ever be.

My final criticism is that Stiglitz's book is carelessly written. Stiglitz was—and perhaps still is—an outstanding economic theorist. But he has been producing big, loosely argued books. The laudable aim behind them is to inform a broader audience about economic policies that could make the world a better place, certainly with better lives for the poor, and such advocacy has its place in moving people to action. But he lacks the eloquence, urgency, and passion of the preacher, while he has too often abandoned the rigor of the scientist. In my view, he has not yet found a style suitable to the popular exposition of his economic ideas.

The reader should be aware of my own biases. I am so allergic to the muddling of analysis and preaching that I find it hard to do a book like this justice. So let me say that it has many good qualities, and much forceful argument. And there is a certain moral grandeur in someone who seeks to cure the world of "its sick, its lame, and its halt," however halting his own prose.[8]

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Notes

[1] The two previous ones were Globalization and Its Discontents (Norton, 2002) reviewed in these pages by Benjamin M. Friedman, August 15, 2002; and The Roaring Nineties (Norton, 2003), reviewed in these pages by William D. Nordhaus, January 15, 2004.

[2] Stephen Lewis, UN Special Envoy for HIV/AIDS in Africa, said on August 18, 2006, that "South Africa is the unkindest cut of all. It is the only country in Africa...whose government is still obtuse, dilatory and negligent about rolling out treatment. It is the only country in Africa whose government continues to propound theories more worthy of a lunatic fringe than of a concerned and compassionate state." See www.kaisernetwork.org/health_cast/ uploaded_files/Lewis%20Closing%20 Speech.pdf.

[3] For a stimulating contemporary version of Keynes's ideas on interna-tional financial architecture, see Paul Davidson, John Maynard Keynes (Palgrave Macmillan, 2007).

[4] For the best discussion of these issues, see Shaohua Chen and Martin Ravallion, "How Have the World's Poorest Fared Since the Early 1980s?," The World Bank Research Observer, Vol. 19, No. 2 (Fall 2004), pp. 141–169.

[5] See Douglass C. North and Robert P. Thomas, The Rise of the Western World: A New Economic History (Cambridge University Press, 1973).

[6] Alan S. Blinder, "How Many US Jobs Might be Offshorable?," Working Paper No. 142 (March 2007), Center for Economic Policy Studies, Princeton University. Vladimir Masch has produced a plan for "compensated free trade" to "control globalization, save American jobs, prevent trade wars, stop predatory trading, and impose financial discipline on our Micawberish country." See "A Radical Plan to Man-age Globalization," www.businessweek .com, February 14, 2007.

[7] Lawrence Summers, "Wake Up to the Dangers of a Deepening Crisis," Financial Times, November 25, 2007. Stiglitz's views on the current US crisis can be found in "How to Stop the Downturn," Op-Ed in The New York Times, January 23, 2008.

[8] I would like to thank Paul Davidson, Emily Farchy, Vijay Joshi, and Vladimir Masch for their helpful comments on my first draft.

FROM NEW YORK REVIEW OF BOOKS - VOLUME 55, NUMBER 6 · APRIL 17, 2008

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"neoliberalism" -- which advocates the dismantling of the welfare state, the abolition of redistributive social programs for the poor, and the elimination of governmental regulations on corporations.

In a recent issue of the New York Times (December 5, 2006), Professor Thomas B. Edsall of Columbia University's Graduate School of Journalism astutely characterized this reactionary process of neoliberal politics within the United States in these terms: "For a quarter-century, the Republican temper -- its reckless drive to jettison the social safety net; its support of violence in law enforcement and national defense; its advocacy of regressive taxation, environmental hazard and probusiness deregulation; its 'remoralizing' of the pursuit of wealth

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The World's Richest PeopleEdited by Luisa Kroll and Allison Fass 03.08.07, 6:00 PM ET

It has been a busy year for Forbes' team of fortune hunters. Strong equity markets combined with rising real estate values and commodity prices pushed up fortunes from Mumbai to Madrid. Forbes pinned down a record 946 billionaires. There were 178 newcomers, including 19 Russians, 14 Indians, 13 Chinese and 10 Spaniards, as well as the first billionaires from Cyprus, Oman, Romania and Serbia.

Ingenuity, not industry, is the common characteristic; these folks made money in everything from media and real estate to coffee, dumplings and ethanol. Two-thirds of last year's billionaires are richer. Only 17% are poorer, including 32 who fell below the billion-dollar mark. The billionaires' combined net worth climbed by $900 billion to $3.5 trillion. That equates to $3.6 billion apiece.

The average billionaire is 62 years old, two years younger than in 2005. This year's new billionaires are seven years younger than that. Of list members' fortunes, 60% made theirs from scratch.

Within the ranks are simmering rivalries. Microsoft founder Bill Gates, the world's richest man for 13 years, and his pal Warren Buffett, who holds the No. 2 spot despite enormous charitable donations, are quickly losing ground to Mexico's most-monied man, Carlos Slim Helú. Helú's net worth is up an astonishing $19 billion this year--the single biggest one-year gain in a decade--and is now just $7 billion shy of Gates and $3 billion less than Buffett. In Europe, Russia's mostly young, self-made tycoons are catching up to Germany's often-aging heirs and heiresses. Russia now has 53 billionaires (2 shy of Germany's total), but they are worth $282 billion ($37 billion more than Germany's richest).

MOSCOW, April 19: The fortunes of Russia’s 100 richest people leapt by over a third in 2006, growing nearly six times faster than the economy as a whole, the Russian edition of Forbes magazine

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said on Thursday.

The total wealth of the “golden hundred” hit $337 billion (248 billion euros) in 2006, 36 per cent higher than in 2005, according to Forbes' annual ranking.

Russia's gross domestic product grew by 6.7 per cent in 2006. Chelsea club owner Roman Abramovich, a fixture in British tabloids, again took the top spot in the ranking with a fortune of $19.2bn. Natural resources barons filled the other top spots: aluminium magnate Oleg Deripaska took second place with $16.8bn, while steel magnate Vladimir Lisin came in third with 15.1bn.

The state's tightening grip on the oil and gas sectors made itself felt, as only 18 of the 100 richest were in those sectors, down from 41 in 2005. Russia's billionaires also continue to be among the world's youngest: the average age on the list was 45, compared to 62 in the magazine's global ranking.—AFP

After a 20-year reign, Japan is no longer Asia's top spot for billionaires: India has 36, worth a total of $191 billion, followed by Japan with 24, worth a combined $64 billion.

India's rich are also marching toward the top of our rankings. Brothers Mukesh and Anil Ambani, who split up their family’s conglomerate in 2005, join Lakshmi Mittal, who heads the world's biggest steel company, Arcelor Mittal, among the world’s 20 wealthiest. India now has three in the upper echelons, second only to the U.S.

But even in such a prosperous year, 44 people dropped off the list for various reasons.

All our numbers are based on a snapshot of balance sheets taken on Feb. 9, the day we locked in stock prices and exchange rates. So the five executives who took their Fortress Investment Group public at 9:30 a.m. on that morning made the cut. Also on the list is Ernest Gallo, founder of E.&J. Gallo Winery, who died on March 6. But our numbers don't reflect the volatility that shook the markets three weeks later. Between Feb. 9 and March 2 the world's stock markets, as measured by the Morgan Stanley All Country World Local Index, fell by 3.7%. Some fortunes (those based on private accumulations of real estate, for example) didn’t feel a blip.

Published on Friday, December 22, 2006 by OneWorld

Richest 2 Percent Own Half the World's Wealth by Aaron Glantz

The richest 2 percent of adults in the world own more than half the world's wealth, according to a new study released by the Helsinki-based World Institute for Development Economics Research of the United Nations University.

The study's authors say their work is the most comprehensive study of personal 50

wealth ever undertaken. They found the richest 1 percent of adults owned 40 percent of global assets in the year 2000, and that the richest 10 percent of adults accounted for 85 percent of the world's total.

In contrast, the assets of half of the world's adult population account for barely 1 percent of global wealth.

"It reflects the extreme nature of inequality around the world," one of the study's authors, New York University Professor Edward Wolff, told OneWorld. "Yes, we are richer than Africa and Latin America and most of Asia, but how much richer is what hadn't really been established until our study came out," Wolff added.

According to the report, the average American's wealth amounted to $144,000 in the year 2000, more than 100 times higher than the average Indian or Indonesian, whose assets totaled $1,100 and $1,400, respectively.

The study defined wealth as physical and financial assets--like personal savings and home, land, and stock ownership--less debts.

Besides the United States, only Canada, Western Europe, Japan, and Israel showed average personal wealth of more than $50,000.

Pakistan, Vietnam, Cambodia, many former Soviet Republics, and most of sub-Saharan Africa showed average personal wealth of under $2,000.

Conflict-ridden countries like Afghanistan, Iraq, and the Sudan did not report data.

"This is a reminder that most people do not live the way middle class Americans live," David Rauchman of the Washington, DC-based Center for Global Development told OneWorld. "That comes out of two centuries or more of history where North America and Europe have experienced steady and fairly rapid industrial development. Meanwhile, places like Asia and Africa haven't so much."

Rauchman said foreign aid programs and philanthropy would go part of the way toward closing the international wealth gap, but trade and immigration policies are also important.

"If we make it easier for clothing manufacturers and farmers in Bangladesh or Mali to ship their goods to the United States so Americans can buy them, that will help and it will be good for us too," he said. "Same thing for immigration. It's good for Mexico if Mexicans can come to the United States and send money home. If we make it easier for people to come and participate in our economy, it's actually good for economies in the rest of the world."

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But unfettered free trade tends to benefit the wealthy at the expense of the poor, says Anuradha Mittal of the California-based Oakland Institute, a think tank that specializes in social, economic, and environmental issues. She says the rise of free trade has increased the wealth gap, both internationally and inside many countries.

Mittal cites as an example the North American Free Trade Agreement (NAFTA) signed in 1992 by the United States, Canada, and Mexico. "Instead of Mexico being able to export its food to the United States, what's really happened is that U.S. corn exports to Mexico have tripled, pushing 2 million Mexican corn farmers out of business. And those are the very people who then migrate [to the United States]."

Those migrants then work for low wages inside the United States, Mittal argues, pushing wages for all workers down.

In addition, says Mittal, "when you talk about the ability to export you're talking about big plantations, which creates further inequities inside of countries. You're not going to be talking about [improving livelihoods for] small farmers in Mexico or Honduras or India."

One solution put forward by the authors of the United Nations University report is expanding access to microcredit--small loans given to poor people who are not able to get traditional lines of credit from regular banks. The loans, which are often used to help establish or improve small businesses, have proved to be quite safe, with many lenders experiencing repayment rates close to 100 percent.

This month, Bangladeshi economist Muhammad Yunus was awarded the Nobel Peace Prize for his pioneering microcredit program. Yunus shared the award with the Grameen Bank, which he founded 30 years ago. The bank gives small, unsecured loans to nearly 7 million impoverished Bangladeshis--almost all of whom are women.

Yunus started by lending 42 people a total of $27.

"The excitement that was created among the people by this action got me further involved in it," he said in his Nobel acceptance speech in Oslo. "If I could make so many people so happy with such a tiny amount of money, why shouldn't I do more of it? That's what I have been trying to do ever since."

"Grameen Bank gives collateral-free income-generating loans, housing loans, student loans, and micro-enterprise loans to poor families and offers a host of attractive savings, pension funds, and insurance products for its members," Yunus added.

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But despite its benefits, Mittal notes that microcredit alone is unlikely to put a significant dent in the international wealth gap.

"Research shows that more than 55 percent of borrowers after eight years of borrowing are still using their loans to buy food," she said. "So while microcredit is a good survival strategy, it is not a solution for development."

Copyright © 2006 OneWorld

Published on Wednesday, April 2, 2008 by TomDispatch.com

Empire or Humanity?What the Classroom Didn’t Teach Me About the American Empire

by Howard Zinn

With an occupying army waging war in Iraq and Afghanistan, with military bases and corporate bullying in every part of the world, there is hardly a question any more of the existence of an American Empire. Indeed, the once fervent denials have turned into a boastful, unashamed embrace of the idea.

However, the very idea that the United States was an empire did not occur to me until after I finished my work as a bombardier with the Eighth Air Force in the Second World War, and came home. Even as I began to have second thoughts about the purity of the “Good War,” even after being horrified by Hiroshima and Nagasaki, even after rethinking my own bombing of towns in Europe, I still did not put all that together in the context of an American “Empire.”I was conscious, like everyone, of the British Empire and the other imperial powers of Europe, but the United States was not seen in the same way. When, after the war, I went to college under the G.I. Bill of Rights and took courses in U.S. history, I usually found a chapter in the history texts called “The Age of Imperialism.” It invariably referred to the Spanish-American War of 1898 and the conquest of the Philippines that followed. It seemed that American imperialism lasted only a relatively few years. There was no overarching view of U.S. expansion that might lead to the idea of a more far-ranging empire — or period of “imperialism.”

I recall the classroom map (labeled “Western Expansion”) which presented the march across the continent as a natural, almost biological phenomenon. That huge acquisition of land called “The Louisiana Purchase” hinted at nothing but vacant land acquired. There was no sense that this territory had been occupied by hundreds of Indian tribes which would have to be annihilated or forced from their homes — what we now call “ethnic cleansing” — so that whites could settle the land, and later railroads could crisscross it, presaging “civilization” and its brutal discontents.

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Neither the discussions of “Jacksonian democracy” in history courses, nor the popular book by Arthur Schlesinger Jr., The Age of Jackson, told me about the “Trail of Tears,” the deadly forced march of “the five civilized tribes” westward from Georgia and Alabama across the Mississippi, leaving 4,000 dead in their wake. No treatment of the Civil War mentioned the Sand Creek massacre of hundreds of Indian villagers in Colorado just as “emancipation” was proclaimed for black people by Lincoln’s administration.

That classroom map also had a section to the south and west labeled “Mexican Cession.” This was a handy euphemism for the aggressive war against Mexico in 1846 in which the United States seized half of that country’s land, giving us California and the great Southwest. The term “Manifest Destiny,” used at that time, soon of course became more universal. On the eve of the Spanish-American War in 1898, the Washington Post saw beyond Cuba: “We are face to face with a strange destiny. The taste of Empire is in the mouth of the people even as the taste of blood in the jungle.”

The violent march across the continent, and even the invasion of Cuba, appeared to be within a natural sphere of U.S. interest. After all, hadn’t the Monroe Doctrine of 1823 declared the Western Hemisphere to be under our protection? But with hardly a pause after Cuba came the invasion of the Philippines, halfway around the world. The word “imperialism” now seemed a fitting one for U.S. actions. Indeed, that long, cruel war — treated quickly and superficially in the history books — gave rise to an Anti-Imperialist League, in which William James and Mark Twain were leading figures. But this was not something I learned in university either.

The “Sole Superpower” Comes into View

Reading outside the classroom, however, I began to fit the pieces of history into a larger mosaic. What at first had seemed like a purely passive foreign policy in the decade leading up to the First World War now appeared as a succession of violent interventions: the seizure of the Panama Canal zone from Colombia, a naval bombardment of the Mexican coast, the dispatch of the Marines to almost every country in Central America, occupying armies sent to Haiti and the Dominican Republic. As the much-decorated General Smedley Butler, who participated in many of those interventions, wrote later: “I was an errand boy for Wall Street.”

At the very time I was learning this history — the years after World War II — the United States was becoming not just another imperial power, but the world’s leading superpower. Determined to maintain and expand its monopoly on nuclear weapons, it was taking over remote islands in the Pacific, forcing the inhabitants to leave, and turning the islands into deadly playgrounds for more atomic tests.

In his memoir, No Place to Hide, Dr. David Bradley, who monitored radiation in those tests, described what was left behind as the testing teams went home: “[R]adioactivity, contamination, the wrecked island of Bikini and its sad-eyed patient exiles.” The tests in the Pacific were followed, over the years, by more tests in the deserts of Utah and Nevada, more than a thousand tests in all.

When the war in Korea began in 1950, I was still studying history as a graduate student at Columbia University. Nothing in my classes prepared me to understand American policy in Asia. But I was reading I. F. Stone’s Weekly. Stone was among the very few journalists who questioned the official justification for sending an army to Korea. It seemed clear to me then that it was not the invasion of South Korea by the North that prompted U.S. intervention, but the desire of the United States to have a firm foothold on the continent of Asia, especially now that the Communists were in power in China.

Years later, as the covert intervention in Vietnam grew into a massive and brutal military operation, the imperial designs of the United States became yet clearer to me. In 1967, I wrote a

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little book called Vietnam: The Logic of Withdrawal. By that time I was heavily involved in the movement against the war.

When I read the hundreds of pages of the Pentagon Papers entrusted to me by Daniel Ellsberg, what jumped out at me were the secret memos from the National Security Council. Explaining the U.S. interest in Southeast Asia, they spoke bluntly of the country’s motives as a quest for “tin, rubber, oil.”

Neither the desertions of soldiers in the Mexican War, nor the draft riots of the Civil War, not the anti-imperialist groups at the turn of the century, nor the strong opposition to World War I — indeed no antiwar movement in the history of the nation reached the scale of the opposition to the war in Vietnam. At least part of that opposition rested on an understanding that more than Vietnam was at stake, that the brutal war in that tiny country was part of a grander imperial design.

Various interventions following the U.S. defeat in Vietnam seemed to reflect the desperate need of the still-reigning superpower — even after the fall of its powerful rival, the Soviet Union — to establish its dominance everywhere. Hence the invasion of Grenada in 1982, the bombing assault on Panama in 1989, the first Gulf war of 1991. Was George Bush Sr. heartsick over Saddam Hussein’s seizure of Kuwait, or was he using that event as an opportunity to move U.S. power firmly into the coveted oil region of the Middle East? Given the history of the United States, given its obsession with Middle Eastern oil dating from Franklin Roosevelt’s 1945 deal with King Abdul Aziz of Saudi Arabia, and the CIA’s overthrow of the democratic Mossadeq government in Iran in 1953, it is not hard to decide that question.

Justifying Empire

The ruthless attacks of September 11th (as the official 9/11 Commission acknowledged) derived from fierce hatred of U.S. expansion in the Middle East and elsewhere. Even before that event, the Defense Department acknowledged, according to Chalmers Johnson’s book The Sorrows of Empire, the existence of more than 700 American military bases outside of the United States.

Since that date, with the initiation of a “war on terrorism,” many more bases have been established or expanded: in Kyrgyzstan, Afghanistan, the desert of Qatar, the Gulf of Oman, the Horn of Africa, and wherever else a compliant nation could be bribed or coerced.

When I was bombing cities in Germany, Hungary, Czechoslovakia, and France in the Second World War, the moral justification was so simple and clear as to be beyond discussion: We were saving the world from the evil of fascism. I was therefore startled to hear from a gunner on another crew — what we had in common was that we both read books — that he considered this “an imperialist war.” Both sides, he said, were motivated by ambitions of control and conquest. We argued without resolving the issue. Ironically, tragically, not long after our discussion, this fellow was shot down and killed on a mission.

In wars, there is always a difference between the motives of the soldiers and the motives of the political leaders who send them into battle. My motive, like that of so many, was innocent of imperial ambition. It was to help defeat fascism and create a more decent world, free of aggression, militarism, and racism.

The motive of the U.S. establishment, understood by the aerial gunner I knew, was of a different nature. It was described early in 1941 by Henry Luce, multi-millionaire owner of Time, Life, and Fortune magazines, as the coming of “The American Century.” The time had arrived, he said, for the United States “to exert upon the world the full impact of our influence, for such purposes as we see fit, and by such means as we see fit.”

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We can hardly ask for a more candid, blunter declaration of imperial design. It has been echoed in recent years by the intellectual handmaidens of the Bush administration, but with assurances that the motive of this “influence” is benign, that the “purposes” — whether in Luce’s formulation or more recent ones — are noble, that this is an “imperialism lite.” As George Bush said in his second inaugural address: “Spreading liberty around the world… is the calling of our time.” The New York Times called that speech “striking for its idealism.”

The American Empire has always been a bipartisan project — Democrats and Republicans have taken turns extending it, extolling it, justifying it. President Woodrow Wilson told graduates of the Naval Academy in 1914 (the year he bombarded Mexico) that the U.S. used “her navy and her army… as the instruments of civilization, not as the instruments of aggression.” And Bill Clinton, in 1992, told West Point graduates: “The values you learned here… will be able to spread throughout the country and throughout the world.”

For the people of the United States, and indeed for people all over the world, those claims sooner or later are revealed to be false. The rhetoric, often persuasive on first hearing, soon becomes overwhelmed by horrors that can no longer be concealed: the bloody corpses of Iraq, the torn limbs of American GIs, the millions of families driven from their homes — in the Middle East and in the Mississippi Delta.

Have not the justifications for empire, embedded in our culture, assaulting our good sense — that war is necessary for security, that expansion is fundamental to civilization — begun to lose their hold on our minds? Have we reached a point in history where we are ready to embrace a new way of living in the world, expanding not our military power, but our humanity?

Howard Zinn is the author of A People’s History of the United States and Voices of a People’s History of the United States, now being filmed for a major television documentary.

Published on Wednesday, April 2, 2008 by the Seattle Post-Intelligencer

Wall Street Journal: SEPTEMBER 18, 2008

Worst Crisis Since '30s, With No End Yet in Sight By JON HILSENRATH , SERENA NG and DAMIAN PALETTA

The financial crisis that began 13 months ago has entered a new, far more serious phase. Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem -- troubled subprime mortgages -- in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. There's also a growing sense of wariness about the health of trading partners.

The consequences for companies and chief executives who tarry -- hoping for better times in which to raise capital, sell assets or acknowledge losses -- are now clear and brutal, as falling share prices and fearful lenders send troubled companies into ever-deeper holes. This weekend, such a realization led John Thain to sell the century-old Merrill Lynch & Co. to Bank of America Corp. Each episode seems to bring government intervention that is more extensive and expensive than the previous one, and carries greater risk of unintended consequences.

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Expectations for a quick end to the crisis are fading fast. "I think it's going to last a lot longer than perhaps we would have anticipated," Anne Mulcahy, chief executive of Xerox Corp., said Wednesday.

"This has been the worst financial crisis since the Great Depression. There is no question about it," said Mark Gertler, a New York University economist who worked with fellow academic Ben Bernanke, now the Federal Reserve chairman, to explain how financial turmoil can infect the overall economy. "But at the same time we have the policy mechanisms in place fighting it, which is something we didn't have during the Great Depression."

Spreading Disease

The U.S. financial system resembles a patient in intensive care. The body is trying to fight off a disease that is spreading, and as it does so, the body convulses, settles for a time and then convulses again. The illness seems to be overwhelming the self-healing tendencies of markets. The doctors in charge are resorting to ever-more invasive treatment, and are now experimenting with remedies that have never before been applied. Fed Chairman Bernanke and Treasury Secretary Henry Paulson, walking into a hastily arranged meeting with congressional leaders Tuesday night to brief them on the government's unprecedented rescue of AIG, looked like exhausted surgeons delivering grim news to the family.

In the wake of this past week's market meltdown, WSJ's economics editor David Wessel looks at the shakeup and sees one of two outcomes: the crisis as catharsis or a drawn-out mess.

Fed and Treasury officials have identified the disease. It's called deleveraging, or the unwinding of debt. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can't pay back the loans, a problem that is exacerbated by the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.

At least three things need to happen to bring the deleveraging process to an end, and they're hard to do at once. Financial institutions and others need to fess up to their mistakes by selling or writing down the value of distressed assets they bought with borrowed money. They need to pay off debt. Finally, they need to rebuild their capital cushions, which have been eroded by losses on those distressed assets.

But many of the distressed assets are hard to value and there are few if any buyers. Deleveraging also feeds on itself in a way that can create a downward spiral: Trying to sell assets pushes down the assets' prices, which makes them harder to sell and leads firms to try to sell more assets. That, in turn, suppresses these firms' share prices and makes it harder for them to sell new shares to raise capital. Mr. Bernanke, as an academic, dubbed this self-feeding loop a "financial accelerator."

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"Many of the CEO types weren't willing...to take these losses, and say, 'I accept the fact that I'm selling these way below fundamental value,'" said Anil Kashyap, a University of Chicago Business School economics professor. "The ones that had the biggest exposure, they've all died."

Deleveraging started with securities tied to subprime mortgages, where defaults started rising rapidly in 2006. But the deleveraging process has now spread well beyond, to commercial real estate and auto loans to the short-term commitments on which investment banks rely to fund themselves. In the first quarter, financial-sector borrowing slowed to a 5.1% growth rate, about half of the average from 2002 to 2007. Household borrowing has slowed even more, to a 3.5% pace.

Not Enough

Goldman Sachs Group Inc. economist Jan Hatzius estimates that in the past year, financial institutions around the world have already written down $408 billion worth of assets and raised $367 billion worth of capital.

But that doesn't appear to be enough. Every time financial firms and investors suggest that they've written assets down enough and raised enough new capital, a new wave of selling triggers a reevaluation, propelling the crisis into new territory. Residential mortgage losses alone could hit $636 billion by 2012, Goldman estimates, triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 -- the equivalent of $250 billion in lost goods and services each year.

"This is a deleveraging like nothing we've ever seen before," said Robert Glauber, now a professor of Harvard's government and law schools who came to Washington in 1989 to help organize the savings and loan cleanup of the early 1990s. "The S&L losses to the government were small compared to this."

Hedge funds could be among the next problem areas. Many rely on borrowed money to amplify their returns. With banks under pressure, many hedge funds are less able to borrow this money now, pressuring returns. Meanwhile, there are growing indications that fewer investors are shifting into hedge funds while others are pulling out. Fund investors are dealing with their own problems: Many have taken out loans to make their investments and are finding it more difficult now to borrow.

That all makes it likely that more hedge funds will shutter in the months ahead, forcing them to sell their investments, further weighing on the market.

Debt-driven financial traumas have a long history, from the Great Depression to the S&L crisis to the Asian financial crisis of the late 1990s. Neither economists nor policymakers have easy solutions. Cutting interest rates and writing stimulus checks to families can help -- and may have prevented or delayed a deep recession. But, at least in this instance, they don't suffice.

In such circumstances, governments almost invariably experiment with solutions with varying degrees of success. President Franklin Delano Roosevelt unleashed an

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alphabet soup of new agencies and a host of new regulations in the aftermath of the market crash of 1929. In the 1990s, Japan embarked on a decade of often-wasteful government spending to counter the aftereffects of a bursting bubble. President George H.W. Bush and Congress created the Resolution Trust Corp. to take and sell the assets of failed thrifts. Hong Kong's free-market government went on a massive stock-buying spree in 1998, buying up shares of every company listed in the benchmark Hang Seng index. It ended up packaging them into an exchange-traded fund and making money.

Taking Out the Playbook

Today, Mr. Bernanke is taking out his playbook, said NYU economist Mr. Gertler, "and rewriting it as we go."

Merrill Lynch & Co.'s emergency sale to Bank of America Corp. last weekend was an example of the perniciousness and unpredictability of deleveraging. In the past year, Merrill had hired a new chief executive, written off $41.4 billion in assets and raised $21 billion in equity capital.

But Merrill couldn't keep up. The more it raised, the more it was forced to write off. When Merrill CEO John Thain attended a meeting with the New York Fed and other Wall Street executives last week, he saw that Merrill was the next most vulnerable brokerage firm. "We watched Bear and Lehman. We knew we could be next," said one Merrill executive. Fearful that its lenders would shut the firm off, he sold to Bank of America.

This crisis is complicated by innovative financial instruments that Wall Street created and distributed. They're making it harder for officials and Wall Street executives to know where the next set of risks is hiding and also contributing to the crisis's spreading impact.

Swaps Game

The latest trouble spot is an area called credit-default swaps, which are private contracts that let firms trade bets on whether a borrower is going to default. When a default occurs, one party pays off the other. The value of the swaps rise and fall as the market reassesses the risk that a company won't be able to honor its obligations. Firms use these instruments both as insurance -- to hedge their exposures to risk -- and to wager on the health of other companies. There are now credit-default swaps on more than $62 trillion in debt, up from about $144 billion a decade ago.

One of the big new players in the swaps game was AIG, the world's largest insurer and a major seller of credit-default swaps to financial institutions and companies. When the credit markets were booming, many firms bought these instruments from AIG, believing the insurance giant's strong credit ratings and large balance sheet could provide a shield against bond and loan defaults. AIG believed the risk of default was low on many securities it insured.

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As of June 30, an AIG unit had written credit-default swaps on more than $446 billion in credit assets, including mortgage securities, corporate loans and complex structured products. Last year, when rising subprime-mortgage delinquencies damaged the value of many securities AIG had insured, the firm was forced to book large write-downs on its derivative positions. That spooked investors, who reacted by dumping its shares, making it harder for AIG to raise the capital it increasingly needed.

Credit default swaps "didn't cause the problem, but they certainly exacerbated the financial crisis," said Leslie Rahl, president of Capital Market Risk Advisors, a consulting firm in New York. The sheer volume of CDS contracts outstanding -- and the fact that they trade directly between institutions, without centralized clearing -- intertwined the fates of many large banks and brokerages.

Few financial crises have been sorted out in modern times without massive government intervention. Increasingly, officials are coming to the conclusion that even more might be needed. A big problem: The Fed can and has provided short-term money to sound, but struggling, institutions that are out of favor. It can, and has, reduced the interest rates it influences to attempt to reduce borrowing costs through the economy and encourage investment and spending.

But it is ill-equipped to provide the capital that financial institutions now desperately need to shore up their finances and expand lending.

Resolution Trust Scenario

In normal times, capital-starved companies usually can raise money on their own. In the current crisis, a number of big Wall Street firms, including Citigroup Inc., have turned to sovereign-wealth funds, the government-controlled pools of money.

But both on Wall Street and in Washington, there is increasing expectation that U.S. taxpayers will either take the bad assets off the hands of financial institutions so they can raise capital, or put taxpayer capital into the companies, as the Treasury has agreed to do with mortgage giants Fannie Mae and Freddie Mac.

One proposal was raised by Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee. Rep. Frank is looking at whether to create an analog to the Resolution Trust Corp., which took assets from failed banks and thrifts and found buyers over several years.

"When you have a big loss in the marketplace, there are only three people that can take the loss -- the bondholders, the shareholders and the government," said William Seidman, who led the RTC from 1989 to 1991. "That's the dance we're seeing right now. Are we going to shove this loss into the hands of the taxpayers?"

The RTC seemed controversial and ambitious at the time. Any version today would be even more complex. The RTC dispensed mostly of commercial real estate. Today's troubled assets are complex debt securities -- many of which include pieces of other instruments, which in turn include pieces of others, many steps removed

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from the actual mortgages or consumer loans on which they are based. Unraveling these strands will be tedious and getting at the underlying collateral, difficult.

In the early stages of this crisis, regulators saw that their rules didn't fit the rapidly changing financial system they were asked to oversee. Investment banks, at the core of the crisis, weren't as closely monitored by the Securities and Exchange Commission as commercial banks were by their regulators.

The government has a system to close failed banks, created after the Great Depression in part to avoid sudden runs by depositors. Now, runs happen in spheres regulators may not fully understand, such as the repurchase agreement, or repo, market, in which investment banks fund their day-to-day operations. And regulators have no process for handling the failure of an investment bank like Lehman Brothers Holdings Inc. Insurers like AIG aren't even federally regulated.

Regulators have all but promised that more banks will fail in the coming months. The Federal Deposit Insurance Corp. is drawing up a plan to raise the premiums it charges banks so that it can rebuild the fund it uses to back deposits. Examiners are tightening their leash on banks across the country.

Pleasant Mystery

One pleasant mystery is why the crisis hasn't hit the economy harder -- at least so far. "This financial crisis hasn't yet translated into fewer...companies starting up, less research and development, less marketing," Ivan Seidenberg, chief executive of Verizon Communications, said Wednesday. "We haven't seen that yet. I'm sure every company is keeping their eyes on it."

At 6.1%, the unemployment rate remains well below the peak of 7.8% in 1992, amid the S&L crisis.

In part, that's because government has reacted aggressively. The Fed's classic mistake that led to the Great Depression was that it tightened monetary policy when it should have eased. Mr. Bernanke didn't repeat that error. And Congress moved more swiftly to approve fiscal stimulus than most Washington veterans thought possible.

In part, the broader economy has held mostly steady because exports have been so strong at just the right moment, a reminder of the global economy's importance to the U.S. And in part, it's because the U.S. economy is demonstrating impressive resilience, as information technology allows executives to react more quickly to emerging problems and -- to the discomfort of workers -- companies are quicker to adjust wages, hiring and work hours when the economy softens.

But the risk remains that Wall Street's woes will spread to Main Street, as credit tightens for consumers and business. Already, U.S. auto makers have been forced to tighten the terms on their leasing programs, or abandon writing leases themselves altogether, because of problems in their finance units. Goldman Sachs economists'

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optimistic scenario is a couple years of mild recession or painfully slow economy growth.

—Aaron Lucchetti, Mark Whitehouse, Gregory Zuckerman and Sudeep Reddy contributed to this article.

737 U.S. Military Bases = Global Empire

By Chalmers Johnson, Metropolitan BooksPosted on February 19, 2007, Printed on July 11, 2007

Once upon a time, you could trace the spread of imperialism by counting up colonies. America's version of the colony is the military base. By following the changing politics of global basing, one can learn much about our ever larger imperial stance and the militarism that grows with it. Militarism and imperialism are Siamese twins joined at the hip. Each thrives off the other.

Garrisoning the Globe

In 2003, Forbes magazine revealed that media mogul Ted Turner was America's top land baron -- with a total of 1.8 million acres across the U.S. The nation's ten largest landowners, Forbes reported, "own 10.6 million acres, or one out of every 217 acres in the country." Impressive as this total was, the Pentagon puts Turner and the entire pack of mega-landlords to shame with over 29 million acres in U.S. landholdings. Abroad, the Pentagon's "footprint" is also that of a giant. For example, the Department of Defense controls 20% of the Japanese island of Okinawa and, according to Stars and Stripes, "owns about 25 percent of Guam." Mere land ownership, however, is just the tip of the iceberg.

In his 2004 book, The Sorrows of Empire, Chalmers Johnson opened the world's eyes to the size of the Pentagon's global footprint, noting that the Department of Defense (DoD) was deploying nearly 255,000 military personnel at 725 bases in 38 countries. Since then, the total number of overseas bases has increased to at least 766 and, according to a report by the Congressional Research Service, may actually be as high as 850. Still, even these numbers don't begin to capture the global sprawl of the organization that unabashedly refers to itself as "one of the world's largest landlords.'" �

The DoD's "real property portfolio," according to 2006 figures, consists of a total of 3,731 sites. Over 20% of these sites are located on more than 711,000 acres outside of the U.S. and its territories. Yet even these numbers turn out to be a drastic undercount.

All told, the Department of Defense owns up to having "over $1 trillion in assets and $1.6 trillion in liabilities." Still, to begin to grasp the Pentagon's global immensity, it helps to look, again, at its land holdings -- all 120,191 square kilometers which are almost exactly the size of North Korea (120,538 square kilometers). These holdings are larger than any of the following nations: Liberia, Bulgaria, Guatemala, South Korea, Hungary, Portugal, Jordan, Kuwait, Israel, Denmark, Georgia, or Austria. The 7,518 square kilometers of 20 micro-states -- the Vatican, Monaco, Nauru, Tuvalu, San Marino, Liechtenstein, Saint Kitts and Nevis, Maldives, Malta, Saint Vincent and the Grenadines, Barbados, Antigua and Barbuda,

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Seychelles, Andorra, Bahrain, Saint Lucia, Singapore, the Federated States of Micronesia, Kiribati and Tonga -- combined pales in comparison to the 9,307 square kilometers of just one military base, White Sands Missile Range.

Our installations abroad bring profits to civilian industries, which design and manufacture weapons for the armed forces or, like the now well-publicized Kellogg, Brown & Root company, a subsidiary of the Halliburton Corporation of Houston, undertake contract services to build and maintain our far-flung outposts. One task of such contractors is to keep uniformed members of the imperium housed in comfortable quarters, well fed, amused, and supplied with enjoyable, affordable vacation facilities. Whole sectors of the American economy have come to rely on the military for sales. On the eve of our second war on Iraq, for example, while the Defense Department was ordering up an extra ration of cruise missiles and depleted-uranium armor-piercing tank shells, it also acquired 273,000 bottles of Native Tan sunblock, almost triple its 1999 order and undoubtedly a boon to the supplier, Control Supply Company of Tulsa, Oklahoma, and its subcontractor, Sun Fun Products of Daytona Beach, Florida.

At Least Seven Hundred Foreign Bases

It's not easy to assess the size or exact value of our empire of bases. Official records on these subjects are misleading, although instructive. According to the Defense Department's annual "Base Structure Report" for fiscal year 2003, which itemizes foreign and domestic U.S. military real estate, the Pentagon currently owns or rents 702 overseas bases in about 130 countries and HAS another 6,000 bases in the United States and its territories. Pentagon bureaucrats calculate that it would require at least $113.2 billion to replace just the foreign bases -- surely far too low a figure but still larger than the gross domestic product of most countries -- and an estimated $591.5 billion to replace all of them. The military high command deploys to our overseas bases some 253,288 uniformed personnel, plus an equal number of dependents and Department of Defense civilian officials, and employs an additional 44,446 locally hired foreigners. The Pentagon claims that these bases contain 44,870 barracks, hangars, hospitals, and other buildings, which it owns, and that it leases 4,844 more.

These numbers, although staggeringly large, do not begin to cover all the actual bases we occupy globally. The 2003 Base Status Report fails to mention, for instance, any garrisons in Kosovo -- even though it is the site of the huge Camp Bondsteel, built in 1999 and maintained ever since by Kellogg, Brown & Root. The Report similarly omits bases in Afghanistan, Iraq, Israel, Kuwait, Kyrgyzstan, Qatar, and Uzbekistan, although the U.S. military has established colossal base structures throughout the so-called arc of instability in the two-and-a-half years since 9/11.

For Okinawa, the southernmost island of Japan, which has been an American military colony for the past 58 years, the report deceptively lists only one Marine base, Camp Butler, when in fact Okinawa "hosts" ten Marine Corps bases, including Marine Corps Air Station Futenma occupying 1,186 acres in the center of that modest-sized island's second largest city. (Manhattan's Central Park, by contrast, is only 843 acres.) The Pentagon similarly fails to note all of the $5-billion-worth of military and espionage installations in Britain, which have long been conveniently disguised as Royal Air Force bases. If there were an honest count, the

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actual size of our military empire would probably top 1,000 different bases in other people's countries, but no one -- possibly not even the Pentagon -- knows the exact number for sure, although it has been distinctly on the rise in recent years.

For their occupants, these are not unpleasant places to live and work. Military service today, which is voluntary, bears almost no relation to the duties of a soldier during World War II or the Korean or Vietnamese wars. Most chores like laundry, KP ("kitchen police"), mail call, and cleaning latrines have been subcontracted to private military companies like Kellogg, Brown & Root, DynCorp, and the Vinnell Corporation. Fully one-third of the funds recently appropriated for the war in Iraq (about $30 billion), for instance, are going into private American hands for exactly such services. Where possible everything is done to make daily existence seem like a Hollywood version of life at home. According to the Washington Post, in Fallujah, just west of Baghdad, waiters in white shirts, black pants, and black bow ties serve dinner to the officers of the 82nd Airborne Division in their heavily guarded compound, and the first Burger King has already gone up inside the enormous military base we've established at Baghdad International Airport.

Some of these bases are so gigantic they require as many as nine internal bus routes for soldiers and civilian contractors to get around inside the earthen berms and concertina wire. That's the case at Camp Anaconda, headquarters of the 3rd Brigade, 4th Infantry Division, whose job is to police some 1,500 square miles of Iraq north of Baghdad, from Samarra to Taji. Anaconda occupies 25 square kilometers and will ultimately house as many as 20,000 troops. Despite extensive security precautions, the base has frequently come under mortar attack, notably on the Fourth of July, 2003, just as Arnold Schwarzenegger was chatting up our wounded at the local field hospital.

The military prefers bases that resemble small fundamentalist towns in the Bible Belt rather than the big population centers of the United States. For example, even though more than 100,000 women live on our overseas bases -- including women in the services, spouses, and relatives of military personnel -- obtaining an abortion at a local military hospital is prohibited. Since there are some 14,000 sexual assaults or attempted sexual assaults each year in the military, women who become pregnant overseas and want an abortion have no choice but to try the local economy, which cannot be either easy or pleasant in Baghdad or other parts of our empire these days.

Our armed missionaries live in a closed-off, self-contained world serviced by its own airline -- the Air Mobility Command, with its fleet of long-range C-17 Globemasters, C-5 Galaxies, C-141 Starlifters, KC-135 Stratotankers, KC-10 Extenders, and C-9 Nightingales that link our far-flung outposts from Greenland to Australia. For generals and admirals, the military provides seventy-one Learjets, thirteen Gulfstream IIIs, and seventeen Cessna Citation luxury jets to fly them to such spots as the armed forces' ski and vacation center at Garmisch in the Bavarian Alps or to any of the 234 military golf courses the Pentagon operates worldwide. Defense secretary Donald Rumsfeld flies around in his own personal Boeing 757, called a C-32A in the Air Force.

Our "Footprint" on the World

Of all the insensitive, if graphic, metaphors we've allowed into our vocabulary, none quite equals "footprint" to describe the military impact of our empire. Chairman of the Joint Chiefs

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of Staff Gen. Richard Myers and senior members of the Senate's Military Construction Subcommittee such as Dianne Feinstein (D-CA) are apparently incapable of completing a sentence without using it. Establishing a more impressive footprint has now become part of the new justification for a major enlargement of our empire -- and an announced repositioning of our bases and forces abroad -- in the wake of our conquest of Iraq. The man in charge of this project is Andy Hoehn, deputy assistant secretary of defense for strategy. He and his colleagues are supposed to draw up plans to implement President Bush's preventive war strategy against "rogue states," "bad guys," and "evil-doers." They have identified something they call the "arc of instability," which is said to run from the Andean region of South America (read: Colombia) through North Africa and then sweeps across the Middle East to the Philippines and Indonesia. This is, of course, more or less identical with what used to be called the Third World -- and perhaps no less crucially it covers the world's key oil reserves. Hoehn contends, "When you overlay our footprint onto that, we don't look particularly well-positioned to deal with the problems we're now going to confront."

Once upon a time, you could trace the spread of imperialism by counting up colonies. America's version of the colony is the military base. By following the changing politics of global basing, one can learn much about our ever larger imperial stance and the militarism that grows with it. Militarism and imperialism are Siamese twins joined at the hip. Each thrives off the other. Already highly advanced in our country, they are both on the verge of a quantum leap that will almost surely stretch our military beyond its capabilities, bringing about fiscal insolvency and very possibly doing mortal damage to our republican institutions. The only way this is discussed in our press is via reportage on highly arcane plans for changes in basing policy and the positioning of troops abroad -- and these plans, as reported in the media, cannot be taken at face value.

Marine Brig. Gen. Mastin Robeson, commanding our 1,800 troops occupying the old French Foreign Legion base at Camp Lemonier in Djibouti at the entrance to the Red Sea, claims that in order to put "preventive war" into action, we require a "global presence," by which he means gaining hegemony over any place that is not already under our thumb. According to the right-wing American Enterprise Institute, the idea is to create "a global cavalry" that can ride in from "frontier stockades" and shoot up the "bad guys" as soon as we get some intelligence on them.

"Lily Pads" in Australia, Romania, Mali, Algeria . . .

In order to put our forces close to every hot spot or danger area in this newly discovered arc of instability, the Pentagon has been proposing -- this is usually called "repositioning" -- many new bases, including at least four and perhaps as many as six permanent ones in Iraq. A number of these are already under construction -- at Baghdad International Airport, Tallil air base near Nasariyah, in the western desert near the Syrian border, and at Bashur air field in the Kurdish region of the north. (This does not count the previously mentioned Anaconda, which is currently being called an "operating base," though it may very well become permanent over time.) In addition, we plan to keep under our control the whole northern quarter of Kuwait -- 1,600 square miles out of Kuwait's 6,900 square miles -- that we now use to resupply our Iraq legions and as a place for Green Zone bureaucrats to relax.

Other countries mentioned as sites for what Colin Powell calls our new "family of bases" include: In the impoverished areas of the "new" Europe -- Romania, Poland, and Bulgaria; in

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Asia -- Pakistan (where we already have four bases), India, Australia, Singapore, Malaysia, the Philippines, and even, unbelievably, Vietnam; in North Africa -- Morocco, Tunisia, and especially Algeria (scene of the slaughter of some 100,00 civilians since 1992, when, to quash an election, the military took over, backed by our country and France); and in West Africa -- Senegal, Ghana, Mali, and Sierra Leone (even though it has been torn by civil war since 1991). The models for all these new installations, according to Pentagon sources, are the string of bases we have built around the Persian Gulf in the last two decades in such anti-democratic autocracies as Bahrain, Kuwait, Qatar, Oman, and the United Arab Emirates.

Most of these new bases will be what the military, in a switch of metaphors, calls "lily pads" to which our troops could jump like so many well-armed frogs from the homeland, our remaining NATO bases, or bases in the docile satellites of Japan and Britain. To offset the expense involved in such expansion, the Pentagon leaks plans to close many of the huge Cold War military reservations in Germany, South Korea, and perhaps Okinawa as part of Secretary of Defense Rumsfeld's "rationalization" of our armed forces. In the wake of the Iraq victory, the U.S. has already withdrawn virtually all of its forces from Saudi Arabia and Turkey, partially as a way of punishing them for not supporting the war strongly enough. It wants to do the same thing to South Korea, perhaps the most anti-American democracy on Earth today, which would free up the 2nd Infantry Division on the demilitarized zone with North Korea for probable deployment to Iraq, where our forces are significantly overstretched.

In Europe, these plans include giving up several bases in Germany, also in part because of Chancellor Gerhard Schr der's domestically popular defiance of Bush over Iraq. But the �degree to which we are capable of doing so may prove limited indeed. At the simplest level, the Pentagon's planners do not really seem to grasp just how many buildings the 71,702 soldiers and airmen in Germany alone occupy and how expensive it would be to reposition most of them and build even slightly comparable bases, together with the necessary infrastructure, in former Communist countries like Romania, one of Europe's poorest countries. Lt. Col. Amy Ehmann in Hanau, Germany, has said to the press "There's no place to put these people" in Romania, Bulgaria, or Djibouti, and she predicts that 80% of them will in the end stay in Germany. It's also certain that generals of the high command have no intention of living in backwaters like Constanta, Romania, and will keep the U.S. military headquarters in Stuttgart while holding on to Ramstein Air Force Base, Spangdahlem Air Force Base, and the Grafenw hr Training Area. �

One reason why the Pentagon is considering moving out of rich democracies like Germany and South Korea and looks covetously at military dictatorships and poverty-stricken dependencies is to take advantage of what the Pentagon calls their "more permissive environmental regulations." The Pentagon always imposes on countries in which it deploys our forces so-called Status of Forces Agreements, which usually exempt the United States from cleaning up or paying for the environmental damage it causes. This is a standing grievance in Okinawa, where the American environmental record has been nothing short of abominable. Part of this attitude is simply the desire of the Pentagon to put itself beyond any of the restraints that govern civilian life, an attitude increasingly at play in the "homeland" as well. For example, the 2004 defense authorization bill of $401.3 billion that President Bush signed into law in November 2003 exempts the military from abiding by the Endangered Species Act and the Marine Mammal Protection Act.

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While there is every reason to believe that the impulse to create ever more lily pads in the Third World remains unchecked, there are several reasons to doubt that some of the more grandiose plans, for either expansion or downsizing, will ever be put into effect or, if they are, that they will do anything other than make the problem of terrorism worse than it is. For one thing, Russia is opposed to the expansion of U.S. military power on its borders and is already moving to checkmate American basing sorties into places like Georgia, Kyrgyzstan, and Uzbekistan. The first post-Soviet-era Russian airbase in Kyrgyzstan has just been completed forty miles from the U.S. base at Bishkek, and in December 2003, the dictator of Uzbekistan, Islam Karimov, declared that he would not permit a permanent deployment of U.S. forces in his country even though we already have a base there.

When it comes to downsizing, on the other hand, domestic politics may come into play. By law the Pentagon's Base Realignment and Closing Commission must submit its fifth and final list of domestic bases to be shut down to the White House by September 8, 2005. As an efficiency measure, Secretary of Defense Rumsfeld has said he'd like to be rid of at least one-third of domestic Army bases and one-quarter of domestic Air Force bases, which is sure to produce a political firestorm on Capitol Hill. In order to protect their respective states' bases, the two mother hens of the Senate's Military Construction Appropriations Subcommittee, Kay Bailey Hutchison (R-TX) and Dianne Feinstein, are demanding that the Pentagon close overseas bases first and bring the troops now stationed there home to domestic bases, which could then remain open. Hutchison and Feinstein included in the Military Appropriations Act of 2004 money for an independent commission to investigate and report on overseas bases that are no longer needed. The Bush administration opposed this provision of the Act but it passed anyway and the president signed it into law on November 22, 2003. The Pentagon is probably adept enough to hamstring the commission, but a domestic base-closing furor clearly looms on the horizon.

By far the greatest defect in the "global cavalry" strategy, however, is that it accentuates Washington's impulse to apply irrelevant military remedies to terrorism. As the prominent British military historian, Correlli Barnett, has observed, the U.S. attacks on Afghanistan and Iraq only increased the threat of al-Qaeda. From 1993 through the 9/11 assaults of 2001, there were five major al-Qaeda attacks worldwide; in the two years since then there have been seventeen such bombings, including the Istanbul suicide assaults on the British consulate and an HSBC Bank. Military operations against terrorists are not the solution. As Barnett puts it, "Rather than kicking down front doors and barging into ancient and complex societies with simple nostrums of 'freedom and democracy,' we need tactics of cunning and subtlety, based on a profound understanding of the people and cultures we are dealing with -- an understanding up till now entirely lacking in the top-level policy-makers in Washington, especially in the Pentagon."

In his notorious "long, hard slog" memo on Iraq of October 16, 2003, Defense secretary Rumsfeld wrote, "Today, we lack metrics to know if we are winning or losing the global war on terror." Correlli-Barnett's "metrics" indicate otherwise. But the "war on terrorism" is at best only a small part of the reason for all our military strategizing. The real reason for constructing this new ring of American bases along the equator is to expand our empire and reinforce our military domination of the world.

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Chalmers Johnson's latest book is The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (Metropolitan). His previous book, Blowback: The Costs and Consequences of American Empire, has just been updated with a new introduction.

Copyright C2004 Chalmers Johnson

In the words of Noam Chomsky, a venerable critic of American imperialism: "Where spending is rising, as in military supplemental bills to conduct the wars in Iraq and Afghanistan, it would sharply decline. Where spending is steady or declining (health, education, job training, the promotion of energy conservation and renewable energy sources, veterans benefits, funding for the UN and UN peacekeeping operations, and so on), it would sharply increase. Bush's tax cuts for people with incomes over $200,000 a year would be immediately rescinded."

Such reforms would begin at once to reduce the malevolent influence of the military-industrial complex, but many other areas would require attention as well. As part of the process of de-garrisoning the planet and liquidating our empire, we would have to launch an orderly closing-up process for at least 700 of the 737 military bases we maintain (by official Pentagon count) in over 130 foreign countries on every continent except Antarctica. We should ultimately aim at closing all our imperialist enclaves, but in order to avoid isolationism and maintain a capacity to assist the United Nations in global peacekeeping operations, we should, for the time being, probably retain some 37 of them, mostly naval and air bases.

Land Grab on a Global Scale

by Dennis Martinez

Among the English-speaking settler societies — U.S., Canada, Australia, New Zealand — an irrational but powerful myth still prevails. It drove “manifest destiny” and is still alive and well, if usually unconscious.

Divinely inspired colonists wrested lands occupied by native peoples and bestowed the mixed blessings of civilization on them. The rationalization for dispossession then — and now — was that these “primitive” peoples were not making productive use of their lands. What they did not know, and still do not, is that they took over lands that were largely shaped and maintained by indigenous peoples through extensive and intensive land care practices that enabled them to not only survive but also thrive.

Enter the 21st century. The work of indigenous dispossession is about to be completed. The last great global land grab and indigenous asset stripping is happening as I write. (I borrowed these phrases from Rebecca Adamson of First Peoples Worldwide and Andy White of Rights and Resources Initiative at a meeting of the World Bank that I participated in.)

We have a big problem. Some unintended outcomes of well-intentioned climate mitigation measures are below the media radar screen. Land values are dramatically increasing because of demand by northern multinational corporations for land to produce biofuels, plantation monocultures for carbon trading offsets and transfat substitutes such as palm oil in the developing south.

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Indigenous peoples presently occupy 22 percent of the Earth’s land surface, are stewards of 80 percent of remaining biodiversity and comprise 90 percent of cultural diversity. As demand increases the value of indigenous lands — already poorly protected — the rate of loss of indigenous assets and livelihood options becomes more rapid. Adding to these losses are losses of homelands set aside by big environmental NGOs and third-world government elites for conservation reserves and parks through forced evictions. Also disappearing is global genetic diversity maintained by indigenous peoples, which is essential for maintaining the capacity of plants and animals to adapt to climate change.

Disappearing with land and resources are an incalculable wealth of stewardship experience and knowledge. But climate change is here. While the developed north (west) is scrambling for solutions, indigenous peoples are receiving the brunt of the effects of climate change caused by the north. Ignored in the global debate are indigenous cultures that have survived intact for millennia while “great” civilizations have repeatedly collapsed. Indigenous peoples are neither noble nor ignoble.

Some have made environmental mistakes in the past and did not survive. The cultures that survived have done so in proportion as they have learned to adapt. They are just people like everyone else, but people with great practical know-how.

The current economic asymmetry is the result of the myth that wealth will eventually filter down to the poor through so-called free trade and speculative global markets. But as the wealth of a small number of privileged individuals has increased, world poverty has increased fivefold.

The Rio Convention on Biological Diversity (1992), Article 8 (j), and Agenda 21 affirmed that indigenous cultures protect biodiversity and should be compensated for their sustainable practices and products. But the U.S.-dominated Uruguay round of GATT in the same year effectively shut out indigenous peoples from any protection or compensation.

In the meantime the world is losing its best strategy for mitigating climate change — viable indigenous cultures who are the stewards of genetic diversity through traditional land practices. They will also lose the continuing contributions of native knowledge to medicine, sustainable agriculture, health products, lubricants, common foods, wildlife and fisheries management, and more.

The tobacco industry is now liable for costs to states for paying smokers’ health bills. Why not hold the developed nations accountable for the damage to ecosystems and indigenous ecosystem peoples who are suffering from climate change that they didn’t cause? Where is the accountability? Why not support existing national and international laws and treaties that are simply ignored?

We do not want victimhood. We want parity and compensation through recognition of our substantial contributions to your wealth. It is not an “ethnic” issue. Indigenous peoples are the miner’s canary. It is about the survival of all humans and it is about the loss of the collective heritage of our species. It is all of our lands and all of our assets that are being stolen by economic criminals. They benefit and we pay.

Dennis Martinez is founder and co-chairman of the Indigenous Peoples’ Restoration Network of the Society for Ecological Restoration International.

©1996-2008 Seattle Post-Intelligencer

Warning on Warming69

By Bill McKibben

Climate Change 2007: The Physical Science Basis: Summary for Policymakers

Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. IPCC, 18 pp., available at www.usgcrp.gov/usgcrp/links/ipcc.htm#4wg1

When the Intergovernmental Panel on Climate Change (IPCC) issued its latest report in early February, it was greeted with shock: "World Wakes to Climate Catastrophe," reported an Australian paper. But global warming is by now a scientific field with a fairly extensive history, and that history helps set the new findings in context— a context that makes the new report no less terrifying but much more telling for its unstated political implications.

Although atmospheric scientists had studied the problem for decades, global warming first emerged as a public issue in 1988 when James Hansen, a NASA scientist, told Congress that his research, and the work of a handful of other scientists, indicated that human beings were dangerously heating the planet, particularly through the use of fossil fuels. This bold announcement set off a scientific and political furor: many physicists and chemists played down the possibility of serious harm, and many governments, though feeling pressure to react, did little to restrain the use of fossil fuel. "More research" was the mantra everyone adopted, and funding for it flowed freely from governments and foundations. Under the auspices of the United Nations, scientists and governments set up a curious hybrid, the IPCC, to track and report on the progress of that research.

From roughly 1988 to 1995, the hypothesis that burning coal and gas and oil in large quantities was releasing carbon dioxide and other gases that would trap the sun's radiation on earth and disastrously heat the planet remained just that: a hypothesis. Scientists used every means at their disposal to reconstruct the history of the earth's climate and to track current changes. For example, they studied the concentration of greenhouse gases in ancient air trapped in glacial cores, sampled the atmosphere with weather balloons, examined the relative thickness of tree rings, and observed the frequency of volcanic eruptions. Most of all, they refined the supercomputer models of the earth's atmosphere in an effort to predict the future of the world's weather

By 1995, the central Herculean tasks of both research and synthesis were largely complete. The report the IPCC issued that year was able to assert that "the balance of evidence suggests" that human activity was increasing the planet's temperature and that it would be a serious problem. This was perhaps the most significant warning our species, as a whole, has yet been given. The report declared (in the pinched language of international science) that humans had grown so large in numbers and especially in appetite for energy that they were now damaging the most basic of the earth's systems—the balance between incoming and outgoing solar energy. Although huge amounts of impressive scientific research have continued over the twelve years since then, their findings have essentially been complementary to the 1995 report—a constant strengthening of the simple basic truth that humans were burning too much fossil fuel.

The 1995 consensus was convincing enough for Europe and Japan: the report's scientific findings were the basis for the Kyoto negotiations and the treaty they produced; those same findings also led

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most of the developed world to produce ambitious plans for reductions in carbon emissions. But the consensus didn't extend to Washington, and hence everyone else's efforts were deeply compromised by the American unwillingness to increase the price of energy. Our emissions continued to soar, and the plans of many of the Kyoto countries in Western Europe to reduce emissions sputtered. (At the same time, most tragically of all, China and India had just begun their rapid industrial takeoffs using precisely the technologies we then knew were wreaking havoc; they did not seek or find much aid from the Western countries that could have encouraged them to take a more benign path.) In 2001 the IPCC issued its Third Assessment Report (TAR), but it coincided with the start of the Bush administration, which refused even to consider a serious policy for climate. The IPCC's new Fourth Assessment of this February (known as AR4) arrives at a more congenial moment, as the new Democratic Congress takes up a wide variety of legislation designed, finally, to curb emissions.

The finding of the new report that attracted the most attention in the press was that scientists were now more confident than ever that the warming we've seen so far (about one degree Fahrenheit in the average global temperature) was caused by human beings. Instead of being merely "likely," the conclusion was now "very likely," which in the IPCC's lexicon means better than a 90 percent chance. But it's been years since any reputable scientist specializing in climate research doubted that conclusion. More important findings were ignored in accounts of the report and in some cases were obscured by the document's very poor prose, which is much more opaque than its predecessors. Those findings include:

The amount of carbon in the atmosphere is now increasing at a faster rate even than before. Temperature increases would be considerably higher than they have been so far were it not

for the blanket of soot and other pollution that is temporarily helping to cool the planet.

Alternative explanations for some of the warming (for example, sunspot activity and the "urban heat island effect," the raising of temperatures in cities caused by high building densities and the use of heat-retaining materials such as concrete and asphalt) are now known to be relatively negligible.

Almost everything frozen on earth is melting. Heavy rainfalls are becoming more common since the air is warmer and therefore holds more water than cold air, and "cold days, cold nights and frost have become less frequent, while hot days, hot nights, and heat waves have become more frequent."

These facts serve as the prelude to the most important part of the new document, its predictions for what is to come. Here too the news essentially confirms the previous report, and indeed most of the predictions about climate change dating back to the start of research: if we don't take the most aggressive possible measures to curb fossil fuel emissions immediately, then we will see temperature increases of— at the best estimate—roughly five degrees Fahrenheit during this century. Technically speaking, that's enormous, enough to produce what James Hansen has called a "totally different planet," one much warmer than that known by any of our human ancestors.

The process by which the IPCC conducts its deliberations—scientists and national government representatives quibbling at enormous length over wording and interpretation—is Byzantine at best,

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and makes the group's achievements all the more impressive. But it sacrifices up-to-the-minute assessment of data in favor of lowest-common-denominator conclusions that are essentially beyond argument. That's a reasonable method, but one result is that the "shocking" conclusions of the new report in fact lag behind the most recent findings of climate science by several years.

That's most obvious here in the discussion of the rise in sea level. Researchers know that sea levels will rise fairly quickly this century, in part because of the melting of mountain glaciers and in part because warm water takes up more space than cold. The new assessment refines the calculations of the rise in sea level and puts the best estimate at a foot or two, which is actually slightly less than the last assessment in 2001. Though it doesn't sound like much, a couple of feet is actually a large amount— enough to inundate many low-lying areas and drown much of the earth's coastal marshes and wetlands. Still, it might be more or less manageable.

During the last eighteen months, however, new research has indicated that a far more rapid rise in sea level may be possible, because the great ice sheets of Greenland and the Antarctic appear to have begun moving more quickly toward the sea. Some of this research appeared in Al Gore's movie An Inconvenient Truth, and James Hansen has written in these pages about this new information [*]; it is responsible for much of the recent increase in the level of alarm. But it is not included in the IPCC report, except as a caveat: "larger values cannot be excluded, but understanding of these effects is too limited to assess their likelihood or provide a best estimate or an upper bound for sea level rise."

In short, the new report is a remarkably conservative document. That it is still frightening in its predictions simply indicates the huge magnitude of the changes we're now causing, changes far larger than most people fully understand. Even using its conservative projections, the panel states unequivocally that typhoons and hurricanes will likely become more intense, that sea ice will shrink and perhaps disappear in the summertime Arctic, that snow cover will contract. Later this year, a second working group will outline the effects of these changes on humans, translating inches of sea-level rise into numbers of refugees, showing the effects of increases in temperature and humidity on malaria-carrying mosquitoes as well as the impact of heat waves on crop losses. The language will still be bloodless, but the findings obviously won't.

The IPCC has always avoided taking political positions—it doesn't recommend specific policies—and it continues this tradition with its new report. In its discussions of the momentum of climate change, however, it does introduce one particularly disturbing statistic. Because of the time lag between carbon emissions and their effect on air temperature, even if we halted the increase in coal, oil, and gas burning right now, temperatures would continue to rise about two tenths of a degree Celsius per decade. But, the report writes, "if all radiative forcing agents [i.e., greenhouse gases] are held constant at year 2000 levels, a further warming trend would occur in the next two decades at a rate of about 0.1ºC per decade."

Translated into English, this means, to put it simply, that if world leaders had heeded the early warnings of the first IPCC report, and by 2000 had done the very hard work to keep greenhouse gas emissions from growing any higher, the expected temperature increase would be half as much as is expected now. In the words of the experts at realclimate.org, where the most useful analyses of the

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new assessment can be found, climate change is a problem with a very high "procrastination penalty": a penalty that just grows and grows with each passing year of inaction.

This is why the most important news about climate at the moment may come not from the IPCC but from Washington. After twenty years of inactivity— a remarkably successful bipartisan effort to accomplish nothing—the first few weeks of the new Congress have witnessed a flurry of activity. A series of bills have been introduced by people ranging from California Representative Henry Waxman and Vermont Senator Bernie Sanders to Arizona's John McCain that would call for more or less aggressive carbon reduction targets. Some of the bills would set in place a "cap-and-trade" system that would set overall limits on emissions of carbon dioxide but would allow companies to freely buy and sell credits permitting them to emit certain amounts of it; this would produce a market for carbon-cutting measures.

The IPCC report doesn't call for particular reduction figures. It does, however, make clear that reduction in emissions must be quick and deep. There is no more optimistic alternative. Even if we do everything right, we're still going to see serious increases in temperature, and all of the physical changes (to one extent or another) predicted in the report. However, there's reason to hope that if the US acts extremely aggressively and quickly we might be able to avoid an increase of two degrees Celsius, the rough threshold at which runaway polar melting might be stopped. This means that any useful legislation will have to feature both a very rapid start to reductions and a long and uncompromising mandate to continue them. Sanders's bill, also endorsed by California's Barbara Boxer, who heads the relevant committee, comes closest to that standard. It calls for an eventual 80 percent cut in emissions by 2050. McCain's bill, cosponsored by one of his challengers for the presidency, Barack Obama, is somewhat weaker in its eventual targets. But the bargaining has barely begun, and in any event quick initial implementation of any cuts will be almost as important as the final numbers.

No one expects President Bush to sign such a bill. In fact, it was widely considered a minor miracle that he uttered the words "climate change" in this year's State of the Union address. (His limp proposal, centering on alternative fuels for some vehicles, was equally widely considered a dud.) What's happening now has much to do with positioning for the next presidential election, and the legislation that will eventually be passed and signed in 2009. What the IPCC report makes clear by implication is that that legislation will be our last meaningful chance: anything less than an all-out assault on carbon in our economy will be rendered meaningless by the increasing momentum of global warming. And of course by now our economy is only part of the problem. Though we use more energy per capita than any other country, the Chinese may pass us in total carbon emissions by decade's end. Even if we start to get our own house in order, we'll need to figure out how, with desperate speed, to lead an equally sweeping international response.

The only really encouraging development is the groundswell of public concern that has built over the last year, beginning with the reaction to Hurricane Katrina and Al Gore's movie. In January, a few of us launched an initiative called stepitup07 .org. It calls for Americans to organize rallies in their own communities on April 14 asking for congressional action. In the first few weeks the Web site was open, more than six hundred groups in forty-six states registered to hold demonstrations—this will

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clearly be the largest organized response to global warming yet in this country. The groups range from environmental outfits to evangelical churches to college sororities, united only by the visceral sense (fueled in part by this winter's bizarre weather) that the planet has been knocked out of whack. The IPCC assessment offers a modest account of just how far out of whack it is—and just how hard we're going to have to work to have even a chance at limiting the damage.

Notes

[*] See "The Threat to the Planet," The New York Review, July 13, 2006.

How Close to Catastrophe?

By Bill McKibben

The Revenge of Gaia: Earth's Climate in Crisis and the Fate of Humanity

by James Lovelock

Basic Books, 177 pp., $25.00

China Shifts Gears: Automakers, Oil, Pollution, and Development

by Kelly Sims Gallagher

MIT Press, 219 pp., $52.00;$21.00 (paper)

Solar Revolution: The Economic Transformation of the Global Energy Industry

by Travis Bradford

MIT Press, 238 pp., $24.95

WorldChanging:A User's Guide for the 21st Century

edited by Alex Steffen

Abrams, 596 pp., $37.50

Design Like You Give a Damn: Architectural Responses to Humanitarian Crises

edited by Architecture for Humanity

Metropolis, 336 pp., $35.00 (paper)

James Lovelock is among the planet's most interesting and productive scientists. His invention of an electron capture device that was able to detect tiny amounts of chemicals enabled other scientists both to understand the dangers of DDT to the eggshells of birds and to figure out the ways in which chlorofluorocarbons (CFCs) were eroding the ozone layer. He's best known, though, not for a gadget

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James Lovelock(click for larger image)

but for a metaphor: the idea that the earth might usefully be considered as a single organism (for which he used the name of the Greek earth goddess Gaia) struggling to keep itself stable.

In fact, his so-called Gaia hypothesis was at first less clear than that— "hardly anyone, and that included me for the first ten years after the concept was born, seems to know what Gaia is," he has written. But the hypothesis has turned into a theory, still not fully accepted by other scientists but not scorned either. It holds that the earth is "a self-regulating system made up from the totality of organisms, the surface rocks, the ocean and the atmosphere tightly coupled as an evolving system" and striving to "regulate surface conditions so as always to be as favourable as possible for contemporary life."

Putting aside questions of planetary consciousness and will (beloved as they were by an early wave of New Age Gaia acolytes), the theory may help us understand how the earth has managed to remain hospitable for life over billions of years even as the sun, because of its own stellar evolution, has become significantly hotter. Through a series of processes involving, among others, ice ages, ocean algae, and weathering rock, the earth has managed to keep the amount of heat-trapping carbon dioxide in the atmosphere, and hence the temperature, at a relatively stable level

This homeostasis is now being disrupted by our brief binge of fossil fuel consumption, which has released a huge amount of carbon dioxide into the atmosphere. Indeed, at one point Lovelock predicts—more gloomily than any other competent observer I am aware of—that we have already pushed the planet over the brink, and that we will soon see remarkably rapid rises in temperature, well beyond those envisioned in most of the computer models now in use—themselves quite dire. He argues that because the earth is already struggling to keep itself cool, our extra increment of heat is particularly dangerous, and he predicts that we will soon see the confluence of several phenomena: the death of ocean algae in ever-warmer ocean waters, reducing the rate at which these small plants can remove carbon from the atmosphere; the death of tropical forests as a result of higher temperatures and the higher rates of evaporation they cause; sharp changes in the earth's "albedo," or reflectivity, as white ice that reflects sunlight back out into space is replaced with the absorptive blue of seawater or the dark green of high-latitude boreal forests; and the release of large amounts of methane, itself a greenhouse gas, held in ice crystals in the frozen north or beneath the sea.

Some or all of these processes will be enough, Lovelock estimates, to tip the earth into a catastrophically hotter state, perhaps eight degrees centigrade warmer in temperate regions like ours, over the course of a very few decades, and that heat will in turn make life as we know it nearly impossible in many places. Indeed, in the photo section of the book there is one picture of a red desert captioned simply "Mars now—and what the earth will look like eventually." Human beings, a hardy species, will not perish entirely, he says; in interviews during his book tour, Lovelock has predicted that about 200 million people, or about one thirtieth of the current world population, will survive if competent leaders make a new home for us near the present-day Arctic. There may also be other survivable spots, like the British Isles, though he notes that rising sea levels will render them more an archipelago. In any event, he predicts that "teeming billions" will perish.

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Lovelock, who is in his eighties, concedes that this is a gloomier forecast than those of scientists more actively engaged in peer-reviewed climatology; it is, in a sense, a visceral feeling. It should be approached somewhat skeptically, for Lovelock has been (as he has always forthrightly admitted) wrong before in his immediate reactions. Though he invented the machine that helped us understand the dangers of CFCs, he also blithely dismissed those dangers, arguing that they couldn't do enough damage to matter. The American chemists Sherry Rowland and Mario Molina ignored his assurances and performed the groundbreaking work on the depletion of the ozone layer that won them the Nobel Prize. (And won for the planet an international agreement on the reduction of CFCs that allowed the earth a chance to repair the ozone hole before it opened so wide as to annihilate much of life through excess ultraviolet radiation.) Lovelock has also failed to identify any clear causal mechanism for his sudden heating hypothesis, explaining that he differs with more conventional forecasts mostly because he thinks they have underestimated both the extent of the self-reinforcing cycles that are causing temperatures to rise and the vulnerability of the planet, which he sees as severely stressed and close to losing equilibrium. It also must be said that parts of his short book read a little oddly—there are digressions into, say, the safety of nitrates in food that don't serve much purpose and raise questions about the rigor of the entire enterprise.

That said, there are very few people on earth—maybe none—with the same kind of intuitive feel for how it behaves as a whole. Lovelock's flashes of insight about Gaia illuminate many of the interconnections between systems that more pedestrian scientists have slowly been trying to identify. Moreover, for the past twenty years, the period during which greenhouse science emerged, most of the effects of heating on the physical world have in fact been more dire than originally predicted. The regular reader of Science and Nature is treated to an almost weekly load of apocalyptic data, virtually all of it showing results at the very upper end of the ranges predicted by climate models, or beyond them altogether. Compared with the original models of a few years ago, ice is melting faster; forest soils are giving up more carbon as they warm; storms are increasing much more quickly in number and size. As I'm writing these words, news comes across the bottom of my computer screen that a new study shows methane leaking from Siberian permafrost at five times the predicted rate, which is seriously bad news since methane is an even more potent greenhouse gas than CO[2] .

In this fast-changing scientific puzzle, the Intergovernmental Panel on Climate Change (IPCC), which has given the world valuable guidance for a decade, stands the risk of being outrun by new data. The panel is supposed to issue a new report in the coming year summarizing the findings made by climate scientists since its last report. But it's unlikely that its somewhat unwieldy procedures will allow it to incorporate fears such as Lovelock's adequately, or even to address fully the far more mainstream predictions issued during the last twelve months by James Hansen of NASA, the planet's top climatologist.[1]

Hansen is not quite as gloomy as Lovelock. Although he recently stated that the Earth is very close to the hottest it has been in a million years, he said that we still have until 2015 to reverse the flow of carbon into the atmosphere before we cross a threshold and create a "different planet." When Hansen gave this warning last December we had ten years to change course, but soon we'll have only nine years, and since nothing has happened in the intervening time to suggest that we're

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gearing up for an all-out effort to reduce greenhouse gas emissions, the divergence between Hansen and Lovelock may be academic. (Somehow it's small comfort to be rooting for the guy who says you've got a decade.)

What's amazing is that even Al Gore's fine and frightening film An Inconvenient Truth now lags behind the scientific cutting edge on this issue—the science is moving fast. It's true that the world is beginning slowly to awaken to the idea that global warming may be a real problem, and legislatures (though not ours) are starting to nibble at it. But very few understand with any real depth that a wave large enough to break civilization is forming, and that the only real question is whether we can do anything at all to weaken its force.

It's to the question of solutions to mitigate the effects of global warming that Lovelock eventually turns, which is odd since in other places he insists that it's too late to do much. His prescriptions are strongly worded and provocative—he thinks that renewable energy and energy conservation will come too slowly to ward off damage, and that an enormous program of building nuclear reactors is our best, indeed our only, real option. "We cannot turn off our energy-intensive, fossil-fuel-powered civilization without crashing," he writes. "We need the soft landing of a powered descent." That power can't come from wind or solar energy soon enough:

Even now, when the bell has started tolling to mark our ending, we still talk of sustainable development and renewable energy as if these feeble offerings would be accepted by Gaia as an appropriate and affordable sacrifice.

Instead, "new nuclear building should be started immediately."

With his extravagant rhetoric, Lovelock does us a favor—it is true that we should be at least as scared of a new coal plant as of a new nuclear station. The latter carries certain obvious risks (which Lovelock argues convincingly loom larger than perhaps they should in our imaginations), while the coal plants come with the absolute guarantee that their emissions will unhinge the planet's physical systems. Every potential source of non-carbon energy should be examined fairly to see what role it might have in avoiding a disastrous future. But Lovelock also undermines his own argument with what amounts to special pleading. He is a foe of wind power because, as he says, he doesn't want his Devon countryside overrun with windmills, placing him in the same camp as Cape Cod vacationers resistant to wind farms offshore in Nantucket Sound or Vermonters reluctant to see some of their high ridgelines dotted with towering turbines. "Perhaps we are NIMBYs," he writes, referring to the abbreviation for the phrase "Not In My Back Yard," but

we see those urban politicians [pushing wind power] as like some unthinking physicians who have forgotten their Hippocratic Oath and are trying to keep alive a dying civilization by useless and inappropriate chemotherapy when there is no hope of cure and the treatment renders the last stages of life unbearable.

This is an understandable aversion, but it would need to rest, as Lovelock admits, on something more than aesthetics, and in this case the foundation is all but nonexistent. He quotes a couple of disillusioned Danes to the effect that wind power hasn't been a panacea in Denmark, and says that

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Britain would need 54,000 big wind turbines to meet its needs, as if that huge number simply ends the argument. (The lack of adequate notes in this book makes checking sources laborious.) But in fact the Germans are adding 2,000 windmills annually, and nearing 20,000 total. Some object to the sight of them scattered across the countryside, and others are enchanted. In any event, whatever one's opinion of wind power, it's not at all clear that a crash program of building atomic reactors makes sense. Most of the economic modeling I've seen indicates that if you took the money intended for building a reactor and invested it instead in an aggressive energy conservation project (one that provided subsidies to companies to modify their factories to reduce power use, for instance), the payoff in cutting back on carbon would be much larger. This doesn't end the argument, either—we will obviously need new energy sources, and the example of the French success with nuclear power (it generates three quarters of their electricity) means it has to be included in the mix of possibilities, as Jim Hansen recently argued in these pages. [2] But Lovelock's argument against wind power is remarkably unpersuasive.

Much more deeply researched, and much more hopeful, data come from the investment banker Travis Bradford. MIT Press has just issued his first book, Solar Revolution, which argues at great length and in great detail that we will soon be turning to solar panels for our power, in part for environmental reasons but more because they will soon be producing power that's as cheap—and much easier to deploy —than any other source. This is a fairly astounding claim—the conventional wisdom among environmentalists is that solar energy lags behind wind power by a decade or more as a cost-effective source of electricity—but he makes the case in convincing fashion.

During the last decade (as Janet Sawin of the Worldwatch Institute has previously described), Japan has heavily subsidized the purchase of rooftop solar panels by home owners. The Japanese authorities began to do this, in part, because they wanted to meet the promises they made on their own soil at the Kyoto conference on global warming, but also, Bradford suggests, because they sensed that the industry could grow if it were encouraged by an initial investment. Within a few years, the subsidy had the desired effect— the volume of demand made both manufacturing and installation much more efficient, driving down the price. Today, the government subsidy has almost entirely disappeared, but demand continues to rise, for the panels now allow homeowners to produce their own power for the same price charged by the country's big utilities. Japan in some ways is a special case—blessed with few domestic energy sources, it has some of the world's most expensive electricity, making solar panels more competitive. On the other hand, it's not particularly sunny in Japan. In any event, Bradford says the Japanese demand for solar power (and now an equally large program in Germany) will be enough to drive the cost of producing solar panels steadily down. Even without huge technological breakthroughs, which he says are tantalizingly near, the current hardware can be made steadily cheaper. He predicts the industry will grow 20 to 30 percent annually for the next forty years, which is akin to what happened with the last silicon-based revolution, the computer chip. No surprise, too, about who will own that industry —almost all the solar panel plants are now in Japan and Germany.

You can see signs of this change already. When I was in Tibet this summer, I repeatedly stumbled across the yak-skin tents of nomadic herders living in some of the most remote (and lofty) valleys in the world. They depended on yak dung, which they burned to cook food and heat their tents, and

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also often on a small solar panel hanging off one side of the tent, powering a lightbulb and perhaps a radio inside. Every small town had a shop selling solar panels for a price roughly equivalent to that of a single sheep. Solar power obviously makes sense in such places, where there's probably never going to be an electric line. But it also increasingly makes sense in suburban developments, where new technologies like solar roof tiles are reducing the cost of outfitting a house to use solar power; in any event, the cost of such tiles would be a small part of the government-subsidized mortgage. These systems are usually tied into the existing grid—when the sun is shining, my Vermont rooftop functions as a small power plant, sending power down the line. At night, I buy electricity like everyone else; in the sunny months of the year, the power the house uses and the power it generates are about the same. All this would make more economic sense, of course, if the destructive environmental costs of burning, say, cheap coal were reflected in the price of the resulting electricity. That seems almost certain to happen once George Bush leaves office. All plausible presidential candidates for both parties are committed to imposing some limits on the use of coal. It's already the rule in the rest of the developed world. But the testimony of Lovelock, Hansen, and the rest of organized science makes it very clear that it would be a wise investment, indeed the wisest possible investment, to spend large sums of government money to hasten this transition to solar power. Where should it come from? One obvious candidate is the Pentagon budget, now devoted to defending us against dangers considerably less threatening than climate change.

But even the widespread adoption of solar power would not put an end to the threat of global warming. The economic transition that our predicament demands is larger and more wrenching even than that. Some scientists have estimated that it would take an immediate 70 percent reduction in fossil fuel burning simply to stabilize climate change at its current planet-melting level. And that reduction is made much harder by the fact that it is needed at just the moment that China and India have begun to burn serious quantities of fossil fuel as their economies grow. Not, of course, American quantities—each of us uses on average eight times the energy that a Chinese citizen does—but relatively serious quantities nonetheless.

Kelly Sims Gallagher, one of the savviest early analysts of climate policy, has devoted the last few years to understanding the Chinese energy transition. Now the director of the Energy Technology Innovation Project at Harvard's Kennedy School, she has just published a fascinating account of the rise of the Chinese auto industry. Her research makes it clear that neither American industry nor the American government did much of anything to point the Chinese away from our addiction to gas-guzzling technology; indeed, Detroit (and the Europeans and Japanese to a lesser extent) was happy to use decades-old designs and processes. "Even though cleaner alternatives existed in the United States, relatively dirty automotive technologies were transferred to China," she writes. One result is the smog that is choking Chinese cities; another is the invisible but growing cloud of greenhouse gases, which come from tailpipes but even more from the coal-fired utilities springing up across China. In retrospect, historians are likely to conclude that the biggest environmental failure of the Bush administration was not that it did nothing to reduce the use of fossil fuels in America, but that it did nothing to help or pressure China to transform its own economy at a time when such intervention might have been decisive.

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It is precisely this question—how we might radically transform our daily lives—that is addressed by the cheerful proprietors of the WorldChanging Web site in their new book of the same name. This is one of the most professional and interesting Web sites that you could possibly bookmark on your browser; almost every day they describe a new technology or technique for environmentalists. Their book, a compilation of their work over the last few years, is nothing less than The Whole Earth Catalog, that hippie bible, retooled for the iPod generation. There are short features on a thousand cool ideas: slow food, urban farming, hydrogen cars, messenger bags made from recycled truck tarps, pop-apart cell phones, and plyboo (i.e., plywood made from fast-growing bamboo). There are many hundreds of how-to guides (how to etch your own circuit board, how to break in your hybrid car so as to maximize mileage, how to organize a "smart mob" (a brief gathering of strangers in a public place). WorldChanging can tell you whom to text-message from your phone in order to advocate for international debt relief, and how to build an iPod speaker from an old tin of Altoids mints. It's a compendium of everything a younger generation of environmental activists has to offer: creativity, digital dexterity, networking ability, an Internet-era optimism about the future, and a deep concern about not only green issues but related questions of human rights, poverty, and social justice. The book's pragmatism is refreshing: "We can do this" is the constant message, and there are enough examples to leave little doubt that sheer cleverness is not what we're lacking as we approach our uncertain future. "We need, in the next twenty-five years or so, to do something never before done. We need to consciously redesign the en-tire material basis of our civilization," Alex Steffen writes in his editor's introduction.

If we face an unprecedented planetary crisis, we also find ourselves in a moment of innovation unlike any that has come before.... We live in an era when the number of people working to make the world better is exploding.

He's right.

If there's one flaw in the WorldChanging method, I think it might be a general distrust of the idea that government could help make things happen. There's a Silicon Valley air to the WorldChanging enterprise—over the years it's been closely connected with Wired magazine, the bible of the digerati and a publication almost as paranoid about government interference and regulation as The Wall Street Journal. Like Internet entrepreneurs, they distrust both government intentions and abilities—bureaucrats tend, after all, to come from the ranks of those neither bold nor smart enough to innovate. A libertarian streak shines through: "When we redesign our personal lives in such a way that we're doing the right thing and having a hell of a good time," Steffen writes, "we act as one-person beacons to the idea that green can be bright, that worldchanging can be lifechanging." I'm sympathetic to this strain of thinking; I believe we're going to need more local and more nimble decision-making in the future to build strong, survivable communities. But it also makes it a little harder to be as optimistic as you'd like to be when reading these pages, which are filled with good ideas that, chances are, won't come to all that much without the support of government and a system of incentives for investment.

You can see a close-up of some of that futility in the new book Design Like You Give a Damn from the nonprofit Architecture for Humanity,[3] a book that is lovely in every sense of the word. The group

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started by sponsoring a competition for new shelters for refugees, and the range of replacements that people thought up for canvas tents makes clear just how much talent is currently going to waste designing McMansions. There are inflatable hemp bubbles and cardboard outhouses and dozens of other designs and prototypes for the world's poorest people and biggest disasters. As time went on the group also collected photos and plans for attractive buildings around the world: health clinics that generate their own power, schools cheap enough for communities to construct. Still, there's something sad about the entire project—most of these designs have never been carried out, because the architects lacked the political savvy or influence to get them adopted by relief agencies or national governments. When there's a disaster, relief agencies still haul out the canvas tents.

There's another way of saying what is missing here. Almost every idea that might bring us a better future would be made much easier if the cost of fossil fuel was higher—if there was some kind of a tax on carbon emissions that made the price of coal and oil and gas reflect its true environmental cost. (Gore, in an important speech at New York University last month, proposed scrapping all payroll taxes and replacing them with a levy on carbon.) If that day came—and it's the day at least envisioned by efforts like the Kyoto Treaty—then everything from solar panels to windmills to safe nuclear reactors (if they can be built) would spread much more easily: the invisible hand would be free to do more interesting work than it's accomplishing at the moment. Perhaps it would actually begin to operate with the speed necessary to head off Lovelock's nightmares. But that will only happen if local, national, and international officials can come together to make it happen, which in turn requires political action. The recent election-driven decision by California governor Arnold Schwarzenegger to embrace a comprehensive set of climate change measures shows that such political action is possible; on the other side of the continent, a Labor Day march across Vermont helped to persuade even the most right-wing of the state's federal candidates to endorse an ambitious program against global warming. The march's final rally drew a thousand people, which makes it possibly the largest global warming protest in the country's history. That's a pathetic fact, but it goes to show how few people are actually needed to begin working toward real change.

The technology we need most badly is the technology of community—the knowledge about how to cooperate to get things done. Our sense of community is in disrepair at least in part because the prosperity that flowed from cheap fossil fuel has allowed us all to become extremely individualized, even hyperindividualized, in ways that, as we only now begin to understand, represent a truly Faustian bargain. We Americans haven't needed our neighbors for anything important, and hence neighborliness—local solidarity—has disappeared. Our problem now is that there is no way forward, at least if we're serious about preventing the worst ecological nightmares, that doesn't involve working together politically to make changes deep enough and rapid enough to matter. A carbon tax would be a very good place to start.

Notes

[1] See Jim Hansen, "The Threat to the Planet," The New York Review, July 13, 2006.

[2] "'The Threat to the Planet': An Exchange," The New York Review, September 21, 2006.

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[3] A short essay of mine, which describes the Brazilian city of Curitiba and its efforts to integrate design and architecture into citywide planning and development, is appended to the end of the book.

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