Wednesday, April 27, 2005

Living in a Global Casino

A certain report (The Triennial Central Bank Survey of Foreign Exchange and Derivative Market Activity 2004) issued by the Bank of International Settlement quotes that "In traditional foreign exchange markets, average daily turnover in April 2004 was $1.9 trillion, a 57% increase at current exchange rates and a 36% rise at constant exchange rates compared to April 2001."

This is a huge volume of trade, if one considers that:

  • According to WTO statistics, the value of the Annual global exports of goods and services in 2003 was around $9 trillion (i.e., volumes of less than one week of Foreign Exchange transactions!!)

  • $1.9 trillion is about 100 times more than the trading volume of all the stockmarkets of the world combined.

    What makes it slightly scary is also the fact that by World Bank's estimates, 95% of these transactions are short term speculations, with 4 out of 5 trades completed in less than a week.

    Thus, given the fact that every day, only 2% of FX transactions relate to any "real" economic trade of goods or services, we are actually living in a global casino, where 98% transactions are speculative.

    Ever since the major world currencies became "float", and got commoditised, the global Currency Market or Foreign Exchange(FX) Market has emerged as one of the largest markets in the world. Currency traders obtain substantial gains by taking advantage of extreme fluctuations in currency price while using the well-known "buy lower - sell higher" principle. In comparing to other sectors of the financial world, foreign currency exchange is quite unique in that it is highly sensitive to many factors, open access to many classes of investors, high liquidity, and 24 hour access - and can transfer billions of dollars across continants at the click of a mouse.

    The major players - and winners - in this market are the investment banks. The world's largest ten banks (which include Merrill Lynch, Citigroup and Chase Manhattan, etc.) control 52% of the global foreign exchange market. The value of foreign exchange transactions conducted by Citigroup Bank in 1998 - $8.5 trillion - exceeded the value of the GDP of the United States in that year. The banks operate in their own interest and on behalf of large corporate and private clients, insurance companies and superannuation funds.

    The FX market also differs from investments in goods and services, in that speculators make money from money alone. No jobs are created and no services provided. The losers are often those least able to pay the price - the poor and marginalised who are the victims of financial crises triggered by (a) "capital account convertibility", normally a condition for loans by the international financial institutions, and (b) the rapid withdrawal of funds from emerging economies by speculators.

    This global casino is a shadowy world, where rumour and mood can shift billions of pounds in minutes, once described by Citibank chairman John Reed as "a little like the physicist who created the bomb".

    In the past, this global casino has triggered the foreign exchange crises which shook Mexico in 1994-5, Asia in 1997 and Russia in 1998.

    In the Nov.'97 7th Summit Level Meeting of the Group of 15 the then Prime Minister Mahathir of Malaysia had made these observations about these speculations:
    (while he was speaking in the meltdown of Malaysian economy around that time, but his remarks are true for all other "economic meltdowns")

    "In Malaysia and in other countries of South East Asia, we spent decades of sweat, toil and tears since independence to develop our countries and grow our economies. Our countries recorded the highest growth rates continuously for many years. But all these seem to have come to nought when, in the space of a few months, currency traders impoverished our countries merely by devaluing our currencies... The rules of trading are devised solely by the traders and these rules have been designed to benefit them. Thus for every dollar that they deposit, the bankers allow them gearing of 20 times. Since the funds at the disposal of these traders run into billions of dollars they have more money to play with than the reserves of most developing nations.

    ...Weak fundamentals are often cited as if these can mysteriously on their own weaken currencies. The truth is that currencies weaken only if currency traders sell them for US dollars. These traders are not doing so to save their investments. In fact they have no investments in our countries. What they actually do is to borrow the particular currency from foreigners or locals and then sell this currency for US dollars.

    ... This deliberate devaluation of the currency of a country by currency traders purely for profit... reduces the purchasing power of the country concerned, as well as the incomes of the people, rich and poor alike. It leads to inflation and economic regression. ..."

    "On the other hand the currency traders take billions of dollars of profits and pay absolutely no taxes to the countries they impoverish and make profits from."


    Sources:
    http://www.bis.org/publ/rpfx05.htm
    http://www.transaction.net/money/book/
    http://en.wikipedia.org/wiki/Foreign_exchange_market
    http://www.southcentre.org/southletter/sl29/south%20letter%2029trans-03.htm
    http://www.onlineopinion.com.au/view.asp?article=1954

  • Tuesday, April 26, 2005

    Preemptive Reconstruction: The New Capitalist Doctrine

    It is logical that a doctrine of "Preemptive War" should be followed by a plan for "Preemptive Reconstruction."... as the excerpts from this article shows:

    Last summer,... the Bush Administration's doctrine of preventive war took a major leap forward. On August 5, 2004, the White House created the Office of the Coordinator for Reconstruction and Stabilization, headed by former US Ambassador to Ukraine Carlos Pascual. Its mandate is to draw up elaborate "post-conflict" plans for up to twenty-five countries that are not, as of yet, in conflict. According to Pascual, it will also be able to coordinate three full-scale reconstruction operations in different countries "at the same time," each lasting "five to seven years."

    .... Pascual's office keeps "high risk" countries on a "watch list" and assembles rapid-response teams ready to engage in prewar planning and to "mobilize and deploy quickly" after a conflict has gone down. The teams are made up of private companies, nongovernmental organizations and members of think tanks - some..., will have "pre-completed" contracts to rebuild countries that are not yet broken. Doing this paperwork in advance could "cut off three to six months in your response time."

    The plans Pascual's teams have been drawing up... are about changing "the very social fabric of a nation," ...not to rebuild any old states,... but to create "democratic and market-oriented" ones. So, for instance (and he was just pulling this example out of his hat, no doubt), his fast-acting reconstructors might help sell off "state-owned enterprises that created a nonviable economy." Sometimes rebuilding, he explained, means "tearing apart the old."


    Of course, "Reconstruction" is just a word, which can have other meanings as well:

    ...."We used to have vulgar colonialism," says Shalmali Guttal, a Bangalore-based researcher with Focus on the Global South. "Now we have sophisticated colonialism, and they call it 'reconstruction.'"

    It certainly seems that ever-larger portions of the globe are under active reconstruction: being rebuilt by a parallel government made up of a familiar cast of for-profit consulting firms, engineering companies, mega-NGOs, government and UN aid agencies and international financial institutions. And from the people living in these reconstruction sites - Iraq to Aceh, Afghanistan to Haiti - a similar chorus of complaints can be heard. The work is far too slow, if it is happening at all. Foreign consultants live high on cost-plus expense accounts and thousand-dollar-a-day salaries, while locals are shut out of much-needed jobs, training and decision-making...

    ...But if the reconstruction industry is stunningly inept at rebuilding, that may be because rebuilding is not its primary purpose. According to Guttal, "It's not reconstruction at all - it's about reshaping everything." ...the rise of a predatory form of disaster capitalism that uses the desperation and fear created by catastrophe to engage in radical social and economic engineering. And on this front, the reconstruction industry works so quickly and efficiently that the privatizations and land grabs are usually locked in before the local population knows what hit them. Kumara, in another e-mail, warns that Sri Lanka is now facing "a second tsunami of corporate globalization and militarization," potentially even more devastating than the first. "We see this as a plan of action amidst the tsunami crisis to hand over the sea and the coast to foreign corporations and tourism, with military assistance from the US Marines."

    ...."Post-conflict" countries now receive 20-25 percent of the World Bank's total lending, up from 16 percent in 1998--itself an 800 percent increase since 1980, according to a Congressional Research Service study. Rapid response to wars and natural disasters has traditionally been the domain of United Nations agencies, which worked with NGOs to provide emergency aid, build temporary housing and the like. But now reconstruction work has been revealed as a tremendously lucrative industry, too important to be left to the do-gooders at the UN. So today it is the World Bank, already devoted to the principle of poverty-alleviation through profit-making, that leads the charge.

    ... But shattered countries are attractive to the World Bank for another reason: They take orders well. After a cataclysmic event, governments will usually do whatever it takes to get aid dollars - even if it means racking up huge debts and agreeing to sweeping policy reforms. And with the local population struggling to find shelter and food, political organizing against privatization can seem like an unimaginable luxury.

    Even better from the bank's perspective, many war-ravaged countries are in states of "limited sovereignty": They are considered too unstable and unskilled to manage the aid money pouring in, so it is often put in a trust fund managed by the World Bank. This is the case in East Timor, where the bank doles out money to the government as long as it shows it is spending responsibly. Apparently, this means slashing public-sector jobs (Timor's government is half the size it was under Indonesian occupation) but lavishing aid money on foreign consultants the bank insists the government hire (researcher Ben Moxham writes, "In one government department, a single international consultant earns in one month the same as his twenty Timorese colleagues earn together in an entire year").



    Natural calamities, apparently, also helps the "reconstruction" efforts of the "dynamic private sector", as the article goes on to recount:

    "...many observers say that today's disaster capitalism really hit its stride with Hurricane Mitch. For a week in October 1998, Mitch parked itself over Central America, swallowing villages whole and killing more than 9,000. Already impoverished countries were desperate for reconstruction aid--and it came, but with strings attached. In the two months after Mitch struck, with the country still knee -deep in rubble, corpses and mud, the Honduran congress initiated what the Financial Times called "speed sell-offs after the storm." It passed laws allowing the privatization of airports, seaports and highways and fast-tracked plans to privatize the state telephone company, the national electric company and parts of the water sector. It overturned land-reform laws and made it easier for foreigners to buy and sell property. It was much the same in neighboring countries: In the same two months, Guatemala announced plans to sell off its phone system, and Nicaragua did likewise, along with its electric company and its petroleum sector.

    All of the privatization plans were pushed aggressively by the (IMF and WB). According to the Wall Street Journal, "the World Bank and International Monetary Fund had thrown their weight behind the [telecom] sale, making it a condition for release of roughly $47 million in aid annually over three years and linking it to about $4.4 billion in foreign-debt relief for Nicaragua."

    Now the bank is using the December 26 tsunami to push through its cookie-cutter policies... most of the World Bank's emergency aid has come in the form of loans, not grants. Rather than emphasizing the need to help the small fishing communities - more than 80 percent of the wave's victims - the bank is pushing for expansion of the tourism sector and industrial fish farms. As for the damaged public infrastructure, like roads and schools, bank documents recognize that rebuilding them "may strain public finances" and suggest that governments consider privatization (yes, they have only one idea). "For certain investments," notes the bank's tsunami-response plan, "it may be appropriate to utilize private financing."

    ...tsunami relief has little to do with recovering what was lost. Although hotels and industry have already started reconstructing on the coast,... governments have passed laws preventing families from rebuilding their oceanfront homes. Hundreds of thousands of people are being forcibly relocated inland, to military style barracks in Aceh and prefab concrete boxes in Thailand. The coast is not being rebuilt as it was - dotted with fishing villages and beaches strewn with handmade nets. Instead, governments, corporations and foreign donors are teaming up to rebuild it as they would like it to be: the beaches as playgrounds for tourists, the oceans as watery mines for corporate fishing fleets, both serviced by privatized airports and highways built on borrowed money.

    In January Condoleezza Rice sparked a small controversy by describing the tsunami as "a wonderful opportunity" that "has paid great dividends for us." ...if anything, Rice was understating the case. A group calling itself Thailand Tsunami Survivors and Supporters says that for "businessmen-politicians, the tsunami was the answer to their prayers, since it literally wiped these coastal areas clean of the communities which had previously stood in the way of their plans for resorts, hotels, casinos and shrimp farms. To them, all these coastal areas are now open land!"

    Friday, April 22, 2005

    The Eleventh Round - A Fable

    Bernard Lietaer, a fellow at the Center for Sustainable Resource Development at the University of California at Berkeley, used to a banker and a currency trader Central Bank in Belgium, where his first project was the design and implementation of the single European currency system. He was also the president of Belgium's Electronic Payment System.

    Here is a nice small fable from his book The Future of Money about the social consequences of an interest-based monetary system.

    The Eleventh Round

    Once upon a time, there was a small village where people knew nothing about money or interest. Each market day, people would bring their chickens, eggs, hams and breads to the marketplace and enter into the time-honored ritual of negotiations and exchange for what they needed with one another. At harvests, or whenever someone’s barn needed repairs after a storm, the villagers simply exercised another age-old tradition of helping one another, knowing that if they themselves had a problem one day, others would surely come to their aid in turn.

    One market day, a stranger with shiny black shoes and an elegant white hat came by and observed the whole process with a sardonic smile. When he saw one farmer running around to corral six chickens wanted in exchange for a big ham, the stranger could not refrain from laughing. “Poor people,” he said, “so primitive.”

    Overhearing this, the farmer’s wife challenged him. “Do you think you can do a better job handling chickens?”

    The stranger responded: “Chickens, no. But there is a much better way to eliminate all the hassles. Bring me one large cowhide and gather the families. I’ll explain the better way.”

    And requested, the families gathered, and the stranger took the cowhide, cut perfect leather rounds in it and put an elaborate and graceful little stamp on each round. He then gave ten rounds to each family, stating that each round represented the value of one chicken. “Now you can trade and bargain with the rounds instead of those unwieldy chickens.” It seemed to make sense and everybody was quite impressed with the stranger.

    “One more thing,” the stranger added. “In one year’s time I will return and I want each of you to bring me back an extra round, an eleventh round. That eleventh round is a token of appreciation for the technological improvement I just made possible in your lives.”

    “But where will that round come from?” asked the wife.

    “You’ll see,” said the stranger, with a knowing look.

    Assuming that the population and its annual production remained exactly the same during that next year, what do you think happened? Remember, that eleventh round was never created.

    As the stranger had suggested, it was far more convenient to exchange rounds instead of the chickens on market days. But this convenience had a hidden cost beyond the demanded eleventh round—that of generating a systemic undertow of competition among all the participants. The equivalent of one out of each eleven families would have to lose all of its rounds, even if everybody managed their affairs well, in order to provide the eleventh round to the stranger.

    The following year, when a storm threatened some of the farmers, there was a greater reluctance to assist neighbors. The families were now in a wrestling match for that eleventh round, the round that had not been created, which actively discouraged the spontaneous cooperation that had long been the tradition in the village.

    Thursday, April 21, 2005

    Ecuador vs. The Economic Hit Man

    Today, the Ecuador's President Lucio Guitiérrez was toppled by a mass-protest (after being sacked by the Ecuador Congress)... Since yesterday's posting on the Economic Hitman "Globalisation as Neo-Colonialism" mentioned John Perkin's comments on Ecuador, this news co-incidentally becomes a good live case study.

    It is a somewhat paradoxical that President Lucio Guitiérrez - a former Army Colonel - was elected in 2002 on promises to oppose the "free-market" policies, which had left more than 62% under the poverty line.

    Unfortunately, he reneged his promises, when a couple of months back, the World Bank approved a new $100 million loan for Ecuador. (where the total debt is already equivalent to 61 percent of Gross Domestic Product. Some 40 percent of Ecuador’s government spending goes to repay external debts).

    The World Bank loan followed a February visit to Ecuador by IMF Managing Director Rodrigo Rato, who declared that Ecuador "must open its oil, electricity and pension sectors to private investment." Further, Ecuador needs "changes to labor market rules, restructuring of public enterprises and changes to social spending to provide more help to the poor majority."... Since last 4-5 years, IMF had been insisting that to repay back the loan,

  • 80% of Ecuador's new oil earnings must be used to service the debt (with another 10% to go into a fund to hedge against the price of oil),
  • increase cooking gas prce by 80%,
  • eliminate 26,000 jobs and
  • halve real wages for the remaining workers by 50 per cent...

    A certain IMF document cites 167 loan conditions - which look more like a financial coup d'etat, than a benevolent assistance to a stuggling economy.... And to think that it all stared by Ecuador taking a loan of $1.5bn in 1983 (and it used to be an OPEC country till 1992!!).

    In exchange for the loan, the Guitiérrez government agreed, in the World Bank’s words, to "reverse expansionary spending" - that is, cut the budget, and "enhance labor flexibility" by slashing jobs and weakening workers’ rights.

    Agreeing to IMF conditions, Guitiérrez recently unveiled those "changes" - a proposed law of "economic rationalization" that would privatize the pension system, dramatically raise the costs of electricity for consumers, sell off state enterprises to private capitalists, cut taxes to businesses and reduce workers’ benefit funds...

    Apparently people of Ecuador did not like these progressive reforms...

    Predictably, this has not been dubbed as one of those colourful "democratic revolutions", that one has been witnessing in Eastern Europe/Central Asia in the past couple of years/months....

    Sources:
    http://www.socialistworker.org/2005-1/540/540_01_IMF.shtml
    http://www.rainforestinfo.org.au/ocp/2100%20words%20oz.htm
    http://www.hartford-hwp.com/archives/25/087.html

  • Wednesday, April 20, 2005

    Economic Hit Man: Globalisation as Neo-Colonialism



    John Perkins, the author of the book, worked for the international consulting firm of Chas T. Main from 1971 to 1981, where he rose to the position of Chief Economist - or as he describes the role: The Economic Hit Man - belonging to a breed of highly paid professionals, who cheat poor countries of trillions of dollars.

    In an interview with Democracy Now, he described his job:
    http://www.democracynow.org/article.pl?sid=04/11/09/1526251

    "We were about 2,000 employees, and I became its chief economist... my real job was deal-making. It was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan – let's say a $1 billion to a country like Indonesia or Ecuador – and this country would then have to give ninety percent of that loan back to a U.S. company, or U.S. companies, to build the infrastructure – a Halliburton or a Bechtel. These were big ones. Those companies would then go in and build an electrical system or ports or highways, and these would basically serve just a few of the very wealthiest families in those countries. The poor people in those countries would be stuck ultimately with this amazing debt that they couldn’t possibly repay. A country today like Ecuador owes over fifty percent of its national budget just to pay down its debt. And it really can’t do it. So, we literally have them over a barrel. So, when we want more oil, we go to Ecuador and say, "Look, you're not able to repay your debts, therefore give our oil companies your Amazon rain forest, which are filled with oil."... So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It's an empire. There's no two ways about it. It’s a huge empire. It's been extremely successful."

    You can watch his interview at:
    http://207.44.245.159/article8171.htm

    In the Prologue of the book, Perkins describes how the EHMs are an integral part of the Globalisation process, and help creating a new form of colonial empire:
    http://www.bkconnection.com/static/cehmexcerpt.asp

    "As is the case with so many things we EHMs must take responsibility for, it is a war that is virtually unknown anywhere outside the country where it is fought... For them, this is a war about the survival of their children and cultures, while for us it is about power, money, and natural resources. It is one part of the struggle for world domination and the dream of a few greedy men, global empire.

    That is what we EHMs do best: we build a global empire. We are an elite group of men and women who utilize international financial organizations to foment conditions that make other nations subservient to the corporatocracy running our biggest corporations, our government, and our banks. Like our counterparts in the Mafia, EHMs provide favors. These take the form of loans to develop infrastructure —electric generating plants, highways, ports, airports, or industrial parks. A condition of such loans is that engineering and construction companies from our own country must build all these projects. In essence, most of the money never leaves the United States; it is simply transferred from banking offices in Washington to engineering offices in New York, Houston, or San Francisco.

    Despite the fact that the money is returned almost immediately to corporations that are members of the corporatocracy (the creditor), the recipient country is required to pay it all back, principal plus interest. If an EHM is completely successful, the loans are so large that the debtor is forced to default on its payments after a few years. When this happens, then like the Mafia we demand our pound of flesh. This often includes one or more of the following: control over United Nations votes, the installation of military bases, or access to precious resources such as oil or the Panama Canal. Of course, the debtor still owes us the money — and another country is added to our global empire.

    ... Ecuador is typical of countries around the world that EHMs have brought into the economic-political fold. For every $100 of crude taken out of the Ecuadorian rain forests, the oil companies receive $75. Of the remaining $25, three-quarters must go to paying off the foreign debt. Most of the remainder covers military and other government expensesÑwhich leaves about $2.50 for health, education, and programs aimed at helping the poor. Thus, out of every $100 worth of oil torn from the Amazon, less than $3 goes to the people who need the money most, those whose lives have been so adversely impacted by the dams, the drilling, and the pipelines, and who are dying from lack of edible food and potable water."


    The last paragraph is a good example of the "trickle-down" economics!!!

    It is somewhat ironic comment on our age that what should be seen as a signed document of pre-meditated personal and institutional crime has merely become a Best Seller book on the New York Times, Washington Post, Wall Street Journal, etc. The contents of the book have neither been challenged or denied by the global financial institutions, that have been quoted in the book - nor has the so-called Civil Society, Rule of Law, etc., taken up the allegations to challenge these financial institutions... it will be read, reviewed, discussed... and the world will return to "business-as-usual".

    Monday, April 18, 2005

    MBA: The Cult of Robber Barons??

    Some time back, Alternative Perspective had featured a posting "MBA Education is bad for Society/ Business... Students!!"

    This posting is a continuation, though from a different angle.

    Yoshi Tsurumi is a professor of international business at Baruch College, and had taught at Harvard Business School from 1972 to 1976, when President GW Bush was an MBA student there. Though much of the article is a criticism of Bush's economic policies, there are also significant observations about the MBA education

    (Since Indian MBA is modelled on US MBA, his observations about the "American business education" are equally applicable to what is taught in the Indian B-Schools).

    Some excerpts from his article "Hail to the Robber Baron":
    http://www.tbrnews.org/Archives/a1514.htm

    "Thirty years ago, President Bush was my student at Harvard Business School... In those days, Bush belonged to a minority of MBA students who were seriously disconnected from taking the moral and social responsibility for their actions.

    Today, he would fit in comfortably with an overwhelming majority of business students and teachers whose role models are celebrated captains of piracy. Since the 1980s... America’s business education has also increasingly become contaminated by the robber baron culture of the pre-Great Depression era.

    ...Business education has also produced former Enron CEO Jeff Skilling and other MBAs behind the malfeasances of Tyco, HealthSouth, Haliburton, AIG, and WorldCom. Many executives of corporate America who hold MBAs have also been engaged in the unethical acts of raiding their corporate treasuries at the expense of employees and stockholders. ...a multitude of CEOs in corporate America give themselves obscenely large bonuses that have little to do with their performance. In 1980, the CEOs of Fortune 500 large corporations received, on average, 70 times larger annual compensations than their average employees... (now) comparable CEOs have come to give themselves 600 to 1,000 times larger annual compensations than their rank-and-file employees whose pay has stagnated....

    ...Meanwhile, American economics study has increasingly become a pseudoscience of mathematical formula manipulation that is devoid of humanity. This economics has conquered America’s business education and become fused with the robber baron culture of greed supremacy. American MBAs are taught to treat ordinary employees as disposable costs and to swallow uncritically the gospel that corporations exist only to reward abstract stockholders. MBAs are taught the pretend-science of manipulating accounting, finance, employees, customers, and stock prices. Financial games and hostile takeovers of competitors are taught to accomplish corporations’ sole objective — to make money and manipulate stock prices.

    ...To justify the robber baron culture, America’s business educators and economists falsely cite their demigod of laissez-faire market economics, Adam Smith. Little do they know that Adam Smith in fact scathingly castigated... business collusion and unfair taxes,... exploitations of labor and communities, and robber barons’ hubris. Nowhere in his 900-page book, The Wealth of Nations, does Smith even imply that those who knowingly harm others and society in their pursuit of personal greed also benefit their society. He rejects the notion that a corporation exists to make money without ethical constraints."

    Sunday, April 17, 2005

    Is the World a Safer Place? - Terrorism vs. Censorship

    One more addition to the current "Myth of Global Terrorism" news:

    In his pre-presidential campaign - and in presidential address - the US President GW Bush had made the remarks that the "war on terrorism" is winning, and that the world is a safer place, etc. etc.

    Nevertheless, this year, the US Administration decided to eliminate the publication of its annual report "The Patterns of Global Terrorism", because the facts did not fit the political statements. A news item from Knight Kidder reports:

    "The State Department decided to stop publishing an annual report on international terrorism after the government's top terrorism center concluded that there were more terrorist attacks in 2004 than in any year since 1985, the first year the publication covered.

    Several U.S. officials defended the decision, saying the methodology used by the National Counterterrorism Center to generate statistics had flaws, such as the inclusion of incidents that may not have been terrorism.

    But other current and former officials charged that Secretary of State Condoleezza Rice's office ordered the report, "Patterns of Global Terrorism," eliminated weeks ago because the 2004 statistics raised disturbing questions about the Bush's administration's frequent claims of progress in the war against terrorism.

    "Instead of dealing with the facts and dealing with them in an intelligent fashion, they try to hide their facts from the American public," charged Larry Johnson, a former CIA analyst and State Department terrorism expert who first disclosed the decision to eliminate the report in The Counterterrorism Blog, an online journal.

    ... According to Johnson and U.S. intelligence officials, statistics that the National Counterterrorism Center provided to the State Department reported 625 "significant" terrorist attacks in 2004. That compared with 175 such incidents in 2003, the highest number in two decades.

    The statistics didn't include attacks on U.S. troops in Iraq, which President Bush as recently as Tuesday called "a central front in the war on terror."...

    The numbers of incidents and fatalities in the report for 2003 were undercounted last year, forcing a revision and embarrassing the White House, which had used the original version to bolster Bush's election-campaign claim that the Iraq war had advanced the fight against terrorism. U.S. officials blamed bureaucratic mistakes involving the Terrorist Threat Integration Center, the forerunner of the National Counterterrorism Center, created under the Intelligence Reform and Terrorism Prevention Act of 2004, which Bush signed Dec. 17...."


    If you are wondering about the first statement mentioning the "myth of global terrorism"... please wait - will come back to it also.

    Wednesday, April 13, 2005

    End of Oil-Age???...

    ...Finally!!
    (I added "Finally", because last year in this blog I had made a posting with similar title:End of Oil...

    ...Since then, the fact that we have "moved beyond the Oil Peak" is - finally - but gradually becoming a part of conventional wisdom).

    In the last one month, two interesting events took place (not really mentioned - or debated - in the mainstream media):

  • Goldman Sachs - the biggest trader of energy derivatives(the Goldman Sachs Commodities Index is considered a barometer of energy and commodities prices), came out with a report that the oil prices would peak to $105.
    http://tinyurl.com/4fof5

  • On the 14th March US Republican Congressman Roscoe Bartlett made a 60minutes presentation on "Oil Demands: The Challenges of Peak Oil" to the US Congress. The presentation was based on factual evidence that the world had reached/is about to reach its peak oil production, after which the oil-based energy age would go into a decline.

    [The text of the presentation is available at:
    http://tinyurl.com/48eod
    And a 45mb video of the same can be downloaded from: http://tinyurl.com/4c339 ]

    What makes Congressman Bartlett's presentation important is that this is the first time ever anywhere in the world, a government representative (Bartlett was the Chairman of the Energy Subcommittee of Science) publicly acknowledged this possibility that the oil age is be ending
    (though, in the scientific community, this has been a much discussed fact).
    http://www.hubbertpeak.com

    To be fair, there were others also, who have also been mentioning such an eventuality since some time. For example:

  • Deutsche Bank had published a 23page report titled "Energy Prospects after Petroleum Age" in December 2004.
    http://tinyurl.com/4d3vc

  • A book to be published in the coming month by Kenneth Deffeyes (a geologist whoused to work with Shell oil Research Lab, and now a Professor Emeritus at univ of Princeton) is titled "Hubbert's Peak: The Impending World Oil Shortage" One can read the first chapter at:
    http://pup.princeton.edu/chapters/s7121.html

  • there is, in fact, an entire website "http://www.lifeaftertheoilcrash.net/Index.html" devoted to this theme...
    http://www.lifeaftertheoilcrash.net/Index.html
    Etc.

    The Evidence:

    Lest one takes these publications as yet another Dooms-Day Prophesy, I am reproducing the graphs from the previous post, which tell their own stories:


    In 1998, the price of a barrel of oil was US$18 - today, it hovers around US$55!!!













  • Sunday, April 10, 2005

    Letter from Baghdad - 1920 version!!!

    Yesterday, to mark the 2nd anniversary of the Fall of Saddam Hussein, tens of thousands of Shiites held anti-American rally against the "occupation" troops, and burned effigies of Bush and Blair, at the same square where jubilant crowds toppled a statue of Saddam Hussein two years ago.



    The parallel to events from WWI to 1920s is remarkable, when the British and French had "liberated" Mesopotamia (Iraq) from the cruel Turkish Ottoman Empire.

    The following are the excerpts from a letter sent by Ex.Lieut-Col TE Lawrence (of "Lawrence of Arabia" fame), which was published in The Sunday Times, August 22, 1920:

    "The people of England have been led in Mesopotamia into a trap from which it will be hard to escape with dignity and honour. They have been tricked into it by a steady withholding of information. The Baghdad communiques are belated, insincere, incomplete. Things have been far worse than we have been told, our administration more bloody and inefficient than the public knows. It is a disgrace to our imperial record, and may soon be too inflamed for any ordinary cure. We are to-day not far from a disaster...

    ... there has been a deplorable contrast between our profession and our practice. We said we went to Mesopotamia to defeat Turkey. We said we stayed to deliver the Arabs from the oppression of the Turkish Government, and to make available for the world its resources of corn and oil. We spent nearly a million men and nearly a thousand million of money to these ends. This year we are spending ninety-two thousand men and fifty millions of money on the same objects.

    Our government is worse than the old Turkish system. They kept fourteen thousand local conscripts embodied, and killed a yearly average of two hundred Arabs in maintaining peace. We keep ninety thousand men, with aeroplanes, armoured cars, gunboats, and armoured trains. We have killed about ten thousand Arabs in this rising this summer. We cannot hope to maintain such an average: it is a poor country, sparsely peopled... We are told the object of the rising was political, we are not told what the local people want.

    ...We say we are in Mesopotamia to develop it for the benefit of the world. all experts say that the labour supply is the ruling factor in its development. How far will the killing of ten thousand villagers and townspeople this summer hinder the production of wheat, cotton, and oil? How long will we permit millions of pounds, thousands of Imperial troops, and tens of thousands of Arabs to be sacrificed on behalf of colonial administration which can benefit nobody but its administrators?"


    As the "Coalition of the Willing" is realising now, even that time the British had stepped into the "Quicksand of History":

    "Britain quickly discovered that colonising Iraq (under a so-called “mandate” from the League of Nations) was vastly more difficult than it was supposed to be. The Iraqis may have been satisfied with the end of Ottoman control, but they were obstinately unimpressed by their new rulers. There were armed uprisings, assassinations of British military officers and bureaucrats in the streets and general unruliness. The British, unable to deal with tribal and regional outbreaks, resorted to bombing the population into a form of submission from the air. By 1921, the British named a new king of Iraq, Faysal bin Hussein al-Hashim, but he never became popular because he was seen by the locals as a tool of London. It was 16 years before Britain finally extricated itself from its “Mesopotamian entanglement”.
    [http://tinyurl.com/6fdch]

    Saturday, April 09, 2005

    Patenting to Curb Innovation

    I picked up this article ("Patent [Amendment] Ordinance: A Blow Against Science & Public Health" by Rajesh Ramakrishnan, in Breakthrough Vol II No.1 March 05) from a posting in one of the maillists.

    The article highlights the following issues:

  • The dangers of amending the Patent Act to include Product Patents apart from the existing Process Patents are that if any product patent has a Unique Selling Proposition no one else can develop a similar product. For example: If a company develops a cure for AIDS can anyone else bring out another product for curing AIDS without patent infringement?

  • Patentability is determined by Money Power. The legal expenses to fight patent law suits run into astronomical figures. The big players in U.S.A. use this route to crush new entrants. There are countless cases on record where this has been done. This is in the country which is the Mother of free enterprise!

  • The benefits of Inventions go to Capital - not to the inventor who generally is a paid employee with the gold chain of a Secrecy Agreement round his neck. Are patents, therefore, the real driving force for individual creativity?

  • Patent laws do not bring about a lowering in prices. For example :The Bush Administration has justified the restrictions on importing cheaper drugs even from Canada as they may be spurious! He has a responsibility to protect the lives of the American people. Yet other countries are to open their doors to U.S. products!

  • The justification for patent protection was that it costs the pharmaceutical companies a lot of money to develop drugs. By outsourcing to India these costs have been drastically cut yet the patent protection has been increased several fold. India doesn't benefit by this research as the patent stands in the name of the MNC, but Indians have to pay for the higher priced drugs. The same applies to Clinical Testing & Research outsourced to India by the MNCs.

  • Prescription drugs are several orders of magnitude more costly than the basic chemicals needed to cure an illness. This is on the plea that they prevent side effects. The basic drugs for AIDS cost a fraction of the patented drugs. These are being blocked from being supplied to the poor countries suffering from the scourge of AIDS.

  • Co-opetition, exchange of information, reverse engineering are the routes to innovation & cost reduction. These are being blocked by the Patent Amendment Bill under pressure from the affluent countries who have rightly seen the threats from the developing countries where the Power of Knowledge is on the ascendant.
  • Monday, April 04, 2005

    Globalising Pollution: the World Bank View

    The February 8th, 1992 issue of The Economist had carried excerpts of a leaked internal memo from Lawrence Summers, the then Chief Economist of the World Bank, (and the current President of Harvard, where his recent remarks about women caused quite some furore).

    The Economist article is reproduced below:

    LET THEM EAT POLLUTION

    Lawrence Summers, chief economist of the World Bank, sent a memorandum to some colleagues on December 12th. The Economist has a copy. Some of the memo has caused a fuss within the Bank:

    "Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs? I can think of three reasons:

    (1) The measurement of the costs of health-impairing pollution depends on the forgone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.

    (2) The costs of pollution are likely to be non-linear as the initial inrements of pollution probably have very low cost. I've always thought that under-populated countries in Africa are vastly under-polluted; their air quality is probably vastly inefficiently low [sic] compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world-welfare-enhancing trade in air pollution and waste.

    (3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income-elasticity. The concern over an agent that causes a one-in-a-million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-5 mortality is 200 per thousand. Also, much of the concern over industrial atmospheric discharge is about visibility-impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare-enhancing. While production is mobile the consumption of pretty air is a non-tradable.

    The problem with arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc) could be turned around and used more or less effectively against every blank proposal for liberalisation."


    Summers later tried to clarify that this memo was intended to "provoke debate" and and was not an advocacy for "dumping of untreated toxic wastes near the homes of poor people."

    The Economist, however, closed the article with comments: "The language is crass, even for an internal memo. But look at it another way: Mr. Summers is asking questions that the World Bank would rather ignore - and, on the economics, his points are hard to answer.", and suggested that there should be a "public debate" on this suggestion.

    Saturday, April 02, 2005

    Living in an Unequal World

    According to some experts, we have reached the age of abundance, and the “trickle-down effect” will take care of the poorer lot of the world – as they say, “The rising tide will raise all the boats.”

    The facts and figures, however, show a very different picture of the world we live in. We seem to be living in an “Siphoning-Up Economy”.

    According to UNDP's Human Development Report (1998) :
    http://tinyurl.com/5j9xe

  • Globally, the richest 20% people consume 58% of all energy, while the poorest 20% get to use only 4% of the global energy output.

  • 87% of the vehicles are owned by the richest 20% of the world, while the poorest 20% own less than 1% of vehicles.

  • The richest 20% consume 84% of the paper, while the poorest 20% use 1.1%.

  • 74% of telephone lines are for the richest 20%; the comparative figure for the poorest 20% is 1.5%.

  • The richest 20% consume about 45% of all meat and fish, while the poorest 20% consume just about 5% of the produce.

  • In all, 86% of the total private consumption expenditure is accounted by the richest 20% living in high-income countries, while the poorest 20% account for negligible 1.3%.

    The UNDP’s Human Development Report (1999) had these statistics :
    http://hdr.undp.org/reports/global/1999/en/

  • The 20% richest people living in the world’s richest countries are beneficiaries of 82% of the global export trade, and 68% of FDIs; the bottom 20% get less than 1%

  • The gap between the rich and the poor countries has widened. In 1913, the top 20% had 13-times more income than the bottom 20%; in 1960 this had grown to 30-times, and in 1997, this proportion had become 74-times.

    Some more facts from other sources:

  • A mere 12% of the world’s population uses 85% of world’s water resources, and this 12% does not live in developing countries
    http://www.foodfirst.org/pubs/backgrdrs/2001/s01v7n3.html

  • The GDP of the world’s 48 poorest countries is less than the combined wealth of the world’s 3 richest people
    http://mondediplo.com/1998/11/01leader

  • According to a 1999 World Bank Report on Global Development Financing, for ever $1 of loan received, the developing countries spend $13 for debt-repayment
    http://www.worldbank.org/prospects/gdf99/

  • According to a 2002 article published in The Guardian “The richest 50m people, huddled in Europe and North America, have the same income as 2.7bn poor people. The slice of the cake taken by 1% is the same size as that handed to the poorest 57%.”
    http://www.guardian.co.uk/debt/Story/0,2763,636624,00.html

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