Looking Backward to Look Forward

Paul Krugman in his NY Times op-ed takes on the issue of whether the US should investigate the past administration's crimes:

Still, you might argue — and many do — that revisiting the abuses of the Bush years would undermine the political consensus the president needs to pursue his agenda.

But the answer to that is, what political consensus? There are still, alas, a significant number of people in our political life who stand on the side of the torturers. But these are the same people who have been relentless in their efforts to block President Obama’s attempt to deal with our economic crisis and will be equally relentless in their opposition when he endeavors to deal with health care and climate change. The president cannot lose their good will, because they never offered any.

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For the fact is that officials in the Bush administration instituted torture as a policy, misled the nation into a war they wanted to fight and, probably, tortured people in the attempt to extract “confessions” that would justify that war. And during the march to war, most of the political and media establishment looked the other way.

It’s hard, then, not to be cynical when some of the people who should have spoken out against what was happening, but didn’t, now declare that we should forget the whole era — for the sake of the country, of course.

Sorry, but what we really should do for the sake of the country is have investigations both of torture and of the march to war. These investigations should, where appropriate, be followed by prosecutions — not out of vindictiveness, but because this is a nation of laws.

We need to do this for the sake of our future. For this isn’t about looking backward, it’s about looking forward — because it’s about reclaiming America’s soul.

In a blog entry Krugman adds the following point:

One addendum to today’s column: the truth, which I think everyone in the political/media establishments knows in their hearts, is that the nine months or so between the summer of 2002 and the beginning of the Iraq insurgency were a great national moral test — a test that most people in influential positions failed.

The Bush administration was obviously — yes, obviously — telling tall tales in order to promote the war it wanted: the constant insinuations of an Iraq-9/11 link, the hyping of discredited claims about a nuclear program, etc.. And the question was, should you stand up against that? Not many did — and those who did were treated as if they were crazy.

For me and many others that was a radicalizing experience; I’ll never trust “sensible” opinion again. But for those who stayed “sensible” through the test, it’s a moment they’d like to see forgotten. That, I believe, is the real reason so many want to let torture and everything else go down the memory hole.

Let’s hope that doesn’t happen.

Whoops! Something from Left Field

Daniel Gross writing on Slate magazine raises something unexpected (at least for me): the CDSs (Credit Default Swaps) which let companies bet on each other has created a "market" in which debtors are happy to let companies go bankrupt rather than negotiate:

One key economic assumption is that people act to preserve their economic interests. Those who have lent money to troubled companies, for example, generally prefer the company remain solvent; otherwise, they can't get paid back. Similarly, lenders to troubled firms frequently favor swift, out-of-court restructuring deals, in which they swap debt for stock, instead of pushing companies into Chapter 11 bankruptcy. That's because companies in Chapter 11 can languish there for years and waste scarce company assets on huge fees to lawyers, consultants, and accountants.

But if a lender or creditor believes it can profit more from a complete failure—i.e., if it has an insurance policy that pays off only in the event of utter devastation—that creditor might be more inclined to push a company toward bankruptcy. And thanks to the financial innovations of recent years—the rampant use of hedging and credit-default swaps, the ability of investors to purchase insurance on debt—that's exactly what seems to be happening. Creditors are acting to protect their economic self-interest by encouraging companies to destroy themselves.

The article goes on to discuss specifics. It is well worth reading the whole article to understand this new phenomenono.

The Financial Crisis in Canada

The following graphic is from the Bank of Canada's April 2009 Monetary Policy Report. It shows the effect of the financial crisis on household wealth in Canada and the US. Canada has held up better because house prices haven't fallen as much as in the US. The hit taken by unemployment and stock market losses are roughly equivalent on both sides of the border:


It is predicting that this quarter's drop in GDP will come in at an annualized rate of -7.3%, the largest quarterly decline on record since 1961. Here is the expected real GDP and the anticipated recovery. I'm a bit of a sceptic about "recovery" because I've now watched economists for a year and a half move this "recovery" out into the "near future"...

K. Eric Drexler, the visionary behind nanotechnology has written a short autobiographical sketch tracing worries about Earth Day and the Club of Rome's Limits to Growth through to his work on nanotechnology. While the biographical sketch is interesting and leads him to envision a nano-tech future, I come away with a different lesson. Take this snippet:

I read The Limits to Growth soon after its publication early in 1972. It made a big impression on me. The authors used system dynamics models with broad, aggregate variables like population, economic growth, natural resources, and pollution to explore the outlines of a range of future scenarios. The scenarios without strict controls on growth all came to a bad end. Some of those scenarios resemble the world we’re in today.

The book scared me and helped crystallize my resolve to work toward a future outside the range of those scenarios — not toward an impossible future of unlimited exponential growth, but toward a future in which Earth’s forests and seas would be compatible with a prosperous human race for centuries to come. I was, and am, persuaded that this will require a profound change in the basis of our industrial civilization. This aim set the course of my life.

The lesson I learn from this is how scare mongering deeply effects us. Even very bright people can get caught up in these doomsday visions and deeply alter the course of their life. Most people get involved but after a short time lose interest and drop out. Others, like Drexler, have their whole life changed by the fear mongering.

I was caught up in the following apocalyptic dramas during my lifespan...

• Rachel Carson's Silent Spring, we poison our environment and then ourselves leaving a dead landscape


• Paul Ehrlich's The Population Bomb, we all die in a Malthusian overpopulation


• Club of Rome's The Limits to Growth, we outrun the resources of earth (oil, metals, etc.)


• The IPCC's Global Warming, the human injected greenhouse gases will cause the heat death of mother Earth


• Laurie Garrett's The Coming Plague: Newly Emerging Diseases in a World Out of Balance, warning that human incursion into tropical spaces will let loose pathogens like Ebola that will wipe us out


• The World Health Organization's The Bird Flu, the H1N5 strain of influenza would jump species boundaries and wipe us out in a mass epidemic


• The Bush admin's War on Terrorism, the idea that the Moslem world was rife with suicidal maniacs bent on destroying the West and therefore justifying preemptive wars, "selling" WMD as a technique to mobilize a country for war, torture, and extraordinary rendition

Do you see the pattern here? It is a combination of a "likely story" promoted (sold by) a group or organization using apocalyptic fear mongering to achieve their end such as stopping some activity they dislike or, in the case of scientific groups, to get funding to pursue their interest in the area.

They all paint a horrible future and spread fear. And not a single one has developed as the most radical adherents would have us believe. In short, it is too easy to be caught up in cult-like fear mongering. It is hard to keep a balance and do enough without going over the edge. Each of the above is a real problem and deserved public attention and political action, but the mad adherents couldn't resist turning them into doomsday scenarios.

Crimes of the State

Here is a blog entry by Michael Froomkin that makes the case that an investigation of war crimes committed by the Bush administration needs to be pursued:

It's Often the Cover-Up that Gets You

An important part of the war crimes defense strategy employed by US torturers has been to plead advice of counsel. This modern version of the ‘just following orders’ defense has had two strands. Both are unraveling.

As regards the front-line officials who actually laid hands (or insects, as the case may be) on detainees and tortured them, the somewhat plausible claim has been that they were not lawyers, that they were entitled to rely on opinions of the OLC [Office of Legal Counsel, the Justice Department], and that it would be wrong to punish them for trusting the Justice Department.

There are two problems with this argument:

• Some of the CIA torture, and it appears at least one likely murder, preceded the torture memos.
• The argument proves too much: there surely must be some level or torture which no amount of fancy paper, much less mendacious paper, from the OLC could justify. The ‘OLC blessed it’ argument has some real power in gray areas — but not everything can be turned into a gray area. At some point, quite likely including some of the activities we’ve been hearing about — waterboarding, slamming people into walls — the acts rise to a level that we can reasonably expect any moral individual to recognize as torture, and for which we justly can and should punish the perpetrators regardless of the soothing orders and opinions on which they relied.

There is less controversy about the higher-ups, the folks who wrote the (shoddy) opinions and gave the (criminal) orders. They don’t get to plead advice of counsel. We see the outlines of a different plea in today’s news — an ignorance defense. Ignorance of history, that is. That isn’t going to work. It isn’t going to work because the legal opinions are an internal failure: they are shoddy work, unconvincing, lacking all craft. This was obvious to anyone with any legal training. (See, for example, my instant analysis of one of these reports at Apologia Pro Tormento: Analyzing the First 56 Pages of the Walker Working Group Report (aka the Torture Memo), back in June 2004.)

It also isn’t going to work because, it now emerges, the recipient of those CYA memos evinced guilty knowledge. Until now we’d been led to believe that the people in the highest reaches of the White House, the Defense Department, the Justice Department were either stupid enough (Gonzales) or venal enough (Rumsfeld) or crazy enough (Cheney) to believe (or make themselves believe) that the sheaf of torture memos represented a genuine, or at least plausible, legal analysis, a conclusion buttressed by Bush administration groupthink enforced by the systematic exclusion of anyone who might raise a dissenting voice.

Well, turns out it wasn’t quite that simple. In Foreign Policy Philip Zelikow, counselor at the Department of State from 2005-07, writes that he offered a cautionary account — and it was suppressed:

I first gained access to the OLC memos and learned details about CIA’s program for high-value detainees shortly after the set of opinions were issued in May 2005. I did so as Secretary of State Condoleezza Rice’s policy representative to the NSC Deputies Committee on these and other intelligence/terrorism issues.

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At the time, in 2005, I circulated an opposing view of the legal reasoning. My bureaucratic position, as counselor to the secretary of state, didn’t entitle me to offer a legal opinion. But I felt obliged to put an alternative view in front of my colleagues at other agencies, warning them that other lawyers (and judges) might find the OLC views unsustainable. My colleagues were entitled to ignore my views. They did more than that: The White House attempted to collect and destroy all copies of my memo. I expect that one or two are still at least in the State Department’s archives.

If the White House had truly believed its legal position was secure, it would not have sought to suppress a dissenting voice. It would be interesting to know who saw the Zelikow memo, and who exactly sought to suppress it. This attempt to flush the truth down a memory hole will not look good should the perpetrator ever find himself or herself in front of a Spanish war crimes tribunal.

Incidentally, for those who harbored the irrational hope that US torture policies at the CIA, Abu Grahib, and Guantanamo were not in fact centrally directed and highly connected, have a look at the Senate Armed Services Committee’s latest report on torture which connects all the dots back to the White House and to Rumsfeld.

The Zelikow memo would be interesting to see. But from Brad DeLong's website citing a blog entry on Talking Points Memo, we learn the following:

Late Update: We may not be seeing the memo anytime soon. Zelikow tells TPMmuckraker that it is highly classified...

Brad DeLong here: May I ask what it is about a memo saying that it is harmful to the national security of the United States for us to torture people--as well as illegal--that can justify classification? I mean, Cheney has asked for the Zelikow memo's declassification, hasn't he?

John R. Talbott's "Obamanomics"

This is a book written in 2008 before Obama won the presidency. But it isn't about running for the presidency or about the details of the financial crisis. It is a book that tries to explain the thinking behind Obama's positions on economic issues (and necessarily deals with the vision of civil society). You get an idea of this from the subtitle: How Bottom-Up Economic Prosperity Will Replace Trickle-Down Economics.

Here is a key bit from early in the book:

He [Obama] explained that a healthy economy is a bottom-up economy, not a top-down economy dependent on trickle-down economics. In a bottom-up economy, the rules of business and government are fair and apply to all. There is a level playing field. In such an environment, people's enthusiasm and motivations are maximized. They feel that their personal success will be determined by their hard work and effort, not by who they know or who they are related to. Obama believes that the key to a growing and prosperous economy is a motivated workforce that is engaged and constantly thinking about how it can improve itself, its company's products and services, and its country. In a rigged system in which big business controls our government, such motivation is impossible. Obama believes that all will benefit from the system he envisions, that Wall Streeet and Main Street are intertwined, that you can't have successful securities investing without companies to invest in, and you can't have successful companies without motivated engaged workers.

The idea that enriching our wealthiest citizens and corporations will cause the money to eventually trickle-down to the workers is wrongheaded. Give a rich person a tax break and he will just put the money in the bank. In a world of global capital flows, such a miniscule increase in global savings will have little to no impact on the general American economy.

But give the average American the opportunity to work for a fair wage, with the chance for personal growth and advancement and the ability to give his children a superior education, and the effects on economic grfowth will be tremendous. Getting the underemployed working again and removing artificial ceilings to advancement will have an immediate impact on the economy, but the biggest long-term economic benefit will be the ability of the sons and daughters of janitors and carpenters to grow up to be scientists, doctors, and successful business executives. (pages 18-19)

Talbott was a Goldman Sachs investment banker, but he has broken ranks with the rich:

We are a nation of laws that are being written by corporate special interests. And we are a country, founded on equality, liberty, justice and opportunity for alol, that is slowly devolving into an unjust class society where life success is based more on inherited position and connections than individual effort and merit. (page 9)

Opportunity or Threat?

A number of people have been remarking that recessions/depressions are times of great innovation. Presumably when things get bad, taking a risk seems less risky. Or perhaps if you are unemployed, you might as well employ yourself by becoming entrepreneurial or getting serious about developing some idea you have.

Here is an interesting article by James Surowiecki in The New Yorker magazine:

In the late nineteen-twenties, two companies—Kellogg and Post—dominated the market for packaged cereal. It was still a relatively new market: ready-to-eat cereal had been around for decades, but Americans didn’t see it as a real alternative to oatmeal or cream of wheat until the twenties. So, when the Depression hit, no one knew what would happen to consumer demand. Post did the predictable thing: it reined in expenses and cut back on advertising. But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the thirties.) By 1933, even as the economy cratered, Kellogg’s profits had risen almost thirty per cent and it had become what it remains today: the industry’s dominant player.

You’d think that everyone would want to emulate Kellogg’s success, but, when hard times hit, most companies end up behaving more like Post. They hunker down, cut spending, and wait for good times to return. They make fewer acquisitions, even though prices are cheaper. They cut advertising budgets. And often they invest less in research and development. They do all this to preserve what they have. But there’s a trade-off: numerous studies have shown that companies that keep spending on acquisition, advertising, and R. & D. during recessions do significantly better than those which make big cuts.

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The academics Peter Dickson and Joseph Giglierano have argued that companies have to worry about two kinds of failure: “sinking the boat” (wrecking the company by making a bad bet) or “missing the boat” (letting a great opportunity pass). Today, most companies are far more worried about sinking the boat than about missing it. That’s why the opportunity to do what Kellogg did exists. That’s also why it’s so nerve-racking to try it.