Archive for the ‘capitalism’ Category

Imperialist (In)Justice: The Case of Sergeant Calloway

April 21, 2009

Battalion Sergeant-Major John W. Calloway, US Army, fought the Spaniards in Cuba, and then the Filipinos for two years, 1899-1900 – when an order was made in Manila that he be reduced in rank to private and discharged “without honor”. What was it that impelled the American colonial officials to rid themselves of this fine African-American non-commissioned officer who had served his country faithfully for ten years, and whose character had always been rated “excellent”, his “services eminently satisfactory”? Why was he dealt with through administrative procedures rather than a court-martial for the treason of which he was suspected?

BY GILL H. BOEHRINGER
Contributor
Bulatlat

Battalion Sergeant-Major John W. Calloway, US Army, fought the Spaniards in Cuba, and then the Filipinos for two years, 1899-1900 – when an order was made in Manila that he be reduced in rank to private and discharged “without honor”. What was it that impelled the American colonial officials to rid themselves of this fine African-American non-commissioned officer who had served his country faithfully for ten years, and whose character had always been rated “excellent”, his “services eminently satisfactory”? Why was he dealt with through administrative procedures rather than a court-martial for the treason of which he was suspected?

Calloway had become friendly with a number of Filipinos, as had many black soldiers who felt sympathy for people who were often treated as inferior and uncivilized. It was a familiar and deeply disturbing scenario, especially as the white Americans referred openly to Filipinos as “niggers” In the case of Calloway, it led to disaster. He had some education, a printer by trade, and was an astute, thoughtful man. He did an informal survey, interviewing Filipinos about their feelings toward the war and the occupying troops. In this process he learned a great deal about the real nature of the war, so different from the benevolent mission portrayed in the media at home (and in The Manila Times and the Manila Freedom, the jingoistic and imperialistic American-owned press.) The Sergeant wrote to an African-American newspaper in his hometown, the Richmond Planet, that the black soldiers were “between the devil and the deep sea” in regard to the war. They faced the dilemma of doing their duty for America where their people were repressed, while they were repressing the nationalist ambitions of a colored race which they found anything but uncivilized. And the concept of inferiority was, of course, anathema to him.

But Calloway went further. Having befriended the Consunji family of San Fernando, Pampanga in February 1900, he wrote to Tomas Consunji that he was “haunted by the feeling of how wrong, morally, we Americans are in the present affair with you. What a wrong to crush every hope and opportunity of a youth of a race… Would to God it lay in my power to rectify the committed error, and compensate the Filipino for the wrong done.” Calloway made other comments, some of which were along the lines that with the growth of education in the country they would gain their independence. He was obviously influenced by the conservative American black leader, Booker T Washington. None indicated an intention to assist the insurgents in any way.

Unfortunately for the Sergeant, the Consunjis, in particular the father Antonio, were under surveillance by US intelligence agents. They reported that the pair were “well known sympathizers with the insurrectos” and Tomas was said to have acted as a “political agent” for them. Perhaps this was particularly worrying to the Americans as they employed him in their own bureaucracy. Later, in justification of his friendship with the Consunjis, Calloway made the point that contact with him seemed appropriate. To no avail.

In October 1901, the Consunji house was raided and Calloway’s letter was discovered. As a result he was given a Court Martial. But strangely, he was charged with “breaches of discipline”. It was alleged that “being a married man” he had “lived in open adultery with a native woman”. Calloway was acquitted – the evidence did not support such a charge. A later official report indicates that “Mrs. Calloway is now in Manila, and apparently on good terms with Calloway, whose release she is trying to bring about.”

It is likely that the Army officials believed they had no case for treason based simply on the letter. No doubt they did not want to reveal the extent of their surveillance operation. (It was Calloway who told the Consunjis of his troubles three years later.) Another motive would have been to avoid the revelations that he had been especially sympathetic to the Filipinos as a result of hearing Tomas’s descriptions of US forces’ brutality to the population of San Fernando. Such allegations would have been spread all over the press in the Islands, and at home by the Anti-Imperialist forces. The Americans seem to have tried to destroy his career by using a trumped up charge.

Having failed to convict Calloway, the Americans were determined to get him out of the country as they considered him an “ extremely dangerous” character. Indeed, the American officials were concerned at the degree of friendship which had developed between their black soldiers and the “natives”. Reports of the number of marriages between them was a matter of particular concern.

Calloway, of course, denied that he was in any way treasonous, pointing to his dedicated service and his heroic volunteer mission some months previously in which he had to sneak through insurgent lines at night to deliver an important order to attack them. He tried to explain that he had private sympathy for the plight of the Filipinos, and that his hope was for them in the future, but that in no way detracted from his commitment to do his public duty for his country. He said this while reminding his interrogators that his people had been very badly treated for hundreds of years back home. He was not afraid to speak the truth to power! Calloway sought a court-martial for the alleged treason so that he could be vindicated.

Instead of another court-martial, the next step against Calloway was to build up the case for an administrative procedure leading to his deportation and discharge. Asked for a recommendation, his Regimental Commander, who had only served as such for three months, showed his prejudice as well as a common fear that the black soldiers were proving unreliable:

‘The education of this man has fostered his self-conceit to an abnormal degree, and he has shown himself to be without principle by abandoning his legal American wife for a Filipino woman… He is likely to join the Filipino ranks should a favorable opportunity offer.” He therefore recommended that Calloway be confined in Manila until he could be deported and discharged without honor. Calloway was extremely unlucky here; in October the previous year, he had been recommended for appointment as 1st Lieutenant by his previous Commander. He sought in vain to have all of his previous commanders contacted.

The matter went up the chain of command, with concurring recommendations at each level. The Commanding Officer of the Northern Luzon Department, Major General Lloyd Wheaton, commented, “In my opinion he will desert to the assasins (sic) infesting this Department if he has the opportunity.” (This was the war criminal who, after his unit was ambushed in the opening weeks of the war, ordered all villages within a 12-mile radius destroyed, and the inhabitants killed. Of course he was never prosecuted, and came to be considered a war hero for his part in defeating the Filipino armed forces.)

Although Calloway was unaware of the precise evidence against him, and the substance of the recommendations against him, he had gained a reasonable idea of what he was up against. In late November, from the National Bilibid Prison, he petitioned the military judicial office for a reversal of the orders against him. In addition to believing himself very badly treated-humiliated and abused in confinement-he also had a dream of staying in the country, in order to start a business, as many black veterans were to do. From his meager pay, he had saved about US$1500 towards that goal.

But his plea was not answered. The matter was referred to the Inspector General, who provides insight on the gaze of accusatorial authority: “Calloway is a bright man, with an adroit mind, a very good command of language, and a marked skill in evading a question and misconstruing words… In view of Calloway’s education, command of language, and knowledge of the meaning of words, as shown in his conversations, and the education of the man to whom he wrote, this letter can only be taken as meaning exactly what it says.” His conclusion: “I regard him as a dangerous man, in view of his relations with the natives, as shown by this letter, and the circumstances of his court-martial.” So dangerous that he concurred with the recommendations to deport and discharge without honor, but added that Calloway “not be allowed to return to these Islands as a civilian.”

By Dec. 12 the recommendations against him were on the desk of the Commanding Officer in the Philippines, who agreed with the conclusions of his Inspector General, and concurred that Calloway should be deported, demoted to rank of private and dishonorably discharged.

In a last ditch attempt to have his case properly heard, he somehow managed to get legal assistance for the first time. His lawyer, Eber C. Smith, was an American with a general practice in Manila. The American dominated Supreme Court denied an application for habeas corpus, holding it had no jurisdiction over persons arrested by the US authorities. (Such a result in the Guantanamo Bay cases would have gladdened the heart of President George W. Bush, but the context of American repression has changed.)

Calloway was shipped back to San Francisco where he remained in prison until the case was reviewed in Washington, D.C. He again wrote a strong plea for re-consideration, pledging once again his loyalty, explaining he had never intended treason and reminding them once again of his record, especially his loyal service for many months after the letter was written. He again sought a court-martial so he could defend himself. Nevertheless, in February 1901, he was informed that the orders stood, he was officially broken in rank to private, discharged without honor.

Eight months later he attempted to re-enlist, but was forbidden to do so. Determined to prove himself, he returned to the Philippines at his own expense and found civilian work in the Bureau of Public Printing. He worked diligently for two years. In April 1904, there followed another petition to re-enlist in the Army, addressed to the Secretary of War, now William Howard Taft of Philippine Commission fame. His faith in the authorities is moving, but was quite ill-judged. The reply was swift, and negative. Subsequently, without Calloway’s knowledge, the authorities in Washington warned the Philippine authorities that a “dangerous character” was now back in the Islands, living at No. 35, San Jose Trozo, Manila.

After that rejection, it seems that Calloway was a defeated man. He appears to have returned to the USA. It is likely he was forced out following the warning about his whereabouts. What happened to him is not known. One commentator suggests that he again attempted to re-enlist to serve his country in World War I, without success.

An interesting twist to the case is that he served in the same “colored” Infantry Regiment as the famous American defector, David Fagan, who fought so effectively as a guerrilla leader with the Filipino army. It was Calloway who had counter-signed Fagan’s original enlistment papers just days before they sailed for Cuba. The regimental association with Fagan was clearly a factor counting against him. From Manila, General Arthur MacArthur, Officer Commanding, said in his official recommendation :

“It is very apparent that he is disloyal and should he remain in these islands, he would undoubtably commit some act of open treason and perhaps join the insurrection out and out. One man of the 24th Infantry by the name of David Fagan has already done so and as a leader among the insurrectos is giving great trouble by directing guerrilla bands.”(Bulatlat.com)

Manila waits for US move on Cpl Smith DFA: Americans not ready to discuss issue

February 14, 2009

By Tarra Quismundo, Kristine L. Alave
Philippine Daily Inquirer
First Posted 03:11:00 02/14/2009

Filed Under: Crime and Law and Justice, Subic rape case, Diplomacy

MANILA, Philippines — A Philippine official on Friday said any new negotiations on custody of Lance Cpl. Daniel Smith would have to wait until the Americans were ready to talk, and indicated Manila was powerless to compel Washington to sit down immediately.

“Right now, the department is very serious in coordinating with the US embassy. But they had to approach first their experts to get their legal opinion,” Department of Foreign Affairs spokesperson Bayani Mangibin said in a phone interview.

Mangibin said: “We don’t have a policy to wait for them … What can we do if they are not ready?”

Earlier, US diplomats made it clear they were firm in their position to keep custody of the American Marine convicted of raping the Filipino woman “Nicole” until the courts had ruled with finality on Smith’s appeal.

Smith has been confined in the US Embassy compound, according to US and Philippine officials, since December 2006 after he was sentenced by a Makati court up to 40 years in jail for raping Nicole during a one-night encounter at Subic Bay Freeport. He has elevated his case to the Court of Appeals.

A new furor erupted over the custody issue after the Supreme Court last week ruled that the US-Philippine executive agreement that allowed the embassy to keep Smith ran counter to the two countries’ Visiting Forces Agreement. The court ordered the DFA to immediately negotiate with the US the transfer of Smith to a Philippine-controlled facility.

Main concern

Mangibin said the DFA had started the “process of coordination” with the embassy on the issue of custody, based on the Supreme Court ruling. He said the DFA was also consulting the Departments of Justice and Interior and Local Government, and the Solicitor General.

“Our main concern is to look for appropriate arrangements for Daniel Smith,” he said.

The embassy has said it is studying the court decision and referred it to government legal experts in Washington.

Mangibin said formal negotiations could begin after the embassy had received the legal opinion from Washington and that in the meantime, Smith would stay at the embassy compound.

3 scenarios

Interior Undersecretary Marius Corpus said yesterday that after his last check on Smith on Feb. 5—or several days before the high court’s ruling came out—he met with an embassy political officer and discussed three possibilities in anticipation of a court decision.

In that meeting, Corpus saw the embassy’s steadfast position to continue holding on to Smith until the appeals process had been completed. After his December 2006 conviction, Smith was briefly held at a Makati jail before the embassy took custody of him—in the middle of the night—based on the controversial executive agreement.

“We talked about the possible consequences of the Supreme Court decision,” Corpus said. The discussion was not prompted by any advance information on the court’s eventual ruling, Corpus said when asked if there was any leak.

“One, that the Supreme Court would declare the VFA unconstitutional. Two, I said it’s highly probable that the court would affirm the VFA’s constitutionality, including the agreement [to hold Smith at the embassy], and that it would order some provisions of the VFA revised,” Corpus said by phone.

“Third, that everything will be upheld, both the VFA and the transfer (of Smith to the embassy).”

Lobby for Smith

Corpus said when the issue of custodial arrangement was brought up, the US side said: “We’ve already agreed on that. We’d like to continue what was agreed upon.”

Corpus said he heard that a congressman from Smith’s home state of Missouri was “lobbying in the State Department for it to take care of Smith.”

“That’s the reason why they defend Smith so much,” Corpus said, adding however that he had no categorical information about the supposed lobby.

Also discussed at the meeting was Smith’s condition while in detention, particularly his having gained a lot of weight, according to Corpus, who said he had been visiting Smith almost monthly.

“They (the embassy officials) said, ‘We should give him work, with your permission,’ so that he will not deteriorate physically,” Corpus said.

Corpus said he agreed, noting that similar activities were allowed local prisoners. He said he just asked that any chores given to Smith should not compromise the terms of his confinement.

‘He is bored’

“You can see the emotional stress in him,” Corpus said. “Every time I talk to him, I can see that he is emotionally suffering. He is very bored. The condition is even better in detention facilities outside, where [detainees] have some company.”

Corpus assured the Nicole camp that Smith remained inside the embassy compound, contrary to claims by some of the rape victim’s supporters that he had been spirited out of the embassy.

“Even if I visit him every day, they will not believe me,” Corpus said.

Send him to Munti

Bayan Muna Rep. Satur Ocampo has joined growing calls for Smith’s immediate transfer to a local prison.

“We demand that the Philippine government immediately effect the transfer of Smith to the New Bilibid Prison,” Ocampo said in a press statement. “We cannot understand why a clear-cut exercise of sovereignty, in this case custody over a convicted foreign felon, should be subject to negotiations.”

Ocampo added: “What the Philippine government should do is simply impose its own laws over a foreigner who violated those laws. It should not negotiate but order the US Embassy to turn over Smith to the proper local authority.”

Indefinite delay

The leftist lawmaker said the high court’s order for the DFA to arrange a detention place acceptable to Washington was just a ruse to “indefinitely delay” Smith’s transfer. With a report from Gil C. Cabacungan Jr.

What the Witnesses Said(Excerpts)

February 14, 2009

Note from the PCIJ: What follows are excerpts from the “Record of Interviews “ with some of the witnesses who met with the investigators of the World Bank’s anti-corruption unit, Department of Institutional Integrity (INT). on the alleged fraud and collusion in the National Road Improvement and Management Program-1 (NRIMP-1) projects. The interviews were separately conducted between April 2003 and November 2006 in the Philippines, Japan and South Korea.

Date of Interview            – 28 April, 2003

Interviewee/s                 –  William Paterson, lead highway engineer – World Bank East Asia and Pacific region; task team leader for the Philippine National Road Improvement Project Phase 1(NRIMP1)

–  Denis Robitaille , regional procurement adviser

Interviewers                  –  Mike Richards and Athene Vila-Boteler

Paterson told INT about two incidents in the NRIMP1 that caused him to believe there was collusive bidding in the project:  He had heard from ‘informal sources’ that government officials usually took 3% of the contract value in kickbacks, but learned in the discussions on five contracts for bidding, the demands had increased to 10%.

He said the DPWH secretary who assumed power in January 2001 had a ‘much better reputation for honesty’ than his predecessor but the replacement in January 2003 was “for the worse.”

The large variation in unit prices alerted him to the possibility of collusion in the bidding. He noted overpricing of materials like asphalt, which was around 50% higher than it should be. The cost of concrete that should be around P700 to P800 per cubic meter was charged P1,100 to P1,400 per cubic meter and the cost of clearing and grubbing was charged P290,000 per hectare when it should only be at P40,000 per hectare.

Paterson raises the possibility that the government, through the DPWH, is actively involved in the collusive arrangements, noting that the bill of quantity (BOQ) is not being reviewed. The excessive pricing of materials, he noted, still conform with the Owners Estimate that is held by the Bureau of Construction.

Paterson found it odd that two local senators have gone to the press to announce the result of the bid evaluation even before the results were published. One of the bidders was rejected because it submitted bogus documents.

According to Paterson, he has “sources” who told him that DPWH takes 10% while senators intend to get 10 – 15% cut of the contract price.

The projects under suspicion of collusion are all in Mindanao. Paterson noted that the DPWH secretary, his deputy, and the project manager that time were all from Mindanao.

Paterson described his sources to INT, including their proximity to the events at issue, but did not identify them by name.

Date of Interview           – 17 March, 2005

Interviewee/s                – William O. Paterson, task team leader

Interviewer/s                 – Merly Khouw, Athene Vila-Boteler, Christian Kammer, Annie Yau and                                                                Thilda Outhuok

It was suggested that there be an independent analysis by an engineer to benchmark the prices and check against excessive price distortions. Paterson was asked if the Philippine President’s personal interest in the project was related to the alleged involvement of her husband as alluded to in the complaint. He said his impression was that it was not as the timing of the government’s complaint was circumstantial to the CG meeting in Mindanao, the location for one of the road packages in question.

EC de Luna, considered as a fairly young contractor with good connections at DPWH, did not qualify on its own merit so it had to tie up with China Road for the 2nd bidding for the 1.6 package.

Date of Interview           – 3 August, 2005

Interviewee                   – Shingo Nakamura, vice president, Yoshida Construction Co.

Interviewers                  – Tim Carrodus / David Hawkes / Michael Kramer

Nakamura filed a complaint against Eduardo C.  de Luna and Augusto Miranda, alleging that the two defrauded Yoshida by falsely representing E.C. De Luna as having been already awarded the contract when in fact it had not. Nakamura said he paid de Luna and Miranda P2 million (about $40,000) in exchange for a P592-million subcontract on a World Bank-financed project (NRIMP-1, CW-RU 1.6) in 2003.

The business environment in the Philippines, he said, is “very dirty,” “as Japan had been 20 to 30 years ago.” All contract awards require “undertables” or corrupt payments. A “syndicate” organized by  de Luna with Miranda, local politicians, and other bidders selects the winning bidder or the “champion.” The champion then pays the losing bidders one to three percent of the contract price.

Contract prices are inflated 25 to 35 percent to cover the cost of bribes that must be paid to various parties, including First Gentleman Mike Arroyo, certain politicians, DPWH officials and others. As a result, contractors must cut back on quality and safety in the construction of roads.

Nakamura first met Eduardo De Luna and Tito Miranda in 2002 through Yoshida’s agent, “Trix”Lim. Yoshida signed a P592-million subcontract with De Luna in Feb. 2003, and paid the $40,000 in cash in local currency in April 2003 to Miranda. Miranda was always asking for contributions to the DPWH Secretary and Mike Arroyo.

Yoshida paid a total of about P10 million to a variety of people: P100,000 for Sen. Barbers, P200,000 during Christmas, etc.

E.C. de Luna was Mike Arroyo’s man. He travelled with Mr. Arroyo, the President, and Tito Miranda to Japan. E.C.de Luna organized a syndicate to control the award of contracts. Miranda is involved as an intermediary for Sen. Barbers.

All the companies that participated in the preliminary qualification process had to be a part of the syndicate, especially the Chinese and Korean. Members of the syndicate – bidders, politicians, DPWH officials, Lim. De Luna, and Miranda – would congregate at the Diamond Hotel every three days to discuss the contract awards.

Contract prices were inflated 25- to 35- percent over the actual costs to generate funds for necessary payments which included the following:

–         1 percent to the Malacanang Presidential Palace (Nakamura said this meant the “Cabinet”)

–         5 percent to Senators (including Sen. Barbers and Sen Rebeira (Revilla?) and his son) 5 percent to Mike Arroyo

–         1 percent to DPWH personnel

–         1 percent to DPWH director

–         3 percent to other local officials, mayors, etc.

·        Contractors also had to make payments of P100 to P300 to government pay clerks. Inspectors were also paid relatively small amounts. Some of the bribe funds came from the 15-percent mobilization payment to contractors at the outset of the contract.

Nakamura introduced Mr. Suzuka of Suzuka Construction Co. to the Philippines after Suzuka heard that it was easy to get contracts because of the syndicate arrangement. Mr. Washo of EIWA Construction was also introduced.

Date of Interview            – 5 August, 2005

Interviewee                   – Tomatu Suzuka -president, Suzuka Construction Co. Ltd.

–         Masaki Suzuka – manager

Interviewers                  – Tim Carrodus, David Hawkes and Michael Kramer

Suzuka’s Philippine office ceased to have business involvement in the Philippines after it had “various issues” three years before the interview. Tomatu Suzuka cited the foreign exchange issues and damage to reputation among the issues his firm withdrew from the Philippines in November 2002.

He said he met with Senator Barbers and Mike Arroyo and “first discussed bribes” but had a “rough approach.” He said he “learned that money was important to do business in the Philippines, which was a “fundamental difference in the way of thinking.”

A certain Mr. Lim, Suzuka’s agent, said Suzuka would have to pay to get a contract, and that dollars would settle problems with the World Bank. He mentioned 2 – 3% to obtain credit or financial support.

Suzuka said he met Lim four years ago (2001) at Diamond hotel. There were policemen and government officials present when they discussed payments. A certain Tito Miranda was also with Lim’s group. Suzuka said he met Sen. Barbers separately. He said he thought Tito was a secretary of Barbers. Tito asked Suzuka to pay for Barbers’ trip to Japan, but that he refused. He said local contacts introduced him to Barbers.

He identified one Trix Lim as the person he was dealing with in the Philippines.

Suzuka even recalled a meeting with Barbers on an island in the Philippines while President Arroyo was delivering a speech and welcomed the Japanese companies. He said he had no contact with President Arroyo.

Suzuka said it was made clear to him that there would be no business in the Philippines without paying money. Money would have to be paid as high up as the president,  senior government officials and politicians in order to do any further business in the country. To win a contract, it would also be necessary to pay the head of the bureau (PMO?) and politicians several million yen.

Suzuka said he knew that the President’s husband handles her business, as what he had heard from local companies and the consultant who prepared the documents for the bidding. However, he said he had no specific information or any direct evidence of any money being paid to somebody specifically.

When shown the bid documents for the contract, Suzuka said his signatures were forged.

Date of Interview            – 8 August, 2008

Interviewee                   – Kyung Hwan Ko – trade service department, Shinhan Bank

Interviewers                  – Athene Vila-Boteles and David Hawkes (in Seoul, Korea)

Ko told the INT that the bid guarantees submitted by Dongsung Construction Co. Ltd. were forged. The document was signed by one Byung Jin Kim, a regular officer of the bank, not a general manager. In addition, Ko said a signature by Shinhan staff on a document would not be in Korean characters, but in English. The letter head of the document was also not correct and that the bank guarantees it issues do not have the guaranteed sum printed on the side. He said the bank does not have a business relationship with Dongsung, which had been bankrupt.

Date of Interview            – 8 August, 2005

Interviewee                   – Young Min Noh – general manager, marketing division -Shingsung Engineering and Construction Co.

Interviewers                  – Tim Carrodus and Michael Kramer

Noh said he was not familiar with details of the company’s operations in the Philippines, having worked in the last six years in the Middle East. His company received two World Bank contracts in the Philippines.

Date of Interview            – 9 August, 2005

Interviewee                   – Choong-Jo Oh, general manager- overseas civil project team, Daewoo E&C

Interviewers                  – Tim Carrodus and Michael Kramer (at Daewoo head office in Seoul)

Oh said he has heard about problems in the Philippines such as bid rigging but has no personal knowledge about it. He said infrastructure projects are simple and the Chinese companies are very aggressive. Korean companies cannot compete in open tender because of their wage rates and longer depreciation schedule – Korean companies have 10 years compared to Chinese firms’ four years.

Date of Interview            – 9 August, 2005

Interviewee                   – M. G. Kwon – overseas business department/ senior vice president,                                                              Hanjin Heavy Industries & Construction Co. Ltd.

– Hyun Woo Ko, overseas business team manager

–  B.D. Park, senior vice president -international finance

Interviewers                  –  Tim Carrodus and Michael Kramer (in Seoul, Korea)

Kwon and Ko both said they have never heard of Suzuka Construction. The Philippine road construction market is difficult for Korean companies. The Chinese companies are ‘quite aggressive’ while the local companies have political connections.

Date of Interview            – 15 August, 2005

Interviewee                   – Min Young Lee – general manager, Dongsung Construction Co. Ltd, Manila

– Angelico “Bong” Teraga – office engineer/project coordinator

Interviewers                  – David Hawkes and Athene Vila-Boteler

Dongsung Construction was one of the losing bidders in the second round of bidding for contracts 1.4B and 1.6 of NRIMP-1

INT found Dongsung’s bid security was forged. Teraga and Lee acknowledged having prepared the bid documents for both contracts, but said the Shinhan Bank bid securities came from the head office in Korea.

Date of Interview            – 17 August, 2005

Interviewee                   –  Oscar Mercado, vice president – marketing and engineering, EEI Corp.

– Ferdy M. del Prado, group manager – marketing and proposal

Interviewers                  – W. Michael Kramer and David Hawkes

EEI does not usually take part in DPWH controlled projects because of the bad reputation of DPWH and because of the perceived system of collusion governing awards. EEI took over from Philrock, Inc.’s contracts with DPWH. It participated in the 1.4B and 1.6 contracts in joint venture with Hanjin.

Date of Interview            – 18 August, 2005

Interviewee                   –  Manuel M. Bonoan, undersecretary – DPWH

–  (Raul) Asis, assistant secretary

Interviewers                  –  Tim Carrodus and Athene Vila-Boteler (at 17th floor, Shangri-la Hotel, Manila)

Undersecretary Bonoan acknowledged the existence of a major problem in the bidding for WB-funded road projects. He said, “We know they are doing it. We know that they are talking to each other, we can see the pattern, but we don’t know how to document it.”

He said collusion has been talked about a lot, but DPWH have problems documenting it. The interference of politicians, he said, is “where the problem  begins.” He told the INT, “We know all these things; everybody demands money from the contracts so the contractors have to recoup by increasing prices.”

Date of Interview            – 18 August, 2005

Interviewee                   – Engr. Lambert Lee, president, Cavite Ideal

Interviewers                  – W. Michael Kramer and David Hawkes

Gist                              – Lee denied the existence of a syndicate and the rigging of bids. Later in the afternoon, he called Athena Vila-Boteler of the INT to request for a second meeting and said the idea of the existence of a syndicate insulted him deeply.

Date of Interview            – 19 August 2005

Interviewee                   – Fu Yu Cheng, president- China State (Phils) Construction and Engineering Co.

Interviewers                  – Tim Carrodus and Michael Kramer

Fu, who had spent eight years in the Philippines, told INT that it was difficult to do business in the country, particularly in public projects. He noted that China State had withdrawn from Packages 1.4B and 1.6, but refused to explain why. He said no one gave him a price to bid as a losing bidder; neither was China State paid to lose a bid.

Date of Interview            – 1 November, 2006

Interviewee                   – S.J. Kim, general manager-civil department

Heunghwa Industry Co. Ltd.

Interviewers                  –  Tim Carrodus and Edil Dushenaliyev (in Seoul, Korea)

Heunghwa submitted bids for the 1.4B and 1.6 contract packages, but was found ineligible to bid. The INT found that unusual, given the size of the company and its capacity to bid for large-value contracts.  The DPWH cited the company’s lack of experience in construction projects.

Date of Interview            – 1 November, 2006

Interviewee                   – Kuk Jung-Soo -deputy general manager, Keangham Enterprises Ltd.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Seoul)

After INT explained its findings of collusion in biddings, Kuk said that the business environment in the Philippines is difficult and that Keangham intend to withdraw from the country. The company is unprofitable, he said.

One of the biggest problems, according to Kuk, is that the length of the roads put up for         bidding is too short to be commercially feasible for the company. The scope of the road construction       could be initially 100 kilometers and the value of the contract could be up to $60 million, but when    the company buys bidding documents, the length of the proposed road becomes just 20 kilometers.

The company most likely withdrew from the bidding not because of collusion, but because of lack of profitability. Kuk, however, did not rule out that the firm could have withdrawn       because of corruption.

Date of Interview            – 2 November, 2006

Interviewee                   – Young-Myung Noh – general manager, marketing division – Shinsung Engineering & Construction Co., Ltd.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Seoul, Korea)

Noh mentioned that the company’s former branch manager in the Philippines had left the Philippines under difficult circumstances but he refused to provide the manager’s contact information. He said he was not aware of the details of his company’s bids in the Philippines, but had been told of collusion where companies were told to put in a bid even if they were going to lose. He said his company reluctantly participates in such tenders because it did not want to be blacklisted informally from future bidding by the DPWH.

INT wanted to find out why Shinsung withdrew from the second round of bidding for package 1.4B and discuss the contract it won for the rehabilitation of the Buug-Kabasalan section of the Zamboanga-Pagadian road. The company had been implicated in collusion on both projects.

Date of Interview            – 2 November, 2006

Interviewee                   – O.Y. Kwon – general manager, overseas civil team-Daelim Industrial Co. Ltd.

– Hun-Tak Kim- general manager , overseas civil engineering department

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (at the company’s office in Seoul)

Kwon and Lim told the INT that Daelim never took part in a collusive scheme and that the company was involved only in plant building and operations projects in the Philippines. They said there are many powerful people around the President of the Philippines who determine the outcome of bidding on road contracts. Because of that, Daelim does not participate in road tenders. Daelim withdrew from the first round of bidding for the 1.4B project because they could not accept a proposal from a powerful man. However, he did not know the name of that person whose supposed agent contacted the company’s representative at his hotel in Manila and offered his services to win a package, in exchange for an unsolicited bribe of an unreasonable amount. Kim said he did not know the powerful people behind the road projects, but assumed they could be retired generals.

Date of Interview            – 2 November, 2006

Interviewee                   – Pan-Seop Lim -team manager, Daewoo E&C

–  Eun-Yong Chang – assistant manager, overseas sales and marketing team

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (at Daewoo’s head office in Seoul)

Lim said he had little knowledge of the details of the allegations of collusion in the bidding of the Philippine road projects. He expressed surprise about bidding pre-arrangement and high level political interference in the WB-financed project.  INT said Daewoo could be implicated and that the meeting was an opportunity for them to cooperate by responding to its findings of collusion. Lim said he was not involved in the bidding preparation and that he was not the right person to be asked why the company did not participate on a contract.  Lim said the company’s involvement in the alleged collusion was insulting and that he was not prepared to hear that.

Date of Interview            – 3 November, 2006

Interviewee                   – Hyun-Woo Ko – manager, Hanjin Heavy Industries

– Nack-Young – deputy manager, overseas business marketing team

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Seoul, Korea)

Hanjin placed bids for two packages, one in joint venture with EEI. Both packages were re-bid three times, and the analysis of the bids had shown collusion in the process, with senior level government officials allegedly involved in pre-arranged procurement.

Ko said the competition was very strong in the Philippines and that he was not aware of any cartel operating in the country.

Date of Interview – 3 November, 2006

Interviewee         – Jeong-Sam Kim – team manager, overseas operation team
– Sammi Construction Co., Ltd

– Jae-Yong Heo – department manager, civil engineering team

Interviewers         – Tim Carrodus and Edil Dushenaliyev (in Busan, Korea)

INT indicated that Sammi could be implicated in collusion in the third round of bidding for contract packages under NRIMP 1 project in the Philippines.  Sammi bid for 1.6A and 1.6B contract packages, but was unsuccessful.

Kim told the INT that he heard from the Manila branch office that corruption was a very serious issue in the country, but he said the company never paid a bribe. The company did not win a single contract although it pre-qualified for four packages under the NRMP 1. He said Chinese companies were acting aggressively in the Philippines, driving the costs extremely low and squeezing out their competitors. For this reason, only a few Korean companies compete with the Chinese on the same tender.

While saying that the company prepared its bid independently of other bidders, Kim admitted to INT that his company had to participate in a collusive scheme out of a concern of being blacklisted and denied future work from DPWH.

Date of Interview            – 7 November, 2006

Interviewee                   – Yu-Tae Kim – director/authorized representative, Manila branch office-Sammi Construction Co., Ltd

Interviewers                  – Terry Matthews, Tim Carrodus and Edil Dushenaliyev

Kim told the INT that he heard from third parties about “unordinary” bidding on the NRIMP packages. He denied that his company was told to put in a losing bid. When told of possible consequences Sammi may face in case of non-cooperation, Kim started to show signs of anxiety and stayed nervous through the rest of the interview, according to INT. Sammi had the highest bid for both the 1.6A and 1.6B packages.  INT said the proposed winner was known one week before the opining of bids. Kim explained its bids were very high because it incurred huge expenses to establish its Manila office but it had to participate in the bidding so as to stay visible in the DPWH radar and not be excluded from future biddings.

Date of Interview            – 7 November, 2006

Interviewees                 – Xie Wen Peng, general manager, China Wu Yi Co. Ltd.

– Wu Yi Bao -deputy general manager

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Xie said nobody called or exerted pressure on the company and that it was usual among Chinese companies to call and ask each other whether they are going to but. However, they never shared their bid price with others. He denied paying money to secure the contract. But he sometimes gave Christmas presents and invite project officials over lunch or dinner. He said he could not complain about the business environment in the Philippines and noted it is no different than in other countries.

Date of Interview            – 8 November, 2006

Interviewee                   – Suh Seung Wong – general manager, Sinsung Engineering & Construction Co. Ltd.

Interviewers                  – Terry Mathews, Tim Carrodus and Edil Dushenaliyev

Wong said he had been in the Philippines for 15 years and found it very difficult to do business in the country. He said some corruption exists, but that he had no evidence to corroborate it. He said he encountered corruption only with the traffic police. He said Shinsung withdrew from the second round of bidding for the 1.4B package because the head office in Korea failed to provide a bid security on time and that the project would overlap with other projects of the company.

Date of Interview            – 8 November, 2006

Interviewee                   –  Kim Won-Ho – general manager-Manila branch office, Daewoo E&C

Interviewers                  – Terry Matthews, Tim Carrodus and Edil Dushenaliyev (in Manila)

Kim recalled that a local politician made him attend a hearing in Congress involving Daewoo’s subcontractor on the Halsema project in Benguet. He said the politician probably wanted to get a portion of the contract to be assigned to a local subcontractor in the area. He said it is a practice in the country for local contractors and government officials to ask to be included in the contract with international companies. Kim said Daewoo could have been disqualified in the 2005 pre-qualification bid for the 1.4A and 1.4C contract because of the INT’s suspicion that it did not want to be part of the collusive scheme on the two packages.

He said local politicians have a vested interest in having large value contracts sliced into smaller package for re-election purposes, and that some, but not all, of the politicians may extract money from smaller contractors to fund their re-election campaigns.

Asked what he knew about EC de Luna Construction, Kim said a person he refused to name told him that EC de Luna could be involved in bidding pre-arrangements and that the Bank’s investigation was triggered by a congressman who wrote a letter to the DPWH.

Date of Interview            – 8 November, 2006

Interviewee                   – Li Peng, general manager-China Geo-Engineering (Phil) Corp.

Interviewers                  -Terry Matthews and Tim Carrodus

Li talked about payment of revolutionary tax to NPA rebels. “The NPA demand a revolutionary tax in order that you can work and protect your machinery and workers. If you have a contract in their areas you have to negotiate. A fee is fixed. If you disagree, then you are summoned by a NPA liaison officer t a meeting, blindfolded and taken to a mountain area and there you meet the NPA people who tell you what the fees or revolutionary taxes are. If you don’t accept you get a bullet in a letter, then a bullet.”

Li also said there were instances when he had to talk to the mayor, governor and congressman to do work in their areas, to be allowed to use the roads. “If you do not cooperate with these politicians, they arrange for your contract to be terminated and rebid and so on.” He said he had to pay “protection fees or commissions” to do work in the project sites.

“Japanese, Korean and Chinese all bid low, then transfer the risk by selling the contract on for a management fee, they do not do the work they win the contract by diving low and then sell to local contractor or a stranger. There are some Chinese companies, no qualifications bid very low and sell to Korean and Chinese. The one who does the work gives fee –maybe 8% of contract price. The project suffers and the contractor who buys has a loss.”

Li said he “paid some money,” 10 percent of contract price, to Sen. Barbers and Tito Miranda who promised to help him. He said he had also talked to Congressman Pichay and asked him if he could assist in getting the contract.

The protection fees or commissions are booked as consultant’s fee, legal expenses or even donations.

Date of Interview            – 8 November, 2006 and 15 November, 2006

Interviewee                   – Noelito D. Policarpio, R.D. Policarpio & Co., Inc. [Philippines]

Interviewers                  – Terry Matthews, Tim Carrodus, and Tom McCarthy (11/08/06)

– Tim Carrodus, Tom McCarthy, and Edil Dushenaliyev (11/15/06)

·        R.D. Policarpio & Co., Inc. (Policarpio Co.) participated in the NRIMP project in the following packages: 1.4A, 1.4C and 1.4B (third round).

·        The involvement of politicians in the awarding of contracts had increased, said Policarpio. In many instances, politicians organize biddings and contractors work together to set how bidding process will turn out.

·        Contractors obtained the price of the contract by paying bribes to individuals of the implementing agencies. All the bidders would then coordinate which contractor would win the bid. This is referred to as the “standard operating procedure” or “S.O.P.”

·        Now, however, politicians heavily influence the S.O.P. by supporting particular contractors. A politician’s support is obtained through a sort of an auction where the contractor willing to pay the highest price gets the necessary political support. This system favors the rich, foreign contractors who can outbid local firms.

·        Policarpio stated that the contractors have had to take part in the corrupt scheme in bidding on all projects in the Philippines that are funded by the World Bank, JBIC, and ADB, as well as locally funded projects.

·        National Road Improvement and Management Project:

–         Packages 1.4A and 1.4C

–         Policarpio explained that the government rejected the application because it could not supply the proper quantity/quality of cement. This, Policarpio said, was merely a pretext, used to make sure that his company did not “play the game.” INT understood this as his company’s exclusion from the bid collusion that would be formalized by the bidders.

–         Pre.-qualification, according to Policarpio, is based on “who you know” – not experience. The company had to be close to certain government officials and politicians. If the company does not cooperate, they can “kick you out.”

–         Package 1.6 (First Round)

–         INT asked Policarpio why his company withdrew from the bidding even if it was pre-qualified. He said he “just didn’t have the time.”

–         INT also asked Policarpio if the reason for his withdrawal was because he knew that he was not going to win so he just gave up early. Policarpio did not agree with this. But he admitted, “they tell me how to bid.”

–   The ABC’s of the Collusive Bidding Scheme

–         The bid collusion involves an entire plutocracy, according to Policarpio. “We will talk to each other, and decide who will get the contract. Sometimes will (agree to) have a small contractor get pre-qualified for strategic reasons.”

–         Policarpio knows that Tito Miranda and Boy Belleza both actively work to manipulate bidding. He said that Eduardo de Luna is “behind” Tito Miranda and “Mr. A” is “behind” de Luna. Mr. A is Mr. Mike Arroyo, Policarpio said.

–         Policarpio said that  de Luna takes an active role in arranging collusive bid schemes in behalf of contractors and politicians. The late Senator Barbers used to be active in using his influence to participate in collusive bid schemes. These activities are now continued by the Barbers sons. Senator Barbers initially used Tito Miranda to arrange his schemes, but later on used  de Luna.

–         Miranda realized that  de Luna is very close to Mr. Arroyo, and has now formed a partnership with de Luna in making arrangements on collusive schemes in behalf of the Barbers sons.

–         Mr. Arroyo is very powerful and places officials in positions, and these officials do what he wants. Policarpio also said he does not believe that Mr. Arroyo’s wife is aware of his corrupt actions.

–         In large government projects, Policarpio said that the process is completely fixed. Prices and winners and losers are determined before the bidding even takes place. Foreign contractors approach politicians and outbid the Philippine companies.

–         Policarpio explained that before, contractors would meet among themselves but now, the decision regarding who will win the contract is made not by contractors but by politicians through the results of the “influence action” system.

–         Losing bidders are paid off by the winning bidder. Politicians would then receive their S.O.P. monies from the contractor’s advance payment, in accordance with the percentage that they have previously negotiated on. Two politicians are usually involved: the politician whose area is hosting or affected by the contract and the politician who controls the implementing agency.

–         For the collusive schemes to work, Policarpio said that the implementing agency must work with the scheme. The DPWH Secretary exercises a very large influence on the schemes and plays a significant role in their success.

–         All payments are paid in cash.

–         Meetings take place at the Diamond Hotel and at a hotel near the U.S. Embassy in Manila. The last meeting Policarpio attended was two weeks ago (check date of interview) at the Diamond Hotel to fix the bidding for a JBIC-funded project.

–         INT asked Policarpio how he accounted for the S.O.P. payments in his company books. He said he does not worry about accounting for the payments because the company books are all “faked” anyway to avoid taxes.

–         INT also asked Policarpio what would happen if he refused to participate in the collusive bid schemes. Policarpio said if he does participate, “they” would try to do something to eliminate his company from bidding in future contracts.

–         Policarpio Co. prepares two bids when tending for a contract: one that conforms with the collusive scheme and one that is a legitimate, “commercial” bid to be submitted in case the collusive scheme falls apart prior to bid submission. Policarpio said he would make the decision as to which bid to actually submit the day before the bid submission deadline.

–         The joint bid submitted by Policarpio/Pancho/Sebastian joint venture in Package 1.4B on August 8, 2006, was part of a collusive bidding scheme, said Policarpio. Prior to the preparation of the bid, he had a telephone conversation with Clemente Pancho, vice-president for Business Development of the Pancho Co. Pancho informed him that he had received the fixing price from the “arrangers” and that he would prepare the bid to reach the predetermined price.

–         Consequently, Policarpio understood that the bid was not going to win and that it was not prepared to win.

–         In a follow-up interview on Nov. 15, 2006, INT asked Policarpio if he was aware if there was a collusive bidding arrangement in the first round of bidding of Package 1.6, where the JV prequalified but withdrew from bidding process. “All bids are fixed,” said Policarpio, noting that the JV in which he was bidding was a designated loser in the scheme.

–         INT asked him why the JV withdrew from bidding. Policarpio said that many times participants in the schemes would decide that they do not have – or unwilling to devote – the resources and time necessary to prepare the bid package since they know that they are going to lose anyway. The JV withdrew because the companies did not have the time to put together a bid at that time which they knew would be unsuccessful.

–         Policarpio also informed INT that he did not understand why the DPWH did not use the ABC formulated by the consultants and used instead used the ABC formulated by its staff. He believes that the ABC’s used in these projects are routinely unrealistic.

Date of Interview            – 9 November, 2006

Interviewee                   –  S.Y. Yoon – commercial and marketing manager, Hanjin

Interviewers                  – Tim Carrodus and Terry Matthews (in Manila)

Yoon said Hanjin’s bid was higher than that of the winning bidder because Hanjin employs Koreans for its projects while local companies use local labor, which is considerably cheaper. In recent times, he said Hanjin decided not to participate in bidding for IBRD projects because of too much competition. He said his company has interest in water-related projects.

Date of Interview       – 9 November, 2006

Interviewees             – Xu Gian -CEO/GM, China International Water and Electric Co.

– Jiang Xiao Hua – chief engineer

Interviewers              -Tim Carrodus, Terry Matthews and Duncan Smith

Xu described the Philippines as “not so easy.” He said that when he took over from the previous general manager in the country, he found the company’s finances “very tight,” the material prices were higher, and prices were manipulated by local people, making it difficult to negotiate prices.

He agreed with INT that one of the big problems in the Philippines was the politicians.  XQ admitted going “sometimes” to meetings of contractors at the Diamond hotel but said he preferred to keep “clean hands.”

Xu said he knew Senator Barbers and met him in 1994 but only as a courtesy and never talked about projects. According to him, it was necessary to “know people” and keep them “happy.”  The local contractors had to pay money to politicians.

Date of Interview            – 9 November, 2006

Interviewee                   – Man-Tae Kim -Keangham Enterprises, Ltd. (Korea)

Interviewers                  – Tom McCarthy and Edil Dushenaliyev (in Manila)

Kim explained that the company couldn’t compete in the Philippines primarily because the       market had many Chinese firms bidding on projects so low that Keangnam cannot get contracts. He       also said it is difficult to operate in the Philippines because the government is not “clean.”

The company has had continuing problems in taxes, which are unclear and too high. According       to Kim, employees in the Philippines have “a difficult attitude” and are “always striking.”

Date of Interview            – 9 November, 2006

Interviewee                   – Junshi Liu, general manager, China Harbour Engineering Co. (ML                                                                 China)

Interviewers                  – Tom McCarthy and Edil Dushenaliyev

The company merged with China Road and Bridge Corp in August 2005, and had changed its name to China Communications Construction Company, Ltd.

It failed to pre-qualify in six packages, pre-qualified but withdrew from bidding in August 2006 on Package 1.6A and pre-qualified and lost in the bidding for Package 1.6B.

Liu described the Philippine government as being “very bureaucratic” on payments and, at time, payments were withheld pending requests for gifts. He found it odd that the government does not favor local contractors. Liu emphasizes the importance of having a good relationship with the DPWH in bidding for projects.  But he denied involvement in any discussions with other contractors to arrange bidding, or pricing. He said he had no knowledge of other contractors working together to fix bidding or prices. However, he said there were informal discussions between contractors prior to submission of bids “to exchange views and lessons learned, informally and privately.”

Date of Interview            – 10 November, 2006

Interviewee                   – Pil Koo Kang – general manager-Manila, Heunghwa Industry Co. Ltd (Korea)

Interviewers                  – Tom McCarthy and Edil Dushenaliyev

Heunghwa submitted to be pre-qualified in a joint venture with EC de Luna but was not pre-qualified for packages 1.4C, 1.4B(1st) and 1.6 (1st); and for 1.4B (2nd) and 1.6 (2nd).

Kang said his company has not bid on IBRD-financed projects because it has no chance of winning the contracts. He said he had heard rumors about IBRD-financed projects in the Philippines, that the contractor has to be connected to many people to win contracts. “We are weak, in that sense and do not know the people you need to know to get the contracts.”

He said the contractors must have connections to government officials, and to agents, or messengers of the government officials. He said there are arrangements made between top government officials and contractors to win contracts. He suggested that INT investigate the winning bidders and talk to the losers “because they always have something to say.”

Kang said he had heard of Tito Miranda and Boy Belleza as agents or messengers for top government officials in arranging bidding on contracts. He confirmed that contractors meet with agents and messengers of government officials before the bidding in order to fix the contract tendering process. Kang said he was told that to get contracts, he has to form a relationship with Eduardo de Luna who was supposedly very close to a top government official. He described de Luna as president of a construction company who is very active in making arrangements between government officials and contractors on contracts. He said de Luna wins contracts with Chinese contractors.

Kang identified the government official that de Luna was connected to as Mike Arroyo, through de Luna’s father-in-law. He admitted that he never participated in any of these dealings and that his knowledge were based on what Kim, his predecessor, had told him and on rumors.

Date of Interview         – 10 November, 2006

Interviewees               – Wen Yuegang, general manager/senior engineer, China Road and Bridge Corp.

– Xiong Shiling, deputy general manager

Interviewers                -Terry Matthews, Tim Carrodus, Duncan Smith and Edil Dushenaliyev

Yuegang said the Philippines was “not an easy place” to work, with NPA and local armed gangs confiscating or restricting access to equipment, and forcing them to pay money. (CRBC’s equipment was burned twice and work forced to be stopped by local armed people.

He denied being instructed by others to put in a specific bid price and stressed that the company’s policy is to set its price at a level so that it will not make a loss. He said his company had never been asked to join a collusive group.

Date of interview           – 13 November, 2006

Interviewee                  – Gerardo V. Pancho, president, C.M. Pancho Construction, Inc. (Phils.)

-Clemente V. Pancho, vice president-business development; head, estimating department

Interviewers                 –  Tim Carrodus, Edil Dushenaliyev and Tom McCarthy

Gerardo Pancho told the INT that the company experiences problems when it competes against foreign contractors, which are able to outbid his company. The Chinese companies are competing unfairly against other companies by using the influence of local politicians…using the names of politicians. His company does not need any political support even if has a relative who is a congressman (Pedro Pancho of Bulacan).  He says his company does not believe in giving money to politicians, and then getting the money back from the project.

Date of Interview            – 15 November, 2006

Interviewee                   –  Panya Visetnut – operations and country manager, Italian-Thai Development Public Co. Ltd (Thailand)

Interviewers                  – Tim Carrodus and Tom McCarthy

The company failed to pre-qualify in six packages and pre-qualified in three others but lost in the bidding.

Panya said it was difficult to do business in the Philippines as a foreigner, and that foreigners themselves present tough competition. He said that while his company could outbid the Japanese firms, he could not submit bids lower than the Chinese companies who can offer lower prices because they are subsidized by the Chinese government.

On the alleged collusion in WB-funded projects, Panya said his company was “ignored” and was  never offered a chance to participate in the collusive bid schemes. He complained that the ABC used by the government is unrealistically low, and does not take into consideration special costs such as the revolutionary tax paid to rebels groups.

Panya said Boy Belleza once offered to do ‘follow up’ services for him for a fee. He denied participating in any collusive bidding schemes or engaging in any arrangement with any other bidder or participating in meetings to designate the winning bidder.

Date of Interview            – 17 November, 2006

Interviewee                   – William (Bill) Paterson, former task team leader East Region, now based in Hanoi, Vietnam

Interviewers                   – Tim Carrodus,  Edil Dushenaliyev, Duncan Smith, Thomas McCarthy and                                                 Richard Leonard

Paterson explained the circumstances leading up to the award of the contracts for NRIMP1 projects.

Date of Interview            – 21 November, 2006

Interviewee                   – Edward C. de Luna, EC de Luna Construction Corp.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

EC de Luna, in a joint venture with China State, was a proposed winner on one of the contract packages but the World Bank did not concur with the DPWH recommendation. De Luna said he did not participate in the third round bidding for the contract because he did not want to lose money again. He said he ‘hates’ politicians. He has to pay them and cannot do anything about it. Some politicians, but not all, want to get a share of contracts in certain areas of the country. Asked of his personal experience with politicians, he said he had to hire local subcontractors connected to politicians in some areas. He likened politicians to the NPA rebels extorting money from contractors. But he denied paying politicians. According to him, politicians meddle in locally funded projects, but not on foreign-funded projects because foreign companies fight back if politicians tried to get a cut out of them.

De Luna denied any involvement in bid collusion. He said one of the losing bidders told him about the alleged collusion. But he did not mind it, thinking that losing bidders in the Philippines always complain about winners and get involved in an intrigue. He admitted knowing Tito Miranda, who coordinates the Philippine-Japan Highway Loan Project of the DPWH, and that he has one contract under the PJHL. But he said he did not know Boy Belleza, an assistant director of Region 4A of the DPWH.

Date of Interview            – 21 November, 2006

Interviewee                   – Federico S. de Vera – sales supervisor- marketing department, EEI Corp.

–  Christopher ‘Peng’ F. Esguerra, sales supervisor

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

De Vera said EEI felt it would not able to meet the pre-qualification criteria, so it entered into a joint venture with Hanjin. In bidding, he said the price is kept confidential before its submission, with very few people in the company knowing about it. Neither de Vera nor Esguerra knew about the alleged bid rigging or the contractors’ meeting at Hyatt or Diamond hotels before the bid opening to designate the winners. Both also said they know either Tito Miranda or Boy Belleza.

The EEI officials said there was a delay in the payment of the P43-million locally-funded Pila-Kalayaan project because of a politician who wanted to get subcontracting work for a local company in his area. They said they did not know if money was given to the politician. Esguerra said he was not aware of any politician asking for a kickback from EEI. Inc as when a local politician expresses interest, EEI can subcontract some work, provided the subcontractor can meet EEI standards.

Date of Interview            – 21 November, 2006

Interviewee                   – Rodolfo J. Corpus, former account of Daelim branch office in Manila

–         R.S. Corpus & Associates

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Corpus said he was not familiar with the details of Daelim’s bidding for the World Bank projects. But having worked for many years at the Construction Development Corporation fo the Philippines (CDCP), he told the INT that he had witnessed the corruption that attended infrastructure projects. He said a third of the project money is lost to corruption of government officials and politicians. He said congressmen would immediately ask for 10 percent of the contract amount, especially on locally-funded projects. World Bank projects are no exemption to this. He said collusion is widely known in the construction community and that it involves all parties, including politicians, government officials, bidders, auditors and officials of the Commission on Audit who get one to two percent of the contract amount. He described DPWH officials as hatchet men or pawns who pull the strings. Contractors who do not participate in the collusive scheme do not get any contract at all. He likened the system to an organized crime where winners are known before the actual bidding could take place.

Corpus said corruption starts from the top, and is a by-product of the political system. He mentioned that Mrs. Arroyo appoints retired generals to top and juicy government positions to buy their loyalty, citing the secretaries of transportation and public works among retired generals who were appointed to plum civilian posts.

Date of Interview            – 21 November, 2006

Interviewee                   – Petronilo Sebastian -P.L. Sebastian

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (at EDSA Shangri-la Hotel)

·          Sebastian denied submitting a pre-arranged bid for the 1.4B package in a JV with Policarpio and C.M. Pancho and that each contractor submitted its own bid. He did not recall making any side payments to politicians or government officials. But the situation with the NPA, he said, is different. He called them extortionists. He has to pay otherwise the NPA will burn the equipment.

·          He had experienced some level of corruption but refused to speak further. He said it involved certain government officials and added that INT should understand his position. Contractors who do not obey the system will be disqualified or face other sanctions. “You know what I mean,” he said.

Date of Interview            – 22 November, 2006

Interviewees                 – Xie Wen Peng – general manager, China Wu Yi Co. Ltd.

–  Wu Yi Bao -deputy general manager

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Xie and Wu denied being asked by politicians or government (officials) to make illicit payments. Wu said that if they had done so, they would have been immediately fired by their head office management. Peng said he believed that some disgruntled losing bidders were not happy with the results of the third round (of bidding) and probably complained to INT. He said local contractors always do “such kind of talk.”

Date of Interview            – 22 November, 2006

Interviewee                   – Clemente V. Pancho, VP – CM Pancho Construction, Inc.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Clemente Pancho said his firm, as the lead partner in the joint venture with Policarpio and PL Sebastian on the 1.4B package, was responsible for the bid preparation, including site visit and cost calculation. The joint venture was formed to meet pre-qualification requirements that were discriminatory against local contractors and favored foreign contractors. Pancho said neither he nor any of his staff attended the Nov. 7, 2006 meeting of the contractors at Hyatt Hotel supposedly to designate CM Pancho as winner in the bid for 1.4.A.1 contract.  Pancho said it was unfair to implicate his company in collusion based on INT’s source and suggested that the source file a complaint to the DPWH or the Ombudsman.

Pancho complained to INT that nobody checks the accuracy of the papers submitted by the Chinese contractors and certified by the Chinese embassy in Manila. He said he was not aware if the Chinese companies made illicit payments to politicians or government officials. The Chinese companies can afford to bid at a loss because they are subsidized by their government.

Date of Interview            – 23 November, 2006

Interviewee                   – Kim Won-Ho, general manager-Manila branch office, Daewoo E&C

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Kim said Daewoo was not at any point in time under pressure from DPWH to submit a bid out of fear of being sanctioned. He said the company withdrew from the second round bidding for the 1.4B package because of tougher competition from the Chinese and manpower problems. And having heard of the INT investigation of alleged collusion, the company did not participate anymore in the third round bidding.

Date of Interview            – 23 November, 2006

Interviewee                   – Manolito Madrasto – chief operating officer, permanent secretariat

— International Federation of Asian and Western Pacific Contractors’ Association

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

IFWAPCA is made up of builders’ associations in 15-member countries.

Madrasto told the INT, “Those who don’t cheat are penalized by the ones who do.”  He said any sanctions against contractors should be made with due process and that contractors accused of any wrongdoing should be afforded the opportunity to defend their actions.

He said corruption in the Philippines starts with locally-funded projects and has expanded to internationally-funded projects. He noted that at the local level,  the local politician decides who wins. If an international contractor wins, there will be local subcontractors suggested by the local politician. He said he is fully aware of the collusive and corrupt system in the Philippines. According to him, some contractors were threatened physically during the third round of bidding for the packages CW-RU-1.4B , 1.6A and 1.6B where everybody knew who was going to win.

Madrasto estimates that 40 percent is added to the cost of a contract to facilitate payments to the politicians.

He said EC de Luna and J.D. Legaspi are connected to the ‘first gentleman’ and they brag about this relationship; RII Builders and 310 Construction are connected to former president Fidel Ramos while J.M. Luciano Construction is connected to a congressman.

Date of Interview            – 23 November, 2006

Interviewee                   –  Yoon Choi -estimation manager, Hanjin

–  Jong II Eum, operations manager

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Manila)

Mr. Choi explained the process the company undertakes in bidding for contracts.

Date of Interview           – 24 November,  2006

Interviewee                  -Junshi Liu, China Harbor Engineering Company

Interviewers                 -Tom McCarthy and Edil Dushenaliyev

Liu  said the level of political interference, especially in the project area, was the most difficult factor in doing business in the Philippines. He said politicians and government officials at all levels want to benefit from contractors. In a project in Zamboanga City, he said Chian Harbor had to hire security to protect its staff. He said he heard from the local personnel that they had to pay the politicians also. He said it was an accepted rule to pay the politicians and that contractors have to play this game in the Philippines. According to him, contractors bid very high to cover all potential side payments in the future. There’s also a lot of competition between the politicians in picking the winners for the contracts.

Date of Interview            – 28 November, 2006

Interviewee                   – Jonathan M. Amon -manager, J. M. Luciano Construction, Inc.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Amon said that Luciano has an ongoing WB-funded project in joint venture (JV) with RII       Builders and 310 Construction. This contract (1.4C package) is progressing very slowly because       of the low bid price, peace and order, and the politicians. The last two factors were the most serious,       he said.

Amon said that the engineers of all three companies (Luciano, RII Builders and 310       Construction) worked collectively on the cost estimation, each providing an input to its own part of       the work. The cost estimates were consolidated by RII. The JV presented a “normal” bid on both       contract packages (1.4A and 1.4C) and did not factor in any “external” factors such as the side       payment to politicians.

Amon repeated that the JV presented a normal bid for the 1.4A package and the termination of       the contract then was “revenge” from politicians whom the JV refused to pay. It was the politician       in the project area (Surigao), Amon said, but he refused to identify the person. He said that the       DPWH officials were also part of the retaliation action against the JV. Asked about filing a case           with the DPWH Ombudsman, Amon said that he (the Ombudsman) is part of the system since he is       appointed by the President and politicians.

·          Aside from track record and experience, Amon said that one needs to cooperate with everybody to pass pre-qualification. “You know what I mean,” he said, referring to such “cooperation” as paying money to the politicians and government officials. If one does not pay, one does not get the contract.

·          Amon also described Boy Belleza (Asst. General Director of Region 4A) and Tito Miranda (President, DPWH Employees Union Association) as decent persons who would not fix the bidding. He also does not know anything negative about E.C. de Luna.

·          Amon refused to identify the facilitators of the collusive scheme, adding that they are different from project to project and much higher than the persons mentioned above. When asked if these could be the Secretary or Undersecretary of the DPWH, Amon refused to answer, saying that he has five children and needs to think of them.

·          If the bid prices are 20 to 30 percent above the cost estimate (ABC) then politicians are involved in the project, according to Amon. To do away with the interference of politicians, the ABC should be published and no bids above the ABC should be accepted.

·          Amon also said that Chinese companies are winning all the internationally funded tenders because they pay the local politicians and government officials since they have the money to make illicit payments. He knows this because he said he is in the “system” and that everybody in the contracting community is aware of the situation.

·          The surplus amount above the ABC goes to the politicians through the foreign banks of international contractors.

·          Amon noted that foreign contractors rarely partner with local firms but if they do so, they do it for “political insurance.” Foreign contractors need no JVs because they have their own resources and sufficient capacity.

·          Amon denied attending any pre-arrangement meetings at the Diamond or Hyatt Hotels, but said such meetings could take place after the pre-qualification to finalize the list of winners.

·          The current Secretary of the DPWH is a retired general and has been in the position for two years. He said that contractors try not to “mess” with him in order to avoid any harm.

·          Amon stated that Luciano currently has two active projects (hospitals) financed by Land Bank. The company recently finished a P800-million JBIC-financed project in the peaceful part of Mindanao.

·          Amon said they had to pay the NPA both in kind (computers, cellphone, medicine, rice and other goods) and in cash on the 1.4A and 1.4C contract packages, among others. If the company would not pay, its equipment could be burned or destroyed. He admitted that RII Builders paid P1 million to the NPA. He also noted that the local politicians and rebel groups have a mutual respect for each other and do not step into each other’s turfs.

·          Amon told INT that the winner of the 1.4A.1 contract package, C.M. Pancho, was predetermined. He advised INT to look at the result of the bidding in order too see a pattern. He also said that the bidders knew about the outcome and therefore intentionally put in losing bids.
–Compiled by Tita Valderama and Karol Ilagan, PCIJ 2009 (ManilaTimes)

The Confidential Witnesses: Full Testimonies(From PCIJ/ManilaTimes)

February 14, 2009

Note from the PCIJ:  Apart from the 54 witnesses identified in the “Record of Interviews” of the World Bank’s Department of Institutional Integrity (INT),  seven other persons testified on the alleged fraud and collusion in the National Road Improvement and Management Program-1 (NRIMP-1), The INT’s report refers to them as the CWs or Confidential Witnesses. Their full testimonies follow:

Confidential Witness No.1 (CW01):

“A former government official with personal knowledge of the DPWH bid process. CW01 requested that his identity remain confidential. CWO1 expressed concern over collusion in the bidding for said projects, and stated that the primary ‘arrangers’ or ‘facilitators’ of the collusion included: a. contractor Eduardo de Luna (who)… was ‘masterminding’ bids, is close to Mike Arroyo (husband of President Gloria Macapagal Arroyo) and is a go-between for Mr Arroyo on foreign-assisted projects; and b. DPWH staffmember ‘Boy’ Belleza whom CW01 described as a long-time ‘arranger’ dating back to the Marcos regime. CW01 said Mr Belleza had been barred for a time from the DPWH offices.”

“CW01 named multiple Congressmen and Senators who had taken bribes, including former Senator Barbers. According to CW01, members of the DPWH who have taken bribes include: former Secretary Florante Soriquez (who is close to Mr Arroyo and Mr de Luna), and Project Director Lope Adriano.”

“CW01 knew details of the operations of the cartel and echoed others in stating that this process was known as the ‘Standard Operating Procedure.’ First, a Congressman would anoint a winner prior to the bidding by identifying the winner to the District Engineer. The Congressman will tell the District Engineer, ‘This is my Man.’”

“CW01 said contractors pay 15-20% of the contract to the Congressman who sponsors them, either up-front or progressively through the various stages of a project.”

“CW01 said the winning bidder gives the losing bidders 1.5% of the contract value; government officials share in another 2-3%; BAC (bid and awards committee) members also sometimes take money in exchange for not forwarding bids to the central office.”

“CW01 stated that the ABC can also be ‘padded’ by engineers who are paid to increase required quantities and thus manipulate the contract specifications to increase the price.”

“CW01 also said contractors take shortcuts in the execution of the contracts to cover these various costs; according to CW01, the DPWH loses between 15-27% on each contract, not including up to 20% in unnecessary costs added to projects.”

“In essence, CW01 said the bidding process is ‘a sham.’ The only contractors who get contracts are the ones who comply with the system.”

Confidential Witness No. 2 (CW02):

“…another government official with knowledge of the process asked that his identity remain confidential. He noted that witnesses had received threats related to the investigation.”

“Stated that DPWH staff, in particular Mr. Soriquez, would not move on the approval of a contract until a contractor pays them 5% for the approval. CW02 was aware of the ‘SOP.’”

“He said contractors have told him that politicians, district engineers, BAC members, losing bidders, and the media are paid under the SOP. He said politicians in the provinces sometimes interfere with the bid award process if they have friends who want to bid; the politicians insist that their friends win.”

“CW02 said Boy Belleza is in charge of arranging the bids and prices for the losing bidder, and Tito Miranda is the arranger for locally-funded projects.”

“CW02 also identified multiple areas where the bid process was subject to manipulation, noting that (a) the ABC is sometimes padded and calls for more work and supplies than are needed; (b) contractors can shift their bids up as much as 30%, citing the danger of currency fluctuations; and c) contractors can obtain contract variations in order to increase their profits and recoup early losses; these variations can double the price of the contract.”

Confidential Witness No. 3 (CW03):

“CW03, a manger in the Philippines office of a foreign firm, participated in the bidding at issue here. CW03 insisted several times during his interview that his identity remain confidential.”

“CW03 told investigators that bids on public construction contracts are prearranged, the bid rigging is an “open secret,” everyone knows about it, and all contractors must participate to get work. He said every layer of the system is corrupt, and all details for the bid documents are prearranged.”

“CW03 said the bid-rigging system is present on contracts with the National Irrigation Administration, the Department of Transportation and Communications, and the Department of Environment and Natural Resources, as well as with the DPWH.”

“Based on his own personal interactions and involvement in the syndicate, CW03 named a number of other companies involved in the collusion. They include Hanjin, China State, Daelim, and Cavite Ideal. CW03 said Cavite Ideal is ‘famous’ for working with the syndicate, and that China State is a ‘very strong, big payer’.”

“CW03 said some companies meet to discuss bids and other issues on a regular basis. Government officials, according to CW03, act as ‘mediators,’ arranging the collusive pricing. ‘Mediators’ assign prices to the losing bidders for submission on the fraudulent bid documents. CW03 named Mr. Belleza and Mr. Miranda of DPWH as mediators; he specifically noted Mr. Belleza’s involvement in the 1.4B and 1.6 packages.”

“CW03 said mediators hold meetings at the Diamond Hotel near DPWH, before each contract goes out to bid. He told investigators that normally, all prequalified bidders attend these meetings. (He said the prequalification process itself is sometimes prearranged.) The mediator discloses the approximate budget amount to the contractors, and asks who is interested in the contracts.”

“Through private follow-up meetings with the interested contractors, the mediators decide on the winner – i.e., the company promises the largest kickbacks. The mediators assign prices to the losing bidders, and check colluders’ bids just before submission to be sure they are ‘correct.’ The winner gets the contract, and support from local politicians, in exchange for the promised payments.”

“Contractors make payments on the bidding date, on the award date, and when they receive payments under the contract. CW03 told investigators he knew about these matters first hand.”

“CW03 noted that the ABC is widely known by bidders. He told investigators that contractors typically add between 20% and 28% to the ABC.”

“CW03 told investigators that each percentage point added to the ABC and dedicated to a corrupt payment is known as a ‘share.’ The apportionment of shares typically is as follows:

1.      the BAC members each receive one share;

2.      the BAC Chairman receives one extra share;

3.      the DPWH Legal Department receives one share;

4.      relevant NGOs or local media receive one share (as payoff to avoid publicity);

5.      the mediator receives one share;

6.      four to five shares go to the Project Management Office (PMO); and

7.      three to five shares are divided among the losing bidders.

“Thus typically between 17 and 20 shares must be allocated to the cartel’s various facilitators.”

“CW03 said contractors know they can add 25% to the ABC and the World Bank will approve the contract. So the winning bidder typically bids 24% higher than the ABC, and the losers bid higher than that.”

“CW03 said work suffers because of the bribes; contractors cut back on implementation, and simply pay off inspectors with food, lodging, and pocket money. CW03 also stated that corruption is “a way of life” in the Philippines. He predicted that even if solid evidence were to be provided, the government would do nothing to remedy the problem.”

Confidential Witness No. 4 (CW04):

“CW04, another foreign firm, has also participated in DPWH bidding. CW04 agreed to provide information only on grounds that it be treated confidentially. Investigators interviewed CW04A and CW04B, both officials in CW04’s manila office.”

“General Description of Syndicate Operations. CW04 told investigators, ‘(If) you have a project with DPWH, you have to give.’ CW04 said that the syndicate operates on a ‘gentlemen’s agreement,’ and it is understood in the syndicate that those who violate it will be excluded from future pre qualifications and will not win further contracts.”

“According to CW04, ‘coordinators’ – among them the winning contractors – arrange the prices at which losing bidders will bid. CW04 identified Mr. Belleza, (the DPWH Region 1V-A Assistant Director), and another DPWH official as coordinating the collusion for DPWH. They have networks of collaborating officials in all PMOs (i.e., PMOs for JBIC, ADB, and World Bank projects).”

“CW04 showed investigators a chart which outlined payments made and due to each of the colluding contractors, as well as the amounts of their bids. Both individuals said the BAC is involved in the bid-rigging, but they do not know what share it receives, because payments to the BAC are handled by the contractors. Both said the payments would be distributed once the contract was awarded.”

“Bid-Rigging on the 1.4B and 1.6 Contract Packages, CW04 said companies sometimes pay a small amount to be prequalified. He said bribes and kickbacks paid by CW04 are hidden in financial reports under vague expense lines. He provided INT with a copy of an example record of payments to a DPWH official.”

“CW04 said contractors were engaged in negotiations with one another. CW04 said that in at least one of the bidding rounds, the company that was designated by the cartel to be the winner thereafter arranged the bids. CW04 confirmed that CW04 had placed bids that were ‘not meant to win’ because another company already had been designated to be the winner of the contract package. They nonetheless tried to demonstrate participation, in hopes of gaining future contracts.”

“CW04 explained that CW04 had been provided a ‘lump sum’ price to bid by a coordinator. He said he then had to ‘jack up’ the other items in the bid to meet the lump sum.”

“CW04 said the Bill of Quantities in CW04’s bids is obviously inflated by at least 20 to 25%. The choice of how to inflate the prices to meet the requested sum was not imposed by the syndicate but was left to each contractor.”

“Other Contracts. CW04 showed investigators other corporate records concerning cartel payments in other contracts. According to cartel procedure, the designated winning bidder was responsible for paying out a portion of the ABC to the losing bidders.”

“CW04 said the winner paid off politicians for election campaign funds, and paid direct bribes to senior DPWH officials. He provided documentary evidence of some of these payments.”

“CW04 explained that, to avoid bookkeeping problems, CW04 obtained fake receipts to balance out any payment discrepancies. The books were prepared by a certified public accountant, and were sent to CW04’s head office without any supporting details. Moreover, he said, CW04’s submissions to the Philippine Bureau of Internal Revenue (BIR) did not necessarily reflect the company’s true financial condition, as CW04 was also bribing officials of the BIR.”

“In a follow-up interview with investigators, CW04 identified an additional World Bank financial project manipulated by the cartel.”

Confidential Witness No. 5 (CW05):

“CW05 participated in bidding on these contracts. CW05 began his interview by noting that he is afraid for his safety if he speaks about Mr. de Luna; he asked the Bank to protect him.”

“CW05 said it has become difficult to do business in the Philippines. In the last three or four years, he said, politicians have gotten involved in the construction business; they ask for money, and his company does not want to pay it.”

“CW05, just as CW03 and Mr Liu of China Harbour had, described corruption in Philippine road projects as ‘an open secret.’ ‘Everyone knows the situation in the Philippines but no one wants to talk about it because they have to survive.’”

“CW05 commended the Bank for its rejection of the bid in the 1.4B and 1.6 contract packages. He said this rejection showed the Bank understood how corruption had infected the bids.”

“CW05 said Tito Miranda, DPWH Region IV-A Assistant Director, is close with both Mr de Luna and important politicians. CW05 said that Mr de Luna appears to have connections with the police, within the agencies, and with the first family.”

“CW05 said under the syndicate system, contractors are to inform Mr Miranda of their intent in a contract. CW05 said contractors cannot say no to Mr Miranda, and he noted that a contractor in Northern Luzon was shot in the mid-1990s because he would not go along with the syndicate.”

“CW05 told investigators a bid may be inflated up to 50% if the bidder has the support of government officials and is willing to pay what he characterized as ‘expenses.’”

“CW05 said companies sometimes withdraw from bidding because they hear the bids are rigged, and they feel a bid under these circumstances is hopeless.”

Confidential Witness No. 6 (CW06):

“CW06 participated in bidding on these contract packages. CW06 noted that he feared repercussions if his cooperation were to become known.”

“CW06 told investigators that Eduardo de Luna was managing the 1.4B and 1.6 contract packages, as well as the NRIMP 1.4A, 1.4C and 1.5 contract packages. He stated that Mr de Luna claimed to be able to arrange for companies to win any of the contracts for a fee.”

“CW06 said politicians were involved in the bid-rigging on Bank projects, and he identified particular individuals.”

Confidential Witness No. 7 (CW07):

“CW07 is a former employee of a DPWH contractor. CW07 agreed to speak only on conditions of anonymity.”

“CW07 told investigators that one of his employer’s contracts had been prearranged by a DPWH employee.”

“CW07 said that for a given contract, the ‘matchmaker,’ who was in charge of arranging the bidders, would ask contractors if they were interested in a particular project. During a subsequent follow-up meeting, the arranged winner would negotiate the markup necessary, and arrange the payments of the bribes and kickbacks to government officials.”

“According to CW07, under the bid-rigging system, ‘silent guidelines’ are followed which direct the amounts of payoffs to which losing bidders in the cartel are entitled. Under these guidelines, the winner would set aside 3% of the ABC for the participating pre-qualifying and losing bidders to share.”

“CW07 told investigators that losing bidders are told the price they are to bid one day before the bid documents are to be submitted. The arrangers check the losing bidders’ prices immediately before submission to make sure they are ‘correct.’ CW07 said ‘divers’ can avoid the prearranged bidding by bidding lower than the others but they will be punished for it by the syndicate.”

“CW07 said that his company has placed bids for contract packages that it had no intention of winning. CW07 said his company received the bid price from the ‘arranger.’ His company then marked up the price computations to meet the arranged total bid price.”

“CW07 also acknowledged other kickbacks his company paid to the DPWH. He told investigators that he was approached by one senior DPWH official who demanded a kickback in connection with an ongoing contract. CW07 said he ‘couldn’t say no’ and admitted that he paid off the official.”

“CW07 said the headquarters offices of some foreign companies know generally about the bid-rigging system in the Philippines, but prefer not to hear the details.” –PCIJ, 2009 (ManilaTimes)

Ninotchka Roska: Post-Moment

February 3, 2009

After Barack Hussein Obama said “so help me God,” I went outside to check if the earth had been rent asunder, trees had fallen, buildings had sat on themselves and the sky had cracked open.

Nothing. Traffic was normal; children were still running around and dogs had their noses to various small shrubs. All I could think of was: well, Saddam, are you roaring with laughter? Huge karma joke, this one…

Then I watched as George W. Bush was led to a helicopter and flown away – which was a relief, considering how much of the past week had been spent spinning his “legacy.” I’m inclined to believe that people who do this are trying to cover up the inescapable sense that they had made a mistake or something had gone wrong with what they’d done.

People who hold power convince themselves it will last forever. They should read Shelley’s Ozymandias: Round the decay/Of that colossal Wreck, boundless and bare/The lone and level sands stretch far away…(PinoyPressBlog)

Trade envoy fears protectionism growth

January 14, 2009

By Doug Palmer
Reuters
First Posted 09:56:00 01/14/2009

Filed Under: World Financial Crisis, Economy and Business and Finance, Government, Trade (general)

WASHINGTON, United States — The outgoing top US trade negotiator said Tuesday she was concerned about threats to free trade in the United States and abroad, but defended US bailout actions as legal under world trade rules.

“I worry about protectionist trends not just in the United States, (but) in China as well and in other countries,” US trade representative Susan Schwab said in a final news conference before leaving office next week.

“It isn’t just the risk of nasty little protectionist riders and measures going through Congress or major pieces of protectionist legislation … it’s also the damage that inaction and policy paralysis can have,” Schwab said.

President George W. Bush told reporters Monday that failure to win congressional approval of free trade agreements with Colombia, Panama and South Korea was one of the biggest disappointments of his second term.

Many Democrats oppose almost all trade deals in the belief they cost more jobs than they create. But other party members have joined with Republicans to approve trade pacts.

Schwab blamed the failure to approve the Colombia, Panama and South Korea accords on the refusal of Democrats, who have controlled Congress since January 2007, to move legislation that “would generate a split in the Democratic caucus.”

Now, with Democratic President-elect Barack Obama replacing Republican Bush next week in the White House, the United States will “have a Democratic party-dominated trade policy by any definition,” Schwab said.

She argued it was important for Congress to approve legislation giving Obama the authority to negotiate new trade agreements because other countries will be moving ahead on that front even if the United States is not.

NO REGRETS

Schwab said she had no regrets about Bush’s decision to try to force a vote on the Colombia agreement, even though that backfired when House Speaker Nancy Pelosi pushed through a measure to indefinitely delay action on the pact.

“The status quo was untenable and it was important to show where the problem was,” Schwab said, insisting that Colombia has already done much to address worker rights and violence concerns that have been raised by Democrats.

The financial crisis that has crippled economic growth across the world has given rise to fears that countries could erect tariff barriers to keep out imports.

Schwab said that would be a mistake, and added the Bush administration has been scrupulous in ensuring that US bailout packages for banks and automakers stay within the bounds of World Trade Organization (WTO) rules.

“We have not at this point seen evidence that we are doing something that would be inconsistent with the WTO,” she said.

Obama has nominated former Dallas Mayor Ron Kirk to take over Schwab’s job, although he has yet to be confirmed by the Senate. Congressional sources said they had not yet received Kirk’s nomination paperwork.

Schwab declined to offer any public advice for Kirk, but said she had met with him to discuss the outstanding free trade agreements and where things stand in the seven-year-old Doha round of world trade talks.

She expressed concern about Obama’s plan to “fix” the North American Free Trade Agreement by adding stronger labor and environmental provisions.

“There are always dangers in reopening existing agreements and the next administration is going to have to weigh the pros and cons of that,” Schwab said.

Obama also wants to renegotiate the South Korea agreement because of concerns that Democrats have raised about the pact’s auto provisions.

The South Korean government has been pushing toward a vote on the agreement in its legislature in the hope that would force Washington to follow suit.

Schwab said there were pros and cons to that strategy and it was up to Seoul to decide the best course.(PDI)

Obama says spending to avert long recession

January 10, 2009

FAIRFAX, Virginia: President-elect Barack Obama Thursday (Friday in Manila) proposed tax cuts and a green energy push to avert economic disaster, but drew a skeptical reaction in Congress to aspects of his huge stimulus package.

“I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible,” Obama said in his first set-piece speech since his election triumph.

“If nothing is done, this recession could linger for years,” he said, in an appeal to both Congress and the public 12 days be fore his inauguration to back a stimulus bill expected to total at least $775 billion.

But top Democratic senators emerged from a two-hour meeting with top Obama aides on Capitol Hill openly questioning whether a $300-million tax cut included in the plan would ignite growth and create jobs.

And Republican lawmakers balked at the costs of the plan and worried about how much it would add to an already huge budget deficit, tipped to hit $1.2 trillion this year.

But without action, Obama warned, “the unemployment rate could reach double digits,” and that an entire generation’s potential might be thwarted and the United States could lose its global competitive edge.

“In short, a bad situation could become dramatically worse,” he told a packed audience at George Mason University in Washington’s Virginia suburbs, an institution that is ironically a bastion of free-market economic theory.

Major spending

Obama has already vowed a nationwide program of repairs to “crumbling” roads, bridges and schools, a rollout of broadband Internet across rural America and federal aid to cash-strapped US states.

In the speech, he pledged a $1,000 tax cut for 95 percent of working families as the “first stage” of a program of tax relief that would extend into the government’s next budget.

Production of alternative energy would be doubled in the next three years, Obama said, and more than 75 percent of federal buildings and two million homes would be modernized to slash billions from power bills.

The president-elect promised a new “smart” electricity grid to cut blackouts and deliver new forms of energy to homes and businesses.

And he said all patients’ medical records would be computerized within five years, saving lives and billions of dollars.

Answering critics

“I understand that some might be skeptical of this plan,” Obama said.

But what he calls the American Recovery and Reinvestment Plan “won’t just throw money at our problems—we’ll invest in what works.”

Despite expanded Democratic control of both the Senate and House of Representatives, Obama wants convincing majorities of lawmakers to sign on, and that means mollifying Republican critics.

Republican leaders welcomed Obama’s proposal for tax cuts, which he said would total 40 percent of a final package that some economists say could reach up to $1.2 trillion.

Reactions

But House Republican leader John Boehner said, “It is very important as we go ahead that we find the right balance.

“Yes our economy needs help, but at the end of the day how much debt are we going to pile on future generations?” he told reporters. “We cannot buy prosperity with more and more government spending.”

Some Democrats also criticized a planned $3,000 tax break for companies that hire new workers and a family tax cut as being insufficient.

The corporate tax break was “unlikely to be effective,” said Kent Conrad, chairman of the Senate budget committee.

“Business people are not going to hire people to produce products that are not selling,” he told reporters.

Other lawmakers also doubted that tax cuts for families of $1,000 would ignite the necessary spurt in consumer spending.

Deficit concerns

Lawmakers from both parties expressed profound alarm when the Congressional Budget Office Wednesday forecast the US deficit would reach a jaw-dropping $1.2 trillion in this fiscal year.

“President Obama is walking into a fiscal disaster of stunning proportion, coupled with an economic downturn of unknown duration and depth,” Conrad said.

In his speech, Obama acknowledged the costs of his stimulus plan would drive the deficit still higher.

“But equally certain are the consequences of doing too little or nothing at all, for that will lead to an even greater deficit of jobs, incomes, and confidence in our economy,” he said.
–AFP

GLOBAL NEWS: Thousands in Lebanon, Turkey protest Israel attack

January 5, 2009

BEIRUT (AP) – Thousands protesting Israel’s ground offensive on Gaza converged yesterday in Beirut and the Turkish capital, as the leaders of the only two Mideast Arab nations to sign peace treaties with Israel demanded an end to the attack.

In Yemen, security officials said anti-Israel protesters attacked several Jewish homes in the northern province of Omran, smashing windows and pelting them with rocks. The officials, speaking on condition of anonymity because because they were not authorized to talk to the media, said at least one Jewish resident was injured among the tiny minority community.

Lebanese police used water hoses to try to push about 250 demonstrators away from the US Embassy in Lebanon’s capital. When that failed, they fired tear gas, said Lebanese security officials. A second Beirut protest — a sit-in outside the UN building — drew thousands of supporters of Hamas and Lebanon’s Islamic Group.

In Turkey, more than 5,000 people held an anti-Israel rally in Istanbul, waving Palestinian flags and burning effigies of Israeli Prime Minister Ehud Olmert and President George W. Bush. Also in Istanbul, club-wielding police broke up a small demonstration by protesters who hurled eggs at the Israeli Consulate, the private Dogan news agency reported. There were no reports of arrests or injuries.

Israel’s weeklong aerial bombardment of Gaza and the start of the ground offensive Saturday against Hamas have drawn condemnation across the Muslim and Arab world and news coverage of the invasion has dominated Arab satellite television stations.

Thousands in cities from Tehran to Damascus have also taken to the streets to protest the attacks, which have killed about 500 Palestinians and wounded more than 1,600, according to Gaza officials.

In some cases, the protests of the past week were as directed against Arab governments as much as Israel, with many criticizing their perceived inaction or lack of sufficient support of the Palestinians.

Yesterday, the leaders of Egypt and Jordan — the only two Mideast Arab countries to sign a peace agreement with Israel and maintain diplomatic ties — condemned the ground offensive and called for an end to Israel’s onslaught in Gaza.

Several hundred Jordanians shouting “death to Israel” protested against the Gaza offensive yesterday in two separate demonstrations in central Amman, the Jordanian capital. The protests were peaceful and police made no arrests.

In parliament meanwhile, the Jordanian government came under criticism from Islamic opposition lawmakers demanding that it suspend relations with Israel.

“All options are available to assess the relationship with every side, especially Israel,” Prime Minister Nader al-Dahabi told parliament during a heated debate.

“We will reconsider relations according to our higher national interests,” he said. “We will not remain silent about the situation and the serious deterioration in Gaza and neither about the threat which risks the security of the whole area and its stability.”

Palestinian President Mahmoud Abbas, who runs his own Palestinian administration from the West Bank, also denounced Israel’s ground offensive as “brutal aggression” in his harshest words yet in describing Israel’s assault on his Hamas rivals.

Israel says the aim of the operation is to stop the Palestinian militant Hamas group from firing rockets at southern Israeli towns. Hamas is opposed to any peace settlement with Israel and calls for the destruction of the Jewish state.

“This battle will end a (peace) settlement forever,” Hamas’ representative in Lebanon, Osama Hamdan, told the protesters at the sit-in. “This battle will show who are the men.”

Five civilians and one policeman were lightly injured in the clash outside the US Embassy earlier in the day, according to the Lebanese officials, who spoke on condition of anonymity because they were not authorized to speak to the media.

Meanwhile, the leader of Lebanon’s militant Hezbollah group, Sheik Hassan Nasrallah, discussed the situation in Gaza with visiting chief Iranian nuclear negotiator Saeed Jalili, the group’s Al-Manar TV said.

Al-Manar did not give further details but said Nasrallah and Jalili, who arrived here Saturday from neighboring Syria, discussed “ways of ending this aggression.”

Hezbollah, which is a strong ally of Hamas, possesses a formidable arsenal of rockets and missiles that bloodied Israel during a monthlong war in 2006. Hezbollah has not threatened to join Hamas in its current battle with Israel, but Nasrallah said last week that his men are on alert in case Israel attacks Lebanon.(PhilStar)

GLOBAL NEWS: Gaza civilians left exposed in Israeli invasion

January 5, 2009

GAZA CITY (AP) – With booms from artillery and airstrikes keeping them awake, the 10 members of Lubna Karam’s family spent the night huddled in the hallway of their Gaza City home.

Earlier strikes shattered the living room windows, letting cold air pour in. The Karams haven’t had electricity for a week and have run out of cooking gas. The family, including three small children younger than four, eats cold, canned beans.

“It’s war food,” said Karam, 28. “What else can we do?”

As Israel’s offensive against Hamas moves from pinpointed airstrikes to ground fighting and artillery shelling, Gaza’s civilians are increasingly exposed. Some two dozen civilians were killed within hours after the start of Israel’s ground invasion Saturday night.

Israel says eight days of aerial bombardment, followed by the ground invasion, seek to undermine Hamas’ ability to fire rockets at the Jewish state. So far, more than 500 Palestinians and four Israelis have been killed. Palestinian and UN officials say at least 100 Palestinian civilians are among the dead.

The ground offensives will put Israeli solders, Gaza militants and civilians in much closer quarters.

The guiding principle of Israel’s ground invasion is to move in with full force and try to minimize Israeli casualties, Israeli military correspondent Alex Fishman wrote in the daily Yediot Ahronoth. “We’ll pay the international price later for the collateral damage and the anticipated civilian casualties,” Fishman said.

While Israeli said its airstrikes have targeted only Hamas installations and leaders, some of the bombs were so powerful that they destroyed or damaged adjacent houses.

Karam said she always felt under threat. She said her family didn’t sleep. “We keep hearing the sounds of airplanes and we don’t know if we’ll live until tomorrow, or not,” she said.

Anas Mansour, 21, a resident of the Rafah refugee camp on the Gaza-Egypt border, said he and his family may try to leave the area later yesterday. Mansour said he was sleeping in his clothes, with his identification cards in his pocket in case he had to flee quickly.

He said he could see his neighbor loading a donkey cart with mattresses and blankets to leave, but hadn’t yet decided if he’d do the same. “Where can we go? It’s all the same,” Mansour said.

Deprivation is nothing new in Gaza, but the Israeli-led blockade of the territory has grown increasingly tighter over the past two months, making cooking gas and many foods scare.

Adding to that, last week’s bombings damaged the strip’s sanitary and electrical infrastructure, leaving many residents without power and water, and most shops are now shuttered.

“When there was a siege, we kept taking about a catastrophe,” said Hatem Shurrab, 24, of Gaza City. “But then the airstrikes started, and now we don’t even know what word to use. There’s no word in the dictionary that can describe the situation we are in.”(PhilStar)

Israeli troops invade Gaza

January 5, 2009

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Smoke caused by explosions rises over Gaza City yesterday. AP

GAZA CITY – Israeli ground troops and tanks cut swaths through the Gaza Strip early yesterday, bisecting the coastal territory and surrounding its biggest city as the new phase of a devastating offensive against Hamas gained momentum.

At least 23 Palestinians were killed in the new fighting as trucks and cars packed with families fled Gaza City and other towns ahead of the biggest Israeli military operation since its 2006 war with Lebanon.

Thousands of soldiers in three brigade-size formations pushed into Gaza after nightfall Saturday, beginning a long-awaited ground offensive after a week of intense aerial bombardment.

Black smoke billowed over Gaza City at first light and bursts of machine-gun fire rang out.

Witnesses said that Israeli infantry units and tanks had taken control of the Salaheddine Road, the main highway along the length of the enclave, dividing Gaza.

TV footage showed Israeli troops with night-vision goggles and camouflage face paint marching in single file. Artillery barrages preceded their advance, and they moved through fields and orchards following bomb-sniffing dogs ensuring their routes had not been booby-trapped.

The military said troops killed or wounded dozens of militant fighters.

Palestinian medics and doctors said 23 Palestinians have been killed – three Hamas fighters and the rest civilians. Many of the casualties were in the northern Gaza town of Beit Lahiya, the scene of some of the heaviest fighting.

A Palestinian child was killed and 11 other children were wounded in the strike, when a tank shell hit a house in eastern Gaza City, Gaza medics said.

Israel launched the nighttime offensive on Saturday after eight days of air strikes in which at least 485 Palestinians died and more than 2,400 were wounded, Gaza medics said.

More than 80 children are among the dead.

Explosions and shooting could be heard in many areas as troops backed by Apache helicopters forged into the territory, they said.

Militants fired mortars and detonated roadside bombs. The heaviest fighting was reported in and around Jabaliya.

Army ambulances were seen bringing Israeli wounded to a hospital in the southern Israeli city of Beersheba. The military reported 30 Israeli troops were wounded, two seriously, in the opening hours of the offensive.

But an army spokeswoman said 28 Israeli soldiers have been wounded, two of them seriously, in the ground invasion.

Hamas said nine soldiers had been killed in the operation. The army refused to comment on the claim.

According to the spokeswoman, “28 soldiers have been wounded, with two of them — an officer and a soldier — seriously wounded.”

A statement from Hamas’s armed wing, the Ezzedine al-Qassam Brigades, said that in monitoring Israeli military radio traffic, it learned that five soldiers had been killed.

In his first public comments since the ground operation was launched, Israeli Prime Minister Ehud Olmert said yesterday that the invasion was unavoidable and that his government exhausted all other options before approving the operation.

Defense Minister Ehud Barak predicted a long and difficult campaign in Gaza, a densely populated territory of 1.4 million where militants operate and easily hide among the crowded urban landscape.

Hamas threatened to turn Gaza into a “graveyard” for Israeli forces.

“You entered like rats,” Hamas spokesman Ismail Radwan told Israeli soldiers in a statement on Hamas’ Al Aqsa television. “Gaza will be a graveyard for you, God willing.”

The ground operation is the second phase in an offensive that began as a weeklong aerial onslaught aimed at halting Hamas rocket fire that has reached deeper and deeper into Israel, threatening major cities and one-eighth of Israel’s population. Palestinian officials say dozens of civilians were killed in the air offensive.

Rocket fire has persisted, however, and several rockets fell in Israel on Sunday morning, causing no casualties. In much of southern Israel school has been canceled and life has been largely paralyzed.

While the air offensive presented little risk for Israel’s army, sending in ground troops is a much more dangerous proposition.

Hamas is believed to have some 20,000 gunmen intimately familiar with the dense urban landscape. For months, Israeli leaders had resisted a ground invasion, fearing heavy casualties.

No choice but war

Israeli Prime Minister Ehud Olmert said he decided that the government had no more choice.

“I want to be able to go to the Israeli public and all the mothers and say, ‘We did everything in a responsible manner,’” Olmert said in a statement released by his office.

“In the end, we reached the moment where I had to decide to send out soldiers.”

Olmert stressed the campaign’s objective is to restore quiet to Israel’s south, not to topple Hamas or reoccupy Gaza.

Israel considers Hamas, which has controlled Gaza since June 2007 and is sworn to Israel’s destruction, a terrorist group.

Israel has launched at least two other large ground offensives in Gaza since withdrawing its troops from the area in 2005. But the size of this latest operation dwarfs those, with at least three times the firepower.

Israel also has called up tens of thousands of reserve soldiers, which defense officials said could enable a far broader ground offensive as the operation’s third phase.

The troops could also be used in the event Palestinian militants in the West Bank or Hezbollah guerrillas in Lebanon decide to launch attacks. Hezbollah opened a war against Israel in 2006 when it was in the midst of a large operation in Gaza.

The officials spoke on condition of anonymity because the military’s preparations are classified.

Cutting through

An armored force south of Gaza City penetrated as deep as the abandoned settlement of Netzarim, which Israel left along with other Israeli communities when it pulled out of Gaza in 2005, both military officials and Palestinian witnesses said.

Israeli tanks and troops had pushed into two areas of northern Gaza, one near the Erez crossing and another east of the town of Jabaliya, near an Islamic cemetery.

That move effectively cut off Gaza City, the territory’s largest population center with about 400,000 people, from the rest of Gaza to the south.

The offensive focused on northern Gaza, where most of the rockets are fired into Israel, but at least one incursion was reported in the southern part of the strip. Hamas uses smuggling tunnels along the southern border with Egypt to bring in weapons.

Warplanes struck about four dozen targets overnight, including tunnels, weapons storage facilities, areas used to launch mortars and squads of Hamas fighters, the military said.

Israeli tanks opened fire on Hamas positions after entering the impoverished territory and Hamas forces replied with mortar fire, witnesses said.

They said there were explosions and tank fire just north of Jabaliya, where Palestinian militants were responding with rocket fire.

Gunboats backed up the ground forces, attacking Hamas intelligence headquarters in Gaza City, rocket-launching areas and positions of Hamas marine forces.

Hamas has been responding with mortar shells and rocket-propelled grenades. Field commanders communicated over walkie talkie, updating gunmen on the location of Israeli forces. Commanders told gunmen in the streets not to gather in big groups and not to use cell phones. Hamas’ TV and radio stations, broadcasting from secret locations after their offices were destroyed, remained on the air, broadcasting live coverage.

Ground forces had not entered major Gaza towns and cities by early yesterday morning, instead fighting in rural communities and open areas militants often use to launch rockets and mortar rounds. Militants also fire from heavily populated neighborhoods.

Residents of the small northern Gaza community of al-Attatra said soldiers moved from house to house by blowing holes through walls. Most of the houses were unoccupied, their residents already having fled.

Israel launched the air campaign against Gaza on Dec. 27. Gaza health officials say more than 480 Palestinians were killed in the first eight days of the operation.

The breakdown of combatants and civilians remains unclear, but the UN says at least 100 civilians were killed in the initial, aerial phase of the war.

Hundreds of rockets have hit Israel so far, and four Israelis have been killed.

The decision to send ground troops into Gaza was taken after Hamas kept up its rocket fire despite the aerial assault, government officials said. They spoke on condition of anonymity because discussions leading up to wartime decisions are confidential.

Outrage

The ballooning death toll in Gaza — along with concerns of a looming humanitarian crisis — has aroused mounting world outrage, as evidenced by protests that drew tens of thousands of demonstrators in European capitals on Saturday.

“There is a humanitarian crisis. It’s impossible to say how many innocent women, innocent children and innocent babies are being caught up in this conflict, who are being maimed and killed,” said Chris Gunness, a UN spokesman. “This offensive must stop.”

The offensive has sparked spiraling anger in the Muslim world and protests across the globe.

Denunciations also came from the French government, which unsuccessfully proposed a two-day truce earlier this week, and from Egypt, which brokered the six-month truce whose breakdown preceded the Israeli offensive.

Hamas spokesman Fawzi Barhum said “what is happening in the UN Security Council is a farce that shows the level that America and Zionist occupier dominates its decisions.”

But the US has put the blame squarely on Hamas. White House spokesman Gordon Johndroe said US officials have been in regular contact with the Israelis as well as officials from countries in the region and Europe.

“We continue to make clear to them our concerns for civilians, as well as the humanitarian situation,” he said.

At an emergency consultation of the UN Security Council on Saturday night, the US blocked approval of a statement demanded by Arab countries that would have called for an immediate ceasefire. US deputy ambassador Alejandro Wolff said the US believed that such a statement “would not be adhered to and would have no underpinning for success, (and) would not do credit to the council.”

French President Nicolas Sarkozy is due on Israel today for talks on a ceasefire with Olmert in Jerusalem.

French Foreign Minister Bernard Koucher called the ground invasion a “dangerous military escalation” that would undermine attempts to broker a truce.

British Prime Minister Gordon Brown spoke with Olmert, “pressing hard for an immediate ceasefire.”

Hamas began to emerge as Gaza’s main power broker when it won Palestinian parliamentary elections three years ago. It has ruled the impoverished territory since seizing control from forces loyal to moderate Palestinian President Mahmoud Abbas in June 2007. –AP(PhilStar)

Obama Should Worry About Iraqi Shoes, Too

December 28, 2008

When Iraq’s violence escalates, President Obama better not be caught on his heels when he’s blamed for losing Bush’s “win.”

By Ben Lando
AlterNet
INTERNATIONAL
Posted by Bulalat

After four hours stuck in Baghdad traffic, I was close enough to get out of the car and walk to my hotel. I’m sure it was raw sewage I stepped in, but I didn’t ask; ignorance is bliss, I figured, or every time I take my shoes off I’ll think of what’s on the bottom.

The drive from an interview in Monsour district back to my hotel just outside the Green Zone should have taken 45 minutes, tops.

But it coincided exactly with President Bush’s farewell invasion of Baghdad, and the send-off by 29-year-old Baghdadiyah TV journalist Muntathar al-Zaidi.

“This is a goodbye kiss, you dog,” al-Zaidi yelled and tossed his shoes at Bush, McClatchy Newspapers reports. “Killer of Iraqis, killer of children.”

As soon as my drivers and I were routed from the main highway to side streets by U.S. troops, we knew something was up. Traffic was intense every direction we took; the boys selling candy car-to-car must have made out well.

Frustration grew as the sun went down. Every route was blocked by U.S. troops. Bush made an unnecessary visit to Baghdad and put an American’s life in danger, I thought, and Baghdadis’ lives are frozen until he leaves the country for good.

Iraqis, getting impatient, start each day dressing one shoe at a time. A draft report from the U.S. Special Inspector General for Iraq Reconstruction, leaked to the New York Times and ProPublica this week, ahead of its January scheduled release, pans nearly the entirety of U.S. reconstruction efforts here.

Stuart Bowen, the IG, recounts his first tour of the Coalition Provisional Authority: “What I saw was troubling: large amounts of cash moving quickly out the door. Later that same day, walking the halls of the palace, I overheard someone say: ‘We can’t do that anymore. There is a new inspector general here.’ These red flags were the first signs that the oversight mission the Congress had assigned my office would be extraordinarily challenging.”

SIGIR’s responsibility was to watchdog nearly $50 billion in U.S. taxpayer dollars dedicated here by Congress.

“Over the past five years, this sea of taxpayer dollars flowed to a wide spectrum of initiatives, ranging from training Iraq’s army and police to building big electrical, oil and water projects; from supporting democracy-building efforts like elections to strengthening provincial councils’ budget execution; and from funding rule-of-law reforms to ensuring that Iraq sustains what the U.S. program provided,” the SIGIR report said.

“Some of the initiatives succeeded, but, as this report explains, many did not. … beyond the security issue stands another compelling and unavoidable answer: the U.S government was not adequately prepared to carry out the reconstruction mission it took on in mid-2003.”

So, parallel to, or because of, the continued insecurity, there is a lack of services such as electricity, clean water and fuel — not to mention a deficit of human-rights protection for women and minorities, according to a new U.N. report on human rights in Iraq — it’s not difficult to understand why a journalist threw shoes at the face of this situation.

Some here debated whether he’d be better off using his power as a journalist to explain why Bush is “a dog” — likely, since he has not been released from custody following a painful arrest. Others said it was plain inappropriate to embarrass the prime minister and disrespect a guest in a way so offensive in Arab culture, let alone committing a crime of assault; a rally in the Baghdad neighborhood Sadr City the day after called for the immediate release of al-Zaidi, an overnight hero of the Iraqi street and the Arab world.

No one I’ve spoken to, or overheard, has criticized the motivation of the reporter, who was shell-shocked covering the bombing of Sadr City this year (and was kidnapped last year).

“Ninety percent of Iraqis supported the overthrow of Saddam Hussein, greeted American troops as liberators with flowers and candy,” said a local journalist, whose office I was sharing while I was reporting this week. “Now, 90 percent feel the same way as al-Zaidi.”

“Thanks to you, the Iraq we’re standing in today is dramatically freer, dramatically safer and dramatically better than the Iraq we found eight years ago,” the Los Angeles Times quoted Bush during his visit.

But besting Saddam Hussein shouldn’t have been this hard.

“The work hasn’t been easy, but it’s been necessary,” Bush said after meeting Iraq’s Presidency Council. He called the buildup of U.S. troops in 2007 “one of the greatest successes in the history of the United States military” and the Status of Forces Agreement, which he and Prime Minister Nouri al-Maliki symbolically signed, “a reminder of our friendship and as a way forward to help the Iraqi people realize the blessings of a free society.”

If this were the case, if there was hope on the streets and feasible plans for the future, Iraqis wouldn’t throw shoes at the president of the United States.

But Bush, in his final month in office, is painting Iraq as a success, progress after tough times, nearing victory after tough battles. The reality is: it’s not. Iraq does not yet wear American-made designer shoes; it wears a pair of thin, worn and hole-pocked hand-me-down shoes after years of going barefoot. Violence is down, but only low compared to the days in 2006 and 2007, when bodies were found daily. The demographic map of Baghdad now is evidence of ethnic cleansing, Shiite and Sunni, if they’ve returned to the country, relegated to “their neighborhoods.” This after Saddam Hussein’s time — unquestionably brutal and genocidal in his own right — of intermarrying and protection from religious fundamentalism.

There are neighborhoods unsafe for an Iraqi to go through, let alone an American. A suicide bombing outside a Baghdad checkpoint Monday killed three people, according to McClatchy’s daily roundup of violence, which is seldom blank. Four days earlier, a restaurant in the northern city of Kirkuk exploded, killing 55 and wounding more than 100.

The Overseas Security Advisory Council, a federal advisory committee coordinating security intelligence between the U.S. government and American business overseas, said in the first week of December, al-Qaida in Iraq “demonstrated its continued capability to launch deadly attacks, perpetrating a series of successful attacks against both Iraqi security forces and Iraqi government targets.” At least 54 Iraqis died and hundreds were injured in attacks throughout the country as AQI “demonstrated its ability to adapt to Iraq’s changing security situations.”

Political disputes over provincial and national elections, a referendum on disputed territories and creating an autonomous region in oil-rich Basra province will be rough going for average Iraqis, fodder for militias and armed political groups, most of who were not run off in “The Surge,” but took a break.
And if President-elect Barak Obama doesn’t dispel this myth of Bush winning Iraq, let alone allow his Iraq policy advisers to believe it, he’s in for a swift kick when the Sunni insurgents-turned-security face-off against the Shiite government, when Kurdish-Arab disputes continue to stall government operations, and when Iraqis en masse throw shoes in frustration of the outstanding need to basic services that human rights demand, after six years of losing loved ones.

Much blame can be laid on the Iraqi government: many have played politics while the citizens want. But the political infrastructure and the power struggles in Parliament are a creation of the U.S. experiment in Iraq. And when Congress asks why the United States should spend more money on reconstruction, a look at the SIGIR report unveils the cynicism of the question: the U.S. government wasted, not spent, most of the money the taxpayers sent here.

The Democratic Party on a national level — most recent election withstanding — has woken up each day, tied its shoelaces together and wondered why it tripped in getting its message out. Dems either approved or didn’t articulate the strategic faults of the Bush operation in Iraq, and the result is Iraqis and the world will suffer as consequence. Its electoral losses at the start of the Bush presidency and slight gains since are more a result of voter reaction to the Bush policies than acceptance of Democratic promise.

When Iraq’s violence escalates, President Obama better not be caught on his heels when he’s blamed for losing Bush’s win here. Neither he nor the Democratic Party will be able to duck their opponents’ flying shoes as easily as Bush. AlterNet/Posted byBulatlat.com

The Shoe Heard Round the World

December 28, 2008

As with any event that pushes history forward, when you click the play button over and over to watch Muntanzer al-Zaidi mumble something in Arabic that we now know meant “This is a farewell kiss from the Iraqi people, you dog!,” the question inevitably arises – Why hasn’t this happened before?

BY AARON LAKE SMITH
Truthout/Perspective
INTERNATIONAL
Posted by Bulatlat

As with any event that pushes history forward, when you click the play button over and over to watch Muntanzer al-Zaidi mumble something in Arabic that we now know meant “This is a farewell kiss from the Iraqi people, you dog!,” the question inevitably arises – Why hasn’t this happened before? Watch al-Zaidi rise from the back of the room. See the glimmer of recognition in Bush’s eyes and the animal instinct take over as he avoids the shoes coming at his head. The incident is like a deep whiff of smelling salts, causing the degradations of the past five years to flood back. Remember when the antiwar movement puttered to a halt after Bush declared Mission accomplished? How easily we were fooled into complacency.

It is at this juncture where our antihero appears. Bush had opened the press conference by saying, “The American people have sacrificed a great deal to reach this moment. The battle in Iraq has required a great amount of time and resources” to a crowd of Arab journalists – is it any wonder that shoes were thrown? There is only so much unreality people will put up with before frustration bubbles to the surface, breaking through the veneer of civility. Watching the footage over and over again, the video quenches some thirst I didn’t know I had. There is a spectacular power in al-Zaidi’s visceral response: the spectacular bleary front-page photos of the smooshed face of the president. Bush’s deft and effortless dodge out of the way, like a character in “The Matrix.” Who isn’t haunted by that bemused smile plastered on his face as al-Zaidi is dragged out of the room and beaten? When the front row of reporters apologize, Bush shrugs it off, seeming put off by their servility: “So what if a guy threw a shoe … it doesn’t bother me. And if you want some – if you want the facts, it’s a size 10 shoe that he threw … Do not worry about it.”

But rather than move on and pretend it never happened, amazingly, Bush returns to the shoe throwing. He turns it into a parable, crams it into his deluded concept of democracy, “That’s what happens in free societies, where people try to draw attention to themselves. And so I guess he was affected, because he caused you to say something about it.”

But while Bush lauds civil dissent with one hand, he crushes it with the other. In an opinion piece by the editorial board, The New York Times said: “Mr. Zaidi had been severely beaten by security officers on Sunday after being tackled at the press conference and dragged out. While he has not been formally charged, Iraqi officials said he faced up to seven years in prison if convicted of committing an act of aggression against a visiting head of state. No doubt he must face the charges – and punished if found guilty.”

“No doubt he must face the charges – and punished if found guilty.” Shame on The Times’ editors for giving such a de rigueur shrug for centrism instead of taking a stand. Al-Zaidi is looking at seven years in an Iraqi oubliette in the face. When will The Times have the courage to make the same call for Bush? True democracy requires us to be active participants. The lesson that can be gleaned from al-Zaidi’s rage is that the jelly-like stasis of the present can always be shattered; with a single act, all avenues of possibility widen. Outside of the week’s news stream talking points, many things are still possible. But al-Zaidi is not, as he has been lauded, a “folk hero.”

He’s just a guy who threw his shoes. It could have been any of us. And like all rebels who walk away from the cotillion of civility, he will be rewarded and punished by history. The biggest barrier to democracy is the fear of social transgression, the idea that democracy can be passively observed. We must be constant, active participants in our fates, rather than waiting for others that we can cheer on from the sidelines, to act on our behalf. Truthout/Posted byBulatlat.com

The US War on Terror*

December 28, 2008

“Fascism will never come to America as fascism. It will come as 100 percent Americanism.” Huey Long

“When fascism come to America, it will be wrapped in the flag, carrying a cross” Sinclair Lewis

BY DR. HALUK GERGER
INTERNATIONAL
Posted by Bulatlat

After the Second World War, the US imperialism had premeditated two immediate objectives in its drive to global hegemony. One was to defeat socialism and destroy the Soviet Union together with the regimes allied to it. The second aim was to subvert and subdue the national-democratic revolutions in the colonies and semi-colonies. The anticommunist crusade of the Cold War was the culmination of this plan.

In the preparatory phase of this aggression, the US leaders realized that this kind of total belligerence required tools to manipulate the public opinion for domestic control.

One tool to utilize was fear. As the influential Chairman of the Senate Foreign Relations Committee Arthur Vandenberg had advised President Truman, ruling classes first needed to “scare the hell out of the American people.”

Secondly, the government moved to curtail the democratic process at the home front and began to repress opposition. McCarthyism was the culmination of this sinister process during which democratic institutions were corrupted and due process of law crudely violated. State and corporate terror was unleashed against dissent. Public opinion was unabashedly manipulated.

Thirdly, it was deemed necessary to demonize and criminalize the targeted regimes, political leaders and movements. As a result, it was hoped, public opinion support would be secured for the legitimization of destructive methods like sabotage, torture, assassination, mass murder, coup d’etats, military dictatorships, brushfire wars, pacification programs, and the like. The aim, in short, was manufacturing pretexts, consent, and justification for imperialist terror.

Militarization of both international relations and the domestic environment followed this conspiracy against democracy and peace. The ideological machinations took the human mind, social sensitivities, and public opinion captive.

In 1941, Henry Luce, in his call for the “American Century,” said that, after the World War II, victorious USA should exercise her right “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.” And in 1955, as if directly addressing Luce’s ominous call, the US Air Force General (and later Shell Oil Director) James Doolittle, commissioned to lead a Panel of Consultents to undertake a study of CIA covert operations, wrote the following to President Eisenhower:

“It is now clear that we are facing an implacable enemy whose avowed objective is world domination by whatever means and at whatever cost. There are no rules in such a game. Hitherto acceptable norms of human conduct do not apply. If the United States is to survive, long-standing American concepts of “fair play” must be reconsidered. We must develop effective espionage and counterespionage services and must learn to subvert, sabotage and destroy our enemies by more clever, more sophisticated and more effective methods than those weed against us. It may become necessary that the American people be made acquainted with, understand and support this fundamentally repugnant philosophy…”

Finally, we must underline the fact that the imperialist aggression at the time pointed to a profound crisis of the system. It stemmed from a structural crisis, resulted in an humanistic crisis on the part of the aggressor who denied opponents’ humanism. In the end, the world strayed into the “New Order” of imperialist barbarism—leading up to the utter bankruptcy of imperialism itself.

More than half a century after Luce’s pronunciation, the US has embarked upon yet another imperialist onslaught, this time to reap the fruits of its Cold War victory and to impose a new “American Century.”

The Middle East was chosen as the launching pad in this offensive for global hegemony. In the year 2000, The Project for the New American Century, an influential think-tank, released a report called “Rebuilding America’s Defenses: Strategy, Forces and Resources for a New Century.” Among its authors were Dick Cheney, Donald Rumsfeld, Paul Wolfowitz, Francis Fukuyama, and W. Bush’s brother Jeb Bush. A critical paragraph in the Report said:

“In the Persian Gulf region, the presence of American forces, along with British and French units, has become a semi permanent fact of life. Though the immediate mission of those forces is to enforce the no-fly zones over northern and southern Iraq, they represent the long-term commitment of the United States and its major allies to a region of vital importance. Indeed, the United States has for decades sought to play a more permanent role in Gulf regional security. While the unresolved conflict with Iraq provides the immediate justification, the need for a substantial American force presence in the Gulf transcends the issue of the regime of Saddam Hussein.”

The report also called for a wholesale militarist reorganization in the United States to add momentum to the global hegemony push they sought, comparable with what the notorious NSC-68 demanded in 1948 for the Cold War drive. The authors were yearning for a congenial domestic atmosphere:

“…the process of [such a militaristic] transformation…is likely to be a long one, absent some catastrophic and catalyzing event- like a new Pearl Harbor.”

As if God-sent, the pretext for “justification” descended on New York and Washington DC on September 11, 2001. The new much-needed elusive enemy was christened “terrorism.” It would become the blanket term to denigrate all resistance to imperialism and even any opposition whenever the powers that be may wish so.

Again, similar to the precursory Cold War schemes, a new “ruthless” and “dehumanized” enemy had to be invented to paralyze the world with fright and to vindicate imperialist terror. Now, the “baby-eating Chinese communists” gave way to the “blood-thirsty Arab-Moslem terrorists.” Once again, to justify imperialist aggression devoid of moral or legal restraints, and to delude the people to “support this fundamentally repugnant philosophy” of treachery, “a new kind of war” had to be contrived. A new militarism was needed through which Capital could indulge itself in global plunder…

In 2002, in his cover letter of the notorious Presidential Report “The National Security Strategy of the United States of America” President George W. Bush declared a “war of uncertain duration” against the new enemy.

According to the highest authority of the land, the United States faced an enemy and a kind of war that made all previous conduct obsolete, and even dangerous. Reminiscent of Doolittle’s report and the rhetoric of the Cold War, the new strategy text claimed:

“We are menaced less by fleets and armies than by catastrophic technologies in the hands of the embittered few…The struggle against global terrorism is different from any other war in our history. It will be fought on many fronts against a particularly elusive enemy over an extended period of time…But it is not only this battlefield on which we will engage terrorists…The United States of America is fighting a war against terrorists of global reach. The enemy is not a single political regime or person or religion or ideology. The enemy is terrorism…

The regimes of the new enemy states:

* brutalize their own people and squander their national resources for the personal gain of the rulers;
• display no regard for international law, threaten their neighbors, and callously violate international treaties to which they are party;
• are determined to acquire weapons of mass destruction, along with other advanced military technology, to be used as threats or offensively to achieve the aggressive designs of these regimes;
• sponsor terrorism around the globe; and
• reject basic human values and hate the United States and everything for which it stands…

It has taken almost a decade for us to comprehend the true nature of this new threat. Given the goals of rogue states and terrorists, the United States can no longer solely rely on a reactive posture as we have in the past. The inability to deter a potential attacker, the immediacy of today’s threats, and the magnitude of potential harm that could be caused by our adversaries’ choice of weapons, do not permit that option…The major institutions of American national security were designed in a different era to meet different requirements. All of them must be transformed…”

To justify their agenda of war, invasion, subjugation, and pillage, imperialist spokesmen persisted with instilling fear in the hearts and minds of the people. They began to portray a dehumanized enemy, and started a campaign of demonizing all potential opposition and resistance to domination.

On November 12, 2002, at the District of Columbia Metropolitan Police Operations Center, George W. Bush declared that,

“It’s a new charge. It’s a new charge because we learned on that fateful day that America is now a battlefield. It used to be that oceans would protect us…But we learned a tough lesson, that the old ways are gone, that the enemy can strike us here at home,… On September the 11th, 2001, our nation was confronted by a new kind of war…This is a war….And it’s a different kind of war than we’re used to. I explained part of the difference is the fact that the battlefield is now here at home. It’s also a war where the enemy doesn’t show up with airplanes that they own, or tanks or ships. These are suiciders. These are cold-blooded killers. That’s all they are…There should be no doubt in anybody’s mind the nature of the enemy…We’re adjusting to the new world we’re in…As a matter of fact, there hadn’t a morning that hadn’t gone by that I haven’t saw — seen or read threats…It’s the new reality…”

At a press conference in the White House on December 19, 2002, Bush said, “this new threat required us to think and act differently…right after September the 11th, I knew we were fighting a different kind of war.”

He lectured the students and faculty of the National Defense University on the same theme on October 23, 2007:

“Today, you’re training the next generation of leaders to prevail in the great ideological struggle of our time — the global war on terror. We’re at war with a brutal enemy. We’re at war with cold-blooded killers who despise freedom, reject tolerance, and kill the innocent in pursuit of their political vision. Many of you have met this enemy on the battlefields of Afghanistan and Iraq…This new kind of threat has required a new kind of war — and we’re prosecuting that war on many fronts…in order to defeat the ideology of darkness, the ideology of the terrorists…In this new war, the enemy seeks to infiltrate operatives into our country and attack us from within. They can’t beat our armies; they can’t defeat our military. And so they try to sneak folks in our country to kill the innocent, to achieve their objectives. And that’s one of the reasons we passed the Patriot Act…In this new war, the enemy conspires in secret– and often the only source of information on what the terrorists are planning is the terrorists themselves…In this new war, the enemy seeks weapons of mass destruction that would allow them to kill our people on an unprecedented scale…Today, our adversaries have changed. We no longer worry about a massive Soviet first strike. We worry about terrorist states and terrorist networks that might not be deterred by our nuclear forces. To deal with such adversaries we need a new approach to deterrence…”

And Bush said at the start of his annual meeting with the governors at the White House on Feb 25, 2008, “This is a different kind of struggle than we’ve ever faced before. It’s essential that we understand the mentality of these killers…”

So in the end individuals, organizations, nations as well as states have been declared enemy…The whole world became the battlefield…The rules of war and norms of time-honored civilized behavior became obsolete…As time ceased to be a measurement or criterion in the “war against terror,” war has become eternal…Moral traditions of war declared defunct…The “new enemy” did not even deserve the Cold War’s debased criteria of humane treatment…An evil colossus of the fusion of internal and external enemy was constructed that permitted external aggression and internal repression as one indivisible whole in this “new kind of war…” Habitual imperialist viciousness was now called “unprecedented response to new threats…”

When the useful Soviet actuality ceased to exist, the United States needed another all-encompassing enemy. In order to justify a state of perpetual war in pursuit of “full-spectrum dominance,” she substituted the faceless enemy dubbed “terrorism” for the previous one, namely, “godless communism.”

The sinister ploy to dominate the world and subjugate the people all over the globe into permanent servitude was put into practice with the so-called “war on terror.” It officially commenced with the ferocious bombing of Afghanistan and continued with the invasion of Afghanistan and Iraq. The immediate result was horrendous suffering for millions, mass killings, wanton destruction, systematic torture, and carnage.

Abominable as they were, Afghan and Iraqi predicament proved to be only a prelude to the systematic onslaught and repression that followed.

Capital’s lust for profit and plunder coupled with the constructed self-righteous nationalist extremism cloaked in and propagated with a so-called divine mission, conditioned the US behavior. She began to act as an international outlaw. From Guantanamo to Bingram, Abu Ghraib and Camp Copper, from secret CIA planes to renditions, the whole world witnessed appalling war crimes. Legal terms have been degenerated into an Orwellian language and as Mary Robinson said, in the lexicon of the “war on terror,” “coercive interrogation” replaced torture and kidnapping became “extraordinary rendition.” Private contractors mandated to kill at will were hired on the pretext of fighting terrorism. As Rahul Mahajam observed,

“Defense Secretary Donald said, ‘we’ll have to deal with the networks. One of the ways to do that is to drain the swamp they live in, and that means dealing not only with the terrorists, but those who harbor terrorists.’ The phrase ‘drain the swamp’ has roots in Mao’s description of a guerrilla army as a fish swimming in the sea of the people. U.S. Counterinsurgency experts after World War II took up the phrase in the concept of ‘draining the sea’ to counter guerrilla warfare-a strategy carried out in South Vietnam by massive bombing, forced evacuation (the strategic hamlet program), deforestation (11 million gallons of Agent Orange was dropped in Vietnam), and large-scale torture and political repression (the Phoenix program). No sooner was the phrase uttered than it was on everyone’s lips, from government officials to newspaper editorials around the world. The logic of extermination…of assuming all who didn’t support the extermination were themselves guilty was all in place. How it played out in practice would depend on how much force was sufficient, not on any consideration of principle.”

General Doolittle theorized about “an implacable enemy” against whom, he claimed, “[h]itherto acceptable norms of human conduct do not apply.” President Bush, fifty years later, spoke of “evil forces” who forced upon the US “a new kind of war and a new approach to deterrence” rendering “old ways” defunct.

The fact of the matter is that the “old ways” go back to the days when the Continent was colonized. When the US monopoly capitalism ventured into its first imperialistic forays, the “old ways” were revived. Max Boot’s narrative of the “old ways” from those old days sound disturbingly familiar:

“Already the army had displayed considerable cruelty in fIghting the Filipinos. Even during the initial campaigm of 1899, there were credible reports of solders shooting prisoners ‘while trying to escape,’ burning towns, and torturing suspects to elicit information. One interrogation techniqe, passed down from the Spaniards, was called the ‘water cure’: the victim would be held down, his mouth propped open, and water forced down his throat until his guts felt close to bursting, then a soldier would push on his stomach to clear out the water. American soldiers became more hard-hearted the longer the guerrilla war dragged on… [Marine Captain known as Tiger of Seibo] personally tortured one prisoner by cutting him with a knife, pouring salt and orange juice on his wounds, and then cutting off his ears…The tiny general [General Jacob Smith] told [Major Littleton Waller],’I want no prisoners. I wish you to kill and burn, the more you kill and the more you burn the better you will please me… I want all persons killed who are capable of bearing arms.’
Waller: ‘I would like to know the limit of age.’
Smith: ‘Ten years…’ ”

The fourth president of the United States, James Madison, had once remarked that “no nation can preserve its freedom in the midst of continual warfare.” One main victim of the “war on terror” has been the US society itself.

Immediately after the September 11 attacks, scores of people were rounded up. They were held in special detention centers without charge and bail. They were brutalized. Most of those apprehended were Arabs and Muslims. Political prisoners were placed under an emergency arrangement and kept in solitary confinement for weeks. Aliens were deported on meager grounds based on obscure clauses in long-forgotten old laws.

At the advent of the Cold War, The National Security Act, the foundation of the CIA with an addendum to this Act, the creation of the Defense Department, the “loyalty investigations,” the Smith and McCarran Acts were landmarks of impending aggression.

A similar pattern can be discerned after September 11, 2001. Only a few weeks after the attacks, Bush signed the Patriot Act into law. As Bush later explained in his address at the National Defense University in October 2007,

“in this new war, the enemy seeks to infiltrate operatives into our country and attack us from within. They can’t beat our armies; they can’t defeat our military. And so they try to sneak folks in our country to kill the innocent, to achieve their objectives. And that’s one of the reasons we passed the Patriot Act.”

Three weeks after the signing of the Patriot Act, Bush authorized military tribunals to try anyone suspected of terrorism with the explicit aim of speedy execution and imprisonment of defendants without bothering themselves with the intricacies of the due process. In 2002, the then White House Counsel Alberto Gonzales advised the president that, “as you have said the war against terrorism is a new kind of war. The nature of the new war places a high premium on other factors, such as the ability to quickly obtain information from captured terrorists and their sponsors in order to avoid further atrocities against American citizens.” Gonzales concluded: “In my judgment, this new paradigm renders obsolete Geneva’s strict limitations on questioning of enemy prisoners and renders quaint some of its provisions.” He also argued that by dropping the Geneva Convention, the president would “preserve his flexibility” in the war on terror. This meant that Geneva Convention rules of treating prisoners of war were not applicable any more and that the US did not bound herself with humanitarian rules of war. Also, the advise indicated that torturing suspected persons has become an urgent necessity “in the new kind of war .”

In November 2002, the Homeland Security Act followed. While the Congress was in session discussing the bill, president Bush spoke:

“It’s a different kind of war than we’re used to. I explained part of the difference is the fact that the battlefield is now here at home…The new kind of war has now placed our police and firefighters and rescue workers on the front lines. You’re already on the front lines. Now you got another line. There’s another front to do our duty to the American people…The enemy moves quickly and America must move quickly. We cannot have bureaucratic rules preventing this President and future Presidents from meeting the needs of the American people. To meet the threats to our country, a President must have the authority, as every President since John F. Kennedy has had, to waive certain rights for national security purposes.”

Then followed the internal intelligence gathering as explained by Bush, speaking at the FBI Academy in Virginia on July 11 2005:

“To defend our homeland, we need the best possible intelligence. We face a new kind of enemy. This enemy hides in caves and plots in shadows, and then emerges to strike and kill in cold blood in our cities and communities. Staying a step ahead of this enemy and disrupting their plans is an unprecedented challenge for our intelligence community. We’re reforming our intelligence agencies to meet the new threats. We’ve established a new National Counterterrorism Center where we are bringing together all the available intelligence on terrorist threats. We’re sharing intelligence across all levels of government — the federal level, the state level, and the local level.”

The Patriot Act was the initiator of a chain reaction of repressive dynamic that beset American society and turned the American people into a victim of the “war on terror.” At this point perhaps it is more appropriate to let the Americans speak out themselves.

Even the partial list presented by Matthew Rothschild to the Americans is horrific indeed:

“The government is monitoring your phone calls and can read your e-mails and open your snail mail.

The government can access records of your large financial transactions, such as buying a house.

Law enforcement officers can bust into your home when you’re not there, riffle through your belongings, plant a recording device on your computer, and leave without notifying you for at least thirty days—and may be a lot more.

You no longer have the right to protest where the president or vice president can see you, or at major public events when they aren’t even present.

Law enforcement officers can now monitor you in public if you are merely exercising your political rights.

They can infiltrate your political organizations.

And they can keep track of you at your place of Worship.

The government can find out from bookstores and libraries the material you’ve been reading, and the bookstore owner and the librarian can’t talk about it, except to their lawyers, for a whole year—or more.

The government can hold you in preventive detention for months on end as a “material witness.”

If you are not a citizen the government can depart you on a technicality or for mere political association.

If you are not a citizen the government can label you an “enemy combatant” and send you to secret prisons around the world, where you may never see the light again—much less a lawyer or a judge.

And even if you are a citizen, the government can label you an enemy combatant and hold you in solitary confinement here in the United States.”

And here are glimpses from his compilation of ordinary citizens’ lives: Marc Schultz was reading an article at the coffee shop, called “Weapons of Mass Destruction: Fox News Hits a New Lowest Common Denominator” while another customer peeking behind called the FBI on him. A few days later two agents visited him in his work place. In West Virginia, Renee Jensen put up a dozen protest signs in her yard like: “Mr. Bush: You’re Fired.” She was interrogated by the Secret Service. Glen Hiller interjected a few times when Bush was speaking at a High School Berkeley Springs, West Virginia. The next day her boss fired her on charge of “unacceptable actions.” In Alabama, Lynne Gobbell put a Kerry bumper sticker on her car. She too was fired from her job. In Vermont, High School teacher Tom Treece assigned his students to write (pro or con) essays and prepare posters on the Iraq War. After midnight, the police entered the classroom and took photos of the students’ works. English teacher at the Forsyth Technical Community College in Winston-Salem, in one her classes criticized the war in Iraq. A few days later, she received a disciplinary letter from her supervisor, and after some time of administrative proceedings, her contract was not renewed. Stephen Kobasa teaching English at Kolbe Cathedral High School in Bridgeport, Connecticut, refused to have an American flag in his classroom. He lost his job in 2005. Near Albany, New York, Stephen Downs and his son Roger bought T-shirts in a mall. Downs put his shirt on, and was arrested. The T-shirt’s messages read: “Peace on Earth.”

Joe Conason, rightly expresses his alarm over the fate of fundamental rights and freedoms in the United States in a state of “continual warfare” conducted with ferocious immorality, vicious bellicosity, and with blithe disregard for the rules of war, absolute contempt for due process of law, and deliberate indifference towards the constitution of the land:

“In American history, authoritarian excess has often accompanied war (or the fear of war), from the Alien and Sedition Acts passed by Madison’s political opponents to Abraham Lincoln’s Civil War suspension of habeas corpus; from the Red Scare of World War I to the internment of Japanese in World War II; from Joseph McCarthy’s depredations at the beginning of the Cold war to Richard Nixon’s abuses during the war in Vietnam. Those wartime encroachments eventually receded, owing to the end of hostilities or the vitality of democratic resistance. But what would happen in a nation beset by continual warfare?”

And this is Peter Phillips’ diagnosis of the state of the Union:

“[T]he Bush administration is paltering to the American public with exaggerated misconceptions of worldwide terrorism to frighten us into supporting a global police state, and the US corporate media serves as the handmaid of this deception. With seven hundred military bases and a budget bigger than that of the rest of the world combined, the US military and its corporate media partners have become the new supreme-power force, repressing “terrorism” with full-spectrum dominance and cognitive ideological control…”

The damning joint indictment of Elliot D. Cohen and Bruce W. Fraser in the light of the systematic conduct in the years following the unleashing of the “war on terror” is irrefutable indeed:

“The Nazi government also operated in secrecy…defending its abuses of power in the name of national security…The systematic violations of law and civil liberties in America—the operations of secret prison camps; the president’s claimed right to torture prisoners of war…; the warrantless eavesdropping on phone conversations and e-mail messages; the assumed power of the president to declare martial law and turn America into a police state; the claim that the entire nation is a ‘battlefield in the war on terror’ so that ordinary legal protections don’t apply; the president’s use of signing statements to nullify legislative constraints on executive power; the threat to prosecute journalists for treason if they reported information that endangers ‘national security’ (as determined exclusively by the president and company); the canceling of habeas corpus; the labeling as ‘unlawful enemy combatants’ anyone the president deems ‘hostile’ to the interests of the United States; the suspension of legal protection for whistleblowers who expose government corruption; the attempt to control judicial outcomes (from firing federal prosecutors and intimidating state and federal judges to stocking the Supreme Court with right-wing conservatives)—these and many other antidemocratic, authoritarian activities make the analogy with Nazi Germany not only fitting but compelling…[T]he quest for money and power has created a dangerous, unholy alliance between big business and government, crushing the American dream, snuffing out civil liberties, and leaving us stranded in a media sea of propaganda and lies…[T]he American people…have been shocked and awed into submitting to a megalomaniac government that has made the war on terror a pretext for keeping us all on a short leash…”

Irrespective of their critical public utterences and misgivings on what they call “excesses” of US policies, the member governments of the European Union have been quick to recognize the “common interests,” and seized the opportunity in the “war on terror.” They enthusiastically joined the global crusade and shared the internal repression that went with it. Imperialist belligerence was fused with internal repression. Scores of governments joined hand with the US ruling elite to curtail political dissent and oppress opponents through anti-terror laws. All over the world the “war on terror” was thus turned into a concerted offensive of the ruling classes allied to US imperialism.

The US and its allies, through sovereignty-denial, promoted open-doors imperialism and created new outlets for speculative finance capital to turn the world into a gambling casino. They concocted a bogus legal base and intrigued provocations to intervene wherever capitalist plunder was hindered and imperialist hegemony challenged. To coerce nations into submission they horrendously punished the disobedient. The domestic fronts were pacified through anti-terror lagislation, police-state practices. Curtailment of dissent, violations of basic rights as free speech and association became the common practice. The “war on terror” has become the main tool and excuse in the implementation of the grand design of imperial dominance.

The New World Order created a common interest binding the ruling classes all over the world. The constituent elements of the system were brought together around an ideological common denominator to build up a conspiratiorial network of opression. To check social discontent and resistance in order to create a congenial atmosphere for local and global capitalist accumulation, repression has become one of the main functions of the neoliberal state system. The “war on terror” has become the euphemism of neoliberal onslaught. So the imperialist powers and their lackeys elsewhere began to cooperate in the “war on terror.” An integral part of this colaboration was the corruption of respective legal systems and structured violations of human rights. A new global McCarthyism engulfed the whole world. The right to resist invasion, and organized opposition of the oppressed to exploitation, inequality, hunger, mass unemployement, and political repression have been equated with “terrorism.” This ideological terror has become as destructive as the physical desolation caused by imperialist aggression.

In many parts of the world, notably including “democracies” such as the EU member states, Canada, and Australia, “terrorist lists” were prepared of organizations and political cadres. It was made a criminal offense to have positive relations with those listed. The domestic legislative part the “war on terror” comprised widespread suppression of those who exercised the inalienable right to resist subjugation. With its own lists, the UN supplemented and internationalized such domestic enactments. The “war on terror” has become the “Rambo’s sword” stabbed at human rights and fundamental freedoms. In the course of the “war on terror”, the professed “democracy-building” proved to be “exportation of draconian anti-terror laws.”

Globalization caused severe social-economic dislocations everywhere and together with wars, famine, and epidemics greatly expanded the exodus of people across international borders. Criminalization of immigrants and migrants has attained new heights after the American response to the September 11 attacks. The anti-terror hysteria and “terror laws” have created a new witch-hunt. Minorities and immigrant communities became one of the main victims of this development. The “war on terror” has created a new impetus for racism, and the “anti-terror laws” provided the legal base for persecution of the vulnerable communities. The fueled fear of the “other” was used to tyrannize through anti-terror legislation vocal movements for the rights of minorities.

The criminalization of immigrants have taken grotesque forms as this report from a British paper attests:

“Immigration officers are questioning Tube travelers because they sound ‘foreign’, the Evening Standard has learned. Thousands of passengers are being stopped in a secret operation using tactics the police are specifically forbidden from deploying.

Immigration officers are stopping anyone they consider to look or sound foreign and asking them to produce their papers to prove their right to British residence. Their aim is uncover illegal immigrants and failed asylum seekers. The existence of the spot-check operation has been kept secret by the Home Office but an Evening Standard investigation discovered that teams of immigration officers have been carrying out the procedures since May 2003. It is part of a wider program in which 1,000 suspected illegal immigrants have been detained.

During one operation witnessed by the Evening Standard, a series of people getting off Tube trains were stopped by immigration officers dressed in body armour and carrying handcuffs. The officer in charge said people were picked out for questioning if they sounded foreign. One immigration officer said: ‘If you hear someone speaking a language that’s not European we approach them and ask ‘do you mind if I ask you what nationality you are?’ ‘If they get upset or start acting suspiciously we ask the police to assist and demand identification…”

All these horrendous consequences of the “war on terror,” all suffering, blood and tear, nevertheless, should not conceal the profound crisis of imperialism. All those years of imperialist aggression have shown the absolute futility to subjugate the peoples of the world into servile slaves of Capital. The unrelenting heroic resistances together with deadly contradictions inherent in capitalism have brought about the current severe economic, social, political, strategic, and moral crises of the system. From the US where for more than forty million people securing food is a daily concern to the “wretched of the earth” in Asia, South America, and Africa, the prevalent “food crisis, this profound “humanitarian catastrophe,” is witness to the abyss capitalism has dragged the world into.

It is now time to deliver from this crisis of capitalism and imperialism a democratic-revolutionary front of all the oppressed peoples for national and social emancipation.

*This paper was delivered by the author during the Third International Assembly of the League of Peoples’ Struggle held from June 18-20, 2008 in Hong Kong.

OceanaGold gives up Didipio project

December 20, 2008

BAGUIO CITY — A mining company is temporarily giving up its operations in Didipio, Kasibu town in Nueva Vizcaya, saying the global financial meltdown has affected its business decisions.

OceanaGold, in a media advisory, announced Monday it has “placed the Didipio Gold-copper project in Nueva Vizcaya on care and maintenance following the completion of the strategic review that began in July.”

Admitting it has been affected by the deteriorating global financial crisis, OceanaGold’s CEO Stephen Orr said the global economic conditions require prudent measures to secure and preserve its assets in the Philippines.

“We recognize the inherent value that the Didipio project and our exploration portfolio in the Philippines represent for shareholders but the uncertainty around current financial markets dictates that we affect this strategy,” Orr said.

The company will focus on its New Zealand gold operations it expects to increase production in the fourth quarter of 2008, where the production is predicted between 280,000 to 300,000 ounces priced at US$475 per ounce.

“In these uncertain times, we are focused on maximizing revenue and reducing expenditures to further strengthen the Company’s financial position for the near-term,” Orr said.

Meanwhile, Kalikasan-PNE said OceanaGold’s admission of poor economic condition is “proof that their operations were not economically feasible as the company had projected in the past.”

But the group said the greater factor that led to the company’s failure is the growing resistance and opposition against OceanaGold by the local communities.

“Since the early stage, the indigenous peoples in Nueva Vizcaya have been opposing the project of OceanaGold. The community resistance further escalated due to the human rights violations, landgrabbing, economic displacement and environmental destruction done by OceanaGold in the process of developing its project,” Kalikasan-PNE’s Clemente Bautista said.

In fact, he said, the failure of OceanaGold and of other mining projects such as the Rapu-rapu Polymetallic Project in Albay province are “just a couple of illustrations of how mining corporations and activities are bound to collapse due to the fervent opposition of the people, backed up by the present global situation.”

“This should serve as a warning to other companies and investors, how they should think twice before planning to loot our country’s mineral wealth,” Bautista said.

OceanaGold is just one step shy from totally closing down. In the past, OceanaGold has loaned millions of dollars that have now become insurmountable for the company to repay. During its ‘care and maintenance’ stage, the company will only continue to incur and accumulate losses,”

OceanaGold currently operates in the South Island of New Zealand and in the Philippines. Company assets encompass New Zealand’s largest gold mine at Macraes, which includes the recently commissioned Frasers Underground operation, Reefton Gold Mine also in New Zealand and the Didipio Gold-Copper Project in north Luzon.

OceanaGold is listed on the Toronto, Australian and New Zealand stock exchanges under the symbol “OGC,” according to its media statement. # Northern Dispatch

Asbestos dump hit anew as Lepanto fails to haul out its waste

December 20, 2008

BAGUIO CITY—Residents of Sapid, Mankayan, Benguet filed a second petition that pushed town officials to act on the asbestos wastes earlier dumped by the Lepanto Consolidated Mining Company (LCMCo), after the company failed to fulfill its promise to haul out the toxic materials.

Acting on an earlier petition, town officials contemplated on filing charges against the company. This prompted the said mining firm to haul out said wastes, which turned out to have come from its Makati office.

Community vigilance

Some 115 residents of the said barangay in a petition, asked Mankayan Mayor Manalo B. Galuten and the town council to look into the asbestos wastes left by LCMCo despite the mining company’s commitment to haul out all the said wastes. The petition was dated October 29.

In a report, Sapid barangay council quoted witnesses as saying the wastes were dumped by Shipside Trucking, an LCMCo subsidiary, on April 10 and in 2007 in Sitio Tagumbao, Upper Tram in Barangay Sapid.

Alleging then that the wastes were asbestos materials illegally dumped by the mining company, the Sapid council through Barangay Resolution No. 34-2008 dated April 12, requested LCMCo to “cease unloading or dumping of the waste (asbestos)” in their barangay and to relocate the said wastes to other sites.

Informed about the alleged dumping of asbestos wastes, the Sanguniang Bayan (SB) of Mankayan led by Vice-mayor Paterno Dacanay invited representatives of the mining company to its regular session to shed light on the concern.

Denial

Based on the minutes of the Mankayan SB session on May 6, LCMCo environmentalist Rolando C. Reyes, denied that the wastes dumped were asbestos but materials used for acidic pads and cushions. Reyes assured the members of the SB the wastes are not hazardous in nature. He appeared with Vice-president and resident Manager Magellan G. Bagayao and a certain Edgar Ebiong at the council session.

The pads and cushions came from the company’s Makati City office that was renovated, according to Reyes.

Company representatives also assured the council they complied with policies set by the Department of Environment and Natural Resources (DENR), adding these are properly covered , thus making it safe for the environment.

In a May 7 letter submitted to the SB, the company committed not to repeat the said dumping and should an area be considered as future waste dump, LCMCo would coordinate with town officials concerned before it would begin operating.

Hazardous

Meanwhile, samples taken from the dumpsite were tested by the Environmental and Urban Planning Laboratory of the Saint Louis University Engineering and Architecture department, which later found out that the wastes had an asbestos content of 50.385%.

Asbestos is a fibrous mineral usually used for fire proofing and insulation in buildings, pipes, walls, ceilings, floors and others. It is a serious health hazard if inhaled that could cause asbestosis, lung cancer and mesothelioma, which is a rare type of cancer that most often occur in the thin membrane lining of the lungs, chest, abdomen and heart, according to Dr. Ana Leung of the Community Health Education Services and Training in the Cordillera Region (Chestcore).

Asbestos has been internationally banned because of its toxicity.

Charges

Upon learning of the result of the tests, the Mankayan SB through Resolution No. 289-2008, authorized Galuten to file appropriate charges against the mining firm for illegally dumping toxic waste materials in Upper Tram.

Through a series of meetings with the barangay officials and residents, town officials and representatives from the Environmental Management Bureau of the DENR, LCMCo volunteered to haul out the asbestos waste materials and to relocate outside the municipality. # Cye Reyes(NorDis)

US pyramid scheme hits European banks

December 17, 2008

WASHINGTON, D.C.: Europe’s biggest bank, HSBC, joined a list of top names in world finance admitting huge potential losses in a suspected pyramid fraud scam run by ex-Wall Street heavyweight Bernard Madoff, whose brokerage was to be sold off.

The Securities Investor Protection Corp. (SIPC), which helps investors at failed brokerage firms, said Monday (Tuesday in Manila) it was liquidating Bernard Madoff Investment Securities LLC.

“It is clear that the customers of the Madoff firm need the protections available under federal law,” said SIPC President and CEO Stephen Harbeck in a statement.

But, he warned, “It is unlikely that SIPC and the trustee will be able to transfer the customer accounts of the firm to a solvent brokerage firm” because of the state of the firm’s records.

Shares in Santander, the biggest bank in Spain and the second largest in Europe after HSBC, plunged after the lender said it had exposed more than $3 billion to Madoff Investment Securities in New York.

Fortis Bank Netherlands said it stood to lose up to $1.37 billion in the suspected scam, despite lacking direct exposure to the Madoff firm.

“If, as a result of the alleged fraud, the value of the assets of these funds is nil and the respective clients cannot meet their obligations, Fortis Bank Nederland [Holding] N.V.’s loss could amount to around 850 million euros to one billion euros [$1.17 billion to $1.37 billion],” the bank said in a statement.

Billions lost

British, French, Japanese and Spanish banks and funds said investments totaling billions of dollars could be wiped off their balance sheets in a scandal set to affect some of the world’s richest people.

“The potential exposure under these financing transactions is in the region of one billion US dollars,” the London-based HSBC said.

Royal Bank of Scotland said it could lose about $612 million.

France’s Natixis investment bank, already brought low by subprime losses, put its maximum exposure at $616 million. Retail banking giant BNP Paribas revealed potential losses of $480 million.

Japanese financial giant Nomura said it could lose up to $303 million and officials in South Korea said financial institutions there had a total exposure of some $95 million.

Madoff arrested

Madoff, a 70-year-old Wall Street veteran, was arrested on Thursday, and allegedly confessed to defrauding investors of $50 billion in a scam that collapsed after clients asked for their money back because of the global financial crisis.

International Monetary Fund chief Dominique Strauss-Kahn said he was shocked that US regulators had failed to identify and prevent the fraud.

“The surprise is not that there are some thieves in the system. The question is where were the police? It’s very surprising to find you’re living in a system where a failure of the regulatory system was so big,” he told a news conference in Madrid.

Banks have rushed to disclose potential losses in an apparent bid to avert any deepening of the suspicion that has frozen credit markets.

US authorities alleged that Madoff delivered consistently strong returns to clients by secretly using the principal investment from new investors to pay out other investors in what is known as a “pyramid fraud.”

US Vice President Dick Cheney said in a radio interview that the alleged scam by the former Nasdaq chairman was “very disturbing” but blamed a few “bad apples.”

The unraveling

The scheme apparently worked as long as Madoff could attract new investors but seems to have unraveled when some of his clients asked to withdraw their investment – only to discover that his seemingly brimming coffers were empty.

British investment fund Bramdean Alternatives Limited, which revealed it had invested about $31.2 million in Madoff’s company, said the scandal raised “fundamental questions” about the US financial regulatory system.

“It is astonishing that this apparent fraud seems to have been continuing for so long, possibly for decades, while investors have continued to invest more money into the Madoff funds in good faith,” the firm said in a statement.

More European banks

Spain’s El Pais newspaper reported the country’s second-biggest bank, BBVA, could lose around $686 million in the scam.

Italy’s biggest bank, UniCredit, said its exposure was around $103 million and one of its investment units may also have been indirectly affected.

Geneva’s private banks could lose up to $5 billion, Swiss newspaper Le Temps reported.
— AFP(ManilaTimes)

Financial Collapse, Systemic Crisis ?

December 4, 2008

Illusory answers and necessary answers*

To attract the attention on the financial collapse is not enough. Behind it, a crisis of real economy is standing out, since the financial drift was continuously asphyxiating the growth of the production basis. Solutions brought to the financial crisis can just lead to a crisis of the real economy, i.e. a relative stagnation of the production with its side effects: regression of wages, growth of unemployment, growing precariousness and aggravation of poverty in the Southern countries. We must speak now about depression and no more about recession.

BY SAMIR AMIN
INTERNATIONAL
Posted by Bulatlat

The financial crisis could not be avoided

The violent explosion of this crisis did not surprise us; I mentioned it a few months ago while the conventional economists were ignoring its coming development and consequences, especially in Europe. In order to understand it, we must get rid of the conventional definition of the system which qualifies it as “neo-liberal” and “global”. This definition is superficial and masks the essential. The current capitalist system is dominated by a handful of oligopolies that control the basic decision-making of the world economy. These oligopolies are not solely financial; such as the banks or the insurance companies, but include enterprises involved in industrial production, services, transports and the like. The way they are financiarized is their chief characteristic. We must understand here that the main source of economical decision has been transferred from the production of surplus value in production towards the redistribution of profits between the oligopolies. To that effect the system needs the expansion of financial investments. In that respect the major market, the one which dominates all other markets, is precisely the monetary and financial market. This is my definition of the “financiarization” of the global system. Such a strategy is not the result of independent “decisions” of banks, it is rather the choice of the “financiarized” groups. These oligopolies hence do not produce profits; they just swipe the monopolies’ rent through financial investments.

This system is extremely profitable for dominating sectors of capital. Thus, the system should not be qualified as “market economy” (which is an empty ideological qualification) but as a capitalism of financiarized oligopolies. However, financial investment could not continue indefinitely, while the productive basis was growing at a low rate. Consequently, we have the logic of a “financial bubble”, the sheer translation of the financial investments system. The gross amount of financial transactions reaches two thousands trillions alone, while the world GDP is 44 thousands trillions only. Quite a huge multiple! Thirty years ago, the relative volume of such transactions did not have this extent. As a matter of fact, those transactions were directed in general and expressly to cover the operations linked to production, and internal and external trade. The overall outlook of this financed oligopolies system was – as I said previously- the Achilles’ heel of that capitalist structure. The crisis was doomed to be initiated by a financial collapse.

Behind the financial crisis, the systemic crisis of the aging capitalism

To attract the attention on the financial collapse is not enough. Behind it, a crisis of real economy is standing out, since the financial drift was continuously asphyxiating the growth of the production basis. Solutions brought to the financial crisis can just lead to a crisis of the real economy, i.e. a relative stagnation of the production with its side effects: regression of wages, growth of unemployment, growing precariousness and aggravation of poverty in the Southern countries. We must speak now about depression and no more about recession.

Behind this crisis, the systemic crisis of capitalism is looming right after. The pursuit of the model based on the growth of the real economy –as we know it- and of the consumption attached to it, has become, for the first time in history a real threat for the future of humankind and the planet.

The major character of this systemic crisis is related to the natural resources of the planet, now less abundant than half a century ago. The North-South conflict constitutes for that reason the central axis of coming struggles and conflicts.

The production and consumption-waste system at the moment forbids the access to the world natural resources for the majority of the planet, i.e. the peoples of the South. Previously, an emergent country could take its share of these resources without questioning the privileges of the affluent countries. But today, it is no more the case. The population of opulent countries -15% of the planet’s population- has to monopolize for its own consumption and waste 85% of the world resources, and cannot tolerate that newcomers may reach these resources, since they would provoke shortages for rich people’s standard of living.

If the USA has formulated an objective of military control of the planet, it is because, without it, they cannot secure the exclusive access to these resources. As we know: China, India and the South as a whole need them as well for their development. For the USA, they must limit the access and ultimately, there is only one meaning: war.

On the other hand, to preserve energy sources of fossil origin, USA, Europe and others develop production of bio-fuel projects to a large scale, to the detriment of food production, still accusing the rise of prices.

Illusory answers of the governing powers

Governing powers, under the rule of financial oligopolies, do not have any other project except to restore the same system. However, their success is not impossible, if they can inject enough liquidities to restore the credibility of the financial investments, and if the reactions of the victims –working classes and nations of the South- remain limited. But, in this case, the system steps back to better jump and a new financial collapse, still deeper, is unavoidable, since the “adjustments” for the management of financial and monetary markets are not wide enough, because they do not question the power of oligopolies.

Furthermore, answering the financial crisis by injecting phenomenal public funds to re-establish the security of the financial markets is amusing: first, profits were privatized, if they are jeopardized, the losses are socialised! Reverse, I win, head, you loose.

Conditions for a genuine positive answer to the challenges

To say that the State’s interventions may change the rules of the game, lessen the drifts, is not enough. We must define the logics of that intervention and its social purpose. Of course, we could come back in theory to the formulas associating public and private sectors, to a mix economy as it existed during the glorious thirties in Europe and at the time of Bandoung in Asia and in Africa, when State capitalism was largely dominant, accompanied by strong social policies. But this kind of State intervention is not on the agenda. Also, are the progressive social forces able to impose such a transformation? Not yet to my viewpoint.

The other choice is the toppling of the oligopolies’ exclusive powers, unthinkable without, finally, their nationalisation leading progressively to the socialisation of their management. End of capitalism? I do not think so. Yet, I submit that changes in classes’ relations are possible, imposing adjustment to the capital, in answer to the demands of working classes and peoples. The conditions for such an evolution to occur imply the progress of social struggles, still fragmented and on the defensive position altogether, moving towards a political coherent alternative. In that perspective, the long transition from capitalism to socialism becomes possible. The advances in this direction are obviously always uneven from one country to the other and from one phase to the other.

The dimensions of this desirable and possible alternative are numerous and concern all aspects of economical social and political life. I will recall here the general lines of this necessary answer:
(i) The re invention by the working people of adequate organizations allowing the construction of their unity, bypassing the fragmentation due to the forms of exploitation (unemployment, precariousness and “informal”).
(ii) The awakening of theory and practice for democracy associated to social progress and respect of people’s sovereignty, not dissociated from them.
(iii) The emancipation from the liberal virus based on the myth that the “individual” has already become the subject of history. Frequent rejects of ways of living associated to capitalism (multiple alienations, patriarchal relations, consumerism and destruction of the planet) signal the possibility of this emancipation.
(iv) To get rid of atlantism (NATO) and militarism, associated to it, aiming at the organization of the planet on the basis of apartheid on the world scale.

In the countries of the North, the challenge is to avoid that the general opinion adopts a consensus in support of privileges unacceptable by the peoples of the South. The necessary internationalism goes through anti imperialism and not the “humanitarian”.

In the countries of the South, the strategy of the world oligopolies is to transfer the weight of the crisis on these peoples (devaluation of money reserves, fall of the export raw resources prices and rise of import ones). In counterpoint the crisis presents the opportunity for the renewal of national, popular, democratic alliance of working classes, and on that basis the move from a pattern of capitalist dependent development with growing exclusion of majorities towards an alternative pattern of inclusive development, in other words “delinking”. This involves:

(i) The national control of monetary and financial market (moving away from the integrated global monetary and financial “market”).
(ii) The control of modern technologies, accessible now (defeating the exclusive monopoly of the North, overprotected by WTO rules on industrial property).
(iii) The recuperation of the use of natural resources.
(iv) The defeating of global management, dominated by the oligopolies (WTO) and the military control of the planet by the USA and their allies.
(v) The liberation from the illusions of an autonomous national capitalism system as well as of passeist myths (para religious or para etnic).
(vi) The agrarian question lies in the heart of decisive choices in Third world countries. An inclusive pattern of development needs an agrarian radical reform, that is a political strategy based on the access to the soil for all peasants (half of humankind). On the opposite, the solutions proposed by the dominant powers –to accelerate the privatization of arable soil, and its transformation into merchandise- lead to massive rural disintegration. The industrial development of the concerned countries being not able to absorb this overabundant manpower, this one crowds together in shantytowns or risks its life trying to escape in dugouts via the Atlantic Ocean. There is a direct link between the suppression of access to the soil and the migratory pressures.
(vii) Can regional integration, while encouraging the emergence of new development poles, constitute a resistance and an alternative? Regionalisation is necessary, maybe not for giants such as China, India or even Brazil, but certainly for many other regions in South-East Asia, in Africa or Latin America. Venezuela has rightly chosen to create ALBA (Bolivarian Alternative for Latin America and the Caribbean’s) and the Bank of the South (BANCOSUR), long before the crisis. But ALBA –an economical and political integration project- has not yet received the support of Brazil or even Argentina. However, BANCOSUR, whose aim is to promote another development, gathers these two countries, even though they still have a conventional conception about the role of this bank.

Progresses in this or that direction, North and South, the basis of workers and peoples’ internationalism, constitute the only guarantees for the reconstruction of a better, multipolar democratic world, the only alternative to the barbarism of the aging capitalism. More than ever, the struggle for the 21st century socialism is on the agenda.

*Paper introducing the World Forum of Alternatives, in Caracas, October 2008
Translated from French by Daniel Paquet for Investig’Action
Revised by Samir Amin

On the November Elections and the Next Steps in Building the Anti-Imperialist Movement in the U.S.

December 4, 2008

In January, Barack Obama will become the 44th Commander-in-Chief of the U.S government, which controls and protects an empire of corporations, banks, military bases and occupying armies all around the world. Obama has reached this position by loyally serving this bipartisan system in the U.S. Senate and by being vetted, tested and auditioned over the past two years in running for the presidency. In the course of this, Obama convinced the majority of the U.S. capitalist class (his campaign contributions from Wall Street were twice as big as McCain’s) that he was the best candidate to take the reins of empire at a time when the U.S. is bogged down in two wars in the Middle East, and is in the midst of the biggest financial crisis since the Great Depression, with the worst effects on the lives of working people here and around the world yet to come.

BY DAVID PUGH
Collision Course Media
INTERNATIONAL
Posted by Bulatlat

On Nov. 4, 2008, millions of new voters stepped into political life with the hope that the traditional (as many put it) rich-white-male-Christian cultural monopoly on political power would no longer determine the conditions of life in the United States. These millions who stepped forward to be counted — young, poor, women, people of color, the wronged and abused, the falsely accused, sick and disabled, atheists, Muslims, Buddhists, and progressive Christians, displaced, evicted, and laid-off, and other “outcasts” and have-nots — were repelled by that de facto oligarchy, which had, they felt, excluded them. The Bush regime had arrogantly and unsuccessfully led that traditional elite for 8 years of widening wars and monstrous economic crises, which drew widespread domestic and global anger and condemnation. With high hopes, the millions of new voters were joined by millions of others who were trying to find a way out of the mess that this system has been making of their lives and of the world. Black people, Latinos, other people of color, workers, and youth stepped out of the shadows of solitude and “making do” and into political life, albeit within the confines of a presidential election.

By and large, these millions are responding to the promise of access, of open doors. They bring with them the worries and concerns and angers of their lives—of the wars being waged on false pretenses, of the worsening conditions of life. These are the issues they bring with them, though solutions to these issues were not on the electoral table.

On the night of November 4, hundreds of thousands in cities around the U.S. celebrated their success in electing the first Black president and the fact that millions of whites moved past the racist fears and codewords that have habitually set the boundaries of political life.

But to move forward, celebrations must turn to sober, straight talk.

The interests around which Barack Obama and the Democratic Party leadership have coalesced, despite the campaign banner of “change”, are the interests of the rich and the privileged, even as more wars are looming and the economics of the capitalist system here and worldwide are dragging the lives of millions into deeper crisis.

In January, Barack Obama will become the 44th Commander-in-Chief of the U.S government, which controls and protects an empire of corporations, banks, military bases and occupying armies all around the world. Obama has reached this position by loyally serving this bipartisan system in the U.S. Senate and by being vetted, tested and auditioned over the past two years in running for the presidency. In the course of this, Obama convinced the majority of the U.S. capitalist class (his campaign contributions from Wall Street were twice as big as McCain’s) that he was the best candidate to take the reins of empire at a time when the U.S. is bogged down in two wars in the Middle East, and is in the midst of the biggest financial crisis since the Great Depression, with the worst effects on the lives of working people here and around the world yet to come. For them, Obama is a reliable and safe bet to protect their interests. The fact that Obama will be the first Black president is an undeniable asset for the rulers of the U.S. It symbolizes a shift in the overtly racist practices of the country, but not one substantive enough to overcome the built-in tilt and nature of the system.

In fact, while millions have stepped forward under the banner of “Change”, these millions have the challenge to shape the political terrain for the period ahead. Because if left to Obama and the Democratic Party, the base of support for imperialism will not be challenged, but broadened.

What can we expect from an Obama administration? Will Obama be a new face on the same old stuff, or will there be substantial differences?

The capitalist system requires more than a new face. From it’s new CEO and Congress, the system will require more regulation, more government intervention, more international coordination and multilateral, not unilateral, aggression and occupations. It needs more “partnerships” with compliant regimes in semi-colonies and dependent countries in Asia, Africa, and Latin America. Therefore, we should:

• Expect a U.S. military surge into the killing fields of Afghanistan to protect a government of US-backed warlords from rival fundamentalists, and another surge across the border into Pakistan. This is one promise that Obama is not likely to break.

• Not expect the return of US troops from Iraq, though there will be “redeployments” and further privatizations of the military. Barack Obama has backtracked from his anti-war promises early in the campaign. He will keep tens of thousands of military advisers, trainers, contractors and bases in Iraq, with large numbers of combat troops stationed in neighboring countries. Obama will send US troops from Iraq to Afghanistan.

• Not expect the withdrawal of U.S. troops, advisers and military
bases from the Philippines, Colombia and other global hotspots where
the U.S. imperialists have important economic and strategic interests.

• Expect an Obama presidency–as he pledged to AIPAC– to continue all-out U.S. support for the state of Israel and its brutal military occupation of the land and people of Palestine.

• Not expect the dismantling of the newly formed U.S. military command for Africa (AFRICOM), which is headed by a Black general. Expect expansion of this invasive hegemonic re-colonization program.

Expect that even with a Black president at the helm, there will be no high level assault of the myriad forms of white supremacy that are woven into the capitalist system. Police brutality and the criminalization of Black youth, unemployment rates of 20% and higher in Black communities, re-segregation of schools, ICE raids and deportations aimed at Mexican and other immigrant communities–all of this will continue and even worsen no matter who is president. During his campaign, Barack Obama even denied that the system of white supremacy exists. In an attempt to prevent severe disruptions and the unraveling of the imperialist political-economic-social order, President Obama will promote a seemingly “post-racial” “multi-cultural-ism” that dismisses the profound oppression and exploitation of millions of Black and Latino people as a thing of the past—or as a product of their own making and failings. And he will couple this with a xenophobic appeal that “we’re all in this together”, and blame the crisis that “we Americans” suffer, on the people of the world.

• Expect continued class polarization. Obama’s support for the $700 billion bailout of banks and financial institutions is a clear indication of where his class loyalties lie. More multi-billion dollar bailouts for banks and big corporations lie ahead. With foreclosures, evictions, credit card defaults, unemployment and poverty on the rise, Obama and the Democrats are talking about palliative measures that will not even begin to address the depths of the crisis.

• Expect austerity programs and cuts in social spending in the years ahead. It will be Obama’s job to sell them to Black, Latino, Asian and white working people in the name of national unity and shared sacrifice.

• Not expect strong support for same sex marriage or women’s rights. Barack Obama is opposed to same sex marriage. Obama supports Roe v. Wade but is trying to find “common ground” with anti-choice activists. We cannot expect Obama’s nominees to the Supreme Court to be jurists who take a firm stand for a woman’s right to an abortion unless there is a determined mobilization by pro-choice and progressive forces to make him and the Democrats do so.

On the positive side, this presidential campaign has swept a new generation into political life and has remade the political stage in many ways. Particularly among this new generation, the Obama campaign and election has generated great hopes and expectations, but inevitably the orientation of the new administration toward politics acceptable to the privileged will heighten the burden on the broad masses of Blacks, Latinos/Chicanos and whites, workers and youth.

As this happens, those who have indulged in uncritical exuberance at the election, will come to realize that the “Obama checks” they have written are being returned for “insufficient funds.”

In the meantime, anti-imperialists must resolve to not give the new administration a pass or a honeymoon. The times require us all to focus and develop the People’s Agenda for educating, organizing and mobilizing in the period ahead, including these issues:

The struggle against War and Empire—from Iraq to Afghanistan and Pakistan, Philippines and Colombia, to ending the thousand US military bases around the world, ending the occupation of Palestine, and upholding the sovereignty of all indigenous and colonized peoples. Support people’s struggles against displacement & for the right to return—in the Gulf Coast, the inner cities, and around the world!

The struggle for Justice—from demanding privacy rights, to demanding full rights for immigrants and organizing to stop ICE raids, to ending the criminalization of youth and the massive imprisonment of millions, to defending the reproductive rights of women, the human rights of LGBTQ communities (people with all sexual orientations), and ending forever the policies of torture, indefinite detentions and rendition. Stop police abuse and racial profiling! Free All Political Prisoners!

The struggle for decent lives—demand complete and universal health care, education, housing, and decent jobs for all. Fight all layoffs, deportations, evictions, foreclosures and utility shutoffs. Demand rollbacks in the price of food, rent, and fuel. Fight for unhindered rights of access to technology, to people’s history, people’s culture, and complete and unrestricted rights to organize, to associate, to protest, to travel–and for the right to organize for self-defense against the rising “backlash” and ongoing tide of racist attacks.

Tremendous challenges and opportunities await struggling people throughout the United States. We must join together to overcome the challenges ahead and seize the opportunities to create the just world we need. Posted byBulatlat.com

The Election, Economy, War, and Peace

December 4, 2008

Turning to the future, what can we realistically expect of an Obama administration? We have two sources of information: actions and rhetoric.

The most important actions to date are selection of staff. The first selection was for vice-President: Joe Biden, one of the strongest supporters of the Iraq invasion among Senate Democrats, a long-time Washington insider, who consistently votes with his fellow Democrats but not always, as when he supported a measure to make it harder for individuals to erase debt by declaring bankruptcy. The first post-election appointment was for the crucial position of chief of staff: Rahm Emanuel, one of the strongest supporters of the Iraq invasion among House Democrats and like Biden, a long-term Washington insider. Emanuel is also one of the biggest recipients of Wall Street campaign contributions, the Center for Responsive Politics reports.

BY NOAM CHOMSKY
Z Space
INTERNATIONAL
Posted by Bulatlat

The Election

The word that immediately rolled off of every tongue after the presidential election was “historic.” And rightly so. A Black family in the White House is truly a momentous event.

There were some surprises. One was that the election was not over after the Democratic convention. By usual indicators, the opposition party should have had a landslide victory during a severe economic crisis, after eight years of disastrous policies on all fronts including the worst record on job growth of any post-war president and a rare decline in median wealth, an incumbent so unpopular that his own party had to disavow him, and a dramatic collapse in US standing in world opinion. The Democrats did win, barely. If the financial crisis had been slightly delayed, they might not have.

A good question is why the margin of victory for the opposition party was so small, given the circumstances. One possibility is that neither party reflected public opinion at a time when 80% think the country is going in the wrong direction and that the government is run by “a few big interests looking out for themselves,” not for the people, and a stunning 94% object that government does not attend to public opinion. As many studies show, both parties are well to the right of the population on many major issues, domestic and international.

It could be argued that no party speaking for the public would be viable in a society that is business-run to an unusual extent. Evidence for that is substantial. At a very general level, evidence is provided by the predictive success of political economist Thomas Ferguson’s “investment theory” of politics, which holds that policies tend to reflect the wishes of the powerful blocs that invest every four years to control the state. More specific illustrations are numerous. To mention just one, for 60 years the US has failed to ratify the core principle of international labor law, which guarantees freedom of association. Legal analysts call it “the untouchable treaty in American politics,” and observe that there has never even been any debate about the matter. And many have noted Washington ’s dismissal of conventions of the International Labor Organization as contrasted with the intense dedication to enforcement of monopoly pricing rights for corporations (”intellectual property rights”). There is much to explore here, but this is not the place.

The two candidates in the Democratic primary were a woman and an African-American. That too was historic. It would have been unimaginable forty years ago. The fact that the country has become civilized enough to accept this outcome is a considerable tribute to the activism of the 1960s and its aftermath.

In some ways the election followed familiar patterns. The McCain campaign was honest enough to announce clearly that the election wouldn’t be about issues. Sarah Palin’s hairdresser received twice the salary of McCain’s foreign policy adviser, the Financial Times reported, probably an accurate reflection of significance for the campaign. Obama’s message of “hope” and “change” offered a blank slate on which supporters could write their wishes. One could search websites for position papers, but correlation of these to policies is hardly spectacular, and in any event, what enters into voters’ choices is what the campaign places front and center, as party managers know well.

The Obama campaign greatly impressed the public relations industry, which named Obama “Advertising Age’s marketer of the year for 2008,” easily beating out Apple. The industry’s prime task is to ensure that uninformed consumers make irrational choices, thus undermining market theories. And it recognizes the benefits of undermining democracy the same way.

The Center for Responsive Politics reports that once again elections were bought: “The best-funded candidates won nine out of 10 contests, and all but a few members of Congress will be returning to Washington .” Before the conventions, the viable candidates with most funding from financial institutions were Obama and McCain, with 36% each. Preliminary results indicate that by the end, Obama’s campaign contributions, by industry, were concentrated among Law Firms (including lobbyists) and financial institutions. The investment theory of politics suggests some conclusions about the guiding policies of the new administration.

The power of financial institutions reflects the increasing shift of the economy from production to finance since the liberalization of finance in the 1970s, a root cause of the current economic malaise: the financial crisis, recession in the real economy, and the miserable performance of the economy for the large majority, whose real wages stagnated for 30 years, while benefits declined. The steward of this impressive record, Alan Greenspan, attributed his success to “growing worker insecurity,” which led to “atypical restraint on compensation increases” – and corresponding increases into the pockets of those who matter. His failure even to perceive the dramatic housing bubble, following the collapse of the earlier tech bubble that he oversaw, was the immediate cause of the current financial crisis, as he ruefully conceded.

Reactions to the election from across the spectrum commonly adopted the “soaring rhetoric” that was the hallmark of the Obama campaign. Veteran correspondent John Hughes wrote that ” America has just shown the world an extraordinary example of democracy at work,” while to British historian-journalis t Tristram Hunt, the election showed that America is a land “where miracles happen,” such as “the glorious epic of Barack Obama” (leftist French journalist Jean Daniel). “In no other country in the world is such an election possible,” said Catherine Durandin of the Institute for International and Strategic Relations in Paris . Many others were no less rapturous.

The rhetoric has some justification if we keep to the West, but elsewhere matters are different. Consider the world’s largest democracy, India . The chief minister of Uttar Pradesh, which is larger than all but a few countries of the world and is notorious for horrifying treatment of women, is not only a woman, but a Dalit (”untouchable” ), at the lowest rung of India’s disgraceful caste system.

Turning to the Western hemisphere, consider its two poorest countries: Haiti and Bolivia . In Haiti ’s first democratic election in 1990, grass-roots movements organized in the slums and hills, and though without resources, elected their own candidate, the populist priest Jean-Bertrand Aristide. The results astonished observers who expected an easy victory for the candidate of the elite and the US , a former World Bank official.

True, the victory for democracy was soon overturned by a military coup, followed by years of terror and suffering to the present, with crucial participation of the two traditional torturers of Haiti, France and the US (contrary to self-serving illusions). But the victory itself was a far more “extraordinary example of democracy at work” than the miracle of 2008.

The same is true of the 2005 election in Bolivia . The indigenous majority, the most oppressed population in the hemisphere (those who survived), elected a candidate from their own ranks, a poor peasant, Evo Morales. The electoral victory was not based on soaring rhetoric about hope and change, or body language and fluttering of eyelashes, but on crucial issues, very well known to the voters: control over resources, cultural rights, and so on. Furthermore, the election went far beyond pushing a lever or even efforts to get out the vote. It was a stage in long and intense popular struggles in the face of severe repression, which had won major victories, such as defeating the efforts to deprive poor people of water through privatization.

These popular movements did not simply take instructions from party leaders. Rather, they formulated the policies that their candidates were chosen to implement. That is quite different from the Western model of democracy, as we see clearly in the reactions to Obama’s victory.

In the liberal Boston Globe, the headline of the lead story observed that Obama’s “grass-roots strategy leaves few debts to interest groups”: labor unions, women, minorities, or other “traditional Democratic constituencies. ” That is only partially right, because massive funding by concentrated sectors of capital is ignored. But leaving that detail aside, the report is correct in saying that Obama’s hands are not tied, because his only debt is to “a grass-roots army of millions” – who took instructions, but contributed essentially nothing to formulating his program.

At the other end of the doctrinal spectrum, a headline in the Wall Street Journal reads “Grass-Roots Army Is Still at the Ready” – namely, ready to follow instructions to “push his agenda,” whatever it may be.

Obama’s organizers regard the network they constructed “as a mass movement with unprecedented potential to influence voters,” the Los Angeles Times reported. The movement, organized around the “Obama brand” can pressure Congress to “hew to the Obama agenda.” But they are not to develop ideas and programs and call on their representatives to implement them. These would be among the “old ways of doing politics” from which the new “idealists” are “breaking free.”

It is instructive to compare this picture to the workings of a functioning democracy such as Bolivia . The popular movements of the third world do not conform to the favored Western doctrine that the “function” of the “ignorant and meddlesome outsiders” – the population — is to be “spectators of action” but not “participants” (Walter Lippmann, articulating a standard progressive view).

Perhaps there might even be some substance to fashionable slogans about “clash of civilizations.”

In earlier periods of American history, the public refused to keep to its assigned “function.” Popular activism has repeatedly been the force that led to substantial gains for freedom and justice. The authentic hope of the Obama campaign is that the “grass roots army” organized to take instructions from the leader might “break free” and return to “old ways of doing politics,” by direct participation in action.

Latin America

In Bolivia, as in Haiti, efforts to promote democracy, social justice, and cultural rights, and to bring about desperately needed structural and institutional changes are, naturally, bitterly opposed by the traditional rulers, the Europeanized mostly white elite in the Eastern provinces, the site of most of the natural resources currently desired by the West. Also naturally, their quasi-secessionist movement is supported by Washington , which once again scarcely conceals its distaste for democracy when it does not conform to strategic and economic interests. The generalization is a staple of serious scholarship, but does not make its way to commentary about the revered “freedom agenda.”

To punish Bolivians for showing “the world an extraordinary example of democracy at work,” the Bush administration cancelled trade preferences, threatening tens of thousands of jobs, on the pretext that Bolivia was not cooperating with US counter-narcotic efforts. In the real world, the UN estimates that Bolivia ’s coca crop increased 5 percent in 2007, as compared with a 26 percent increase in Colombia , the terror state that is Washington ’s closest regional ally and the recipient of enormous military aid. AP reports that “Cocaine seizures by Bolivian police working with DEA agents had also increased dramatically during the Morales administration. ”

“Drug wars” have regularly been used as a pretext for repression, violence, and state crimes, at home as well.

After Morales’s victory in a recall referendum in August 2008, with a sharp increase in support over his 2005 success, rightist opposition turned violent, leading to assassination of many peasants supporting the government. After the massacre, a summit meeting of UNASUR, the newly-formed Union of South American Republics, was convened in Santiago Chile . The summit issued a strong statement of support for the elected Morales government, read by Chilean President Michelle Bachelet. The statement declared “their full and firm support for the constitutional government of President Evo Morales, whose mandate was ratified by a big majority” — referring to his overwhelming victory in the referendum a month earlier. Morales thanked UNASUR for its support, observing that “For the first time in South America’s history, the countries of our region are deciding how to resolve our problems, without the presence of the United States .”

A matter of no slight significance, not reported in the US .

The Administration

Turning to the future, what can we realistically expect of an Obama administration? We have two sources of information: actions and rhetoric.

The most important actions to date are selection of staff. The first selection was for vice-President: Joe Biden, one of the strongest supporters of the Iraq invasion among Senate Democrats, a long-time Washington insider, who consistently votes with his fellow Democrats but not always, as when he supported a measure to make it harder for individuals to erase debt by declaring bankruptcy.

The first post-election appointment was for the crucial position of chief of staff: Rahm Emanuel, one of the strongest supporters of the Iraq invasion among House Democrats and like Biden, a long-term Washington insider. Emanuel is also one of the biggest recipients of Wall Street campaign contributions, the Center for Responsive Politics reports. He “was the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investme nt industry.” Since being elected to Congress in 2002, he “has received more money from individuals and PACs in the securities and investment business than any other industry”; these are also among Obama’s top donors. His task is to oversee Obama’s approach to the worst financial crisis since the 1930s, for which his and Obama’s funders share ample responsibility.

In an interview with an editor of the Wall Street Journal, Emanuel was asked what the Obama administration would do about “the Democratic congressional leadership, which is brimming with left-wing barons who have their own agenda,” such as slashing defense spending (in accord with the will of the majority of the population) and “angling for steep energy taxes to combat global warming,” not to speak of the outright lunatics in Congress who toy with slavery reparations and even sympathize with Europeans who want to indict Bush administration war criminals for war crimes. “Barack Obama can stand up to them,” Emanuel assured the editor. The administration will be “pragmatic,” fending off left extremists.

Obama’s transition team is headed by John Podesta, Clinton ’s chief of staff. The leading figures in his economic team are Robert Rubin and Lawrence Summers, both enthusiasts for the deregulation that was a major factor in the current financial crisis. As Treasury Secretary, Rubin worked hard to abolish the Glass-Steagall act, which had separated commercial banks from financial institutions that incur high risks. Economist Tim Canova comments that Rubin had “a personal interest in the demise of Glass-Steagall. ” Soon after leaving his position as Treasury Secretary, he became “chair of Citigroup, a financial-services conglomerate that was facing the possibility of having to sell off its insurance underwriting subsidiary.. . the Clinton administration never brought charges against him for his obvious violations of the Ethics in Government Act.”

Rubin was replaced as Treasury Secretary by Summers, who presided over legislation barring federal regulation of derivatives, the “weapons of mass destruction” (Warren Buffett) that helped plunge financial markets to disaster. He ranks as “one of the main villains in the current economic crisis,” according to Dean Baker, one of the few economists to have warned accurately of the impending crisis. Placing financial policy in the hands of Rubin and Summers is “a bit like turning to Osama Bin Laden for aid in the war on terrorism,” Baker adds.

The business press reviewed the records of Obama’s Transition Economic Advisory Board, which met on November 7 to determine how to deal with the financial crisis. In Bloomberg News, Jonathan Weil concluded that “Many of them should be getting subpoenas as material witnesses right about now, not places in Obama’s inner circle.” About half “have held fiduciary positions at companies that, to one degree or another, either fried their financial statements, helped send the world into an economic tailspin, or both.” Is it really plausible that “they won’t mistake the nation’s needs for their own corporate interests?” He also pointed out that chief of staff Emanuel “was a director at Freddie Mac in 2000 and 2001 while it was committing accounting fraud.”

Those are the actions, at the time of writing. The rhetoric is “change” and “hope.”

Health Care

The primary concern for the administration will be to arrest the financial crisis and the simultaneous recession in the real economy. But there is also a monster in the closet: the notoriously inefficient privatized health care system, which threatens to overwhelm the federal budget if current tendencies persist. A majority of the public has long favored a national health care system, which should be far less expensive and more effective, comparative evidence indicates (along with many studies). As recently as 2004, any government intervention in the health care system was described in the press as “politically impossible” and “lacking political support” – meaning: opposed by the insurance industry, pharmaceutical corporations, and others who count. In 2008, however, first Edwards, then Obama and Clinton, advanced proposals that approach what the public has long preferred. These ideas now have “political support.” What has changed? Not public opinion, which remains much as before. But by 2008, major sectors of power, primarily manufacturing industry, had come to recognize that they are being severely damaged by the privatized health care system. Hence the public will is coming to have “political support.” There is a long way to go, but the shift tells us something about dysfunctional democracy.

International Relations

Internationally, there is not much of substance on the largely blank slate. What there is gives little reason to expect much a change from Bush’s second term, which stepped back from the radical ultranationalism and aggressive posture of the first term, also discarding some of the extreme hawks and opponents of democracy (in action, that is, not soothing words), like Rumsfeld and Wolfowitz.

Israel-Palestine

The immediate issues have to do mostly with the Middle East. On Israel-Palestine, rumors are circulating that Obama might depart from the US rejectionism that has blocked a political settlement for over 30 years, with rare exceptions, notably for a few days in January 2001 before promising negotiations were called off prematurely by Israel. The record, however, provides no basis for taking the rumors seriously. I have reviewed Obama’s formal positions elsewhere (Perilous Power), and will put the matter aside here.

After the election, Israeli president Shimon Peres informed the press that on his July trip to Israel, Obama had told him that he was “very impressed” with the Arab League peace proposal, calling for full normalization of relations with Israel along with Israeli withdrawal from the occupied territories – basically, the long-standing international consensus that the US-Israel have unilaterally blocked (and that Peres has never accepted – in fact, in his last days as Prime Minister in 1996 he held that a Palestinian state can never come into existence). That might suggest a significant change of heart, except that the right-wing Israeli leader Binyamin Netanyahu said that on the same trip, Obama had told him that he was “very impressed” with Netanyahu’s plan, which calls for indefinite Israeli control of the occupied territories.

The paradox is plausibly resolved by Israeli political analyst Aluf Ben, who points out that Obama’s “main goal was not to screw up or ire anyone. Presumably he was polite, and told his hosts their proposals were `very interesting’ – they leave satisfied and he hasn’t promised a thing.” Understandable, but it leaves us with nothing except his fervent professions of love for Israel and dismissal of Palestinian concerns.

Iraq

On Iraq , Obama has frequently been praised for his “principled opposition” to the war. In reality, as he has made clear, his opposition has been entirely unprincipled throughout. The war, he said, is a “strategic blunder.” When Kremlin critics of the invasion of Afghanistan called it a strategic blunder, we did not say that they were taking a principled stand.

By the time of writing, the government of Iraq seems close to accepting a Status of Forces Agreement (SOFA) with Washington on the US military presence in Iraq – with reservations, according to Prime Minister Maliki, who said that this is the best Iraq could get and it was at least “a strong beginning.” The talks dragged on, the Washington Post reports, because Iraq insisted on “some major concessions, including the establishment of the 2011 withdrawal date instead of vaguer language favored by the Bush administration [and] also rejected long-term U.S. military bases on its soil.” Iraqi leaders “consider the firm deadline for withdrawal to be a negotiating victory,” Reuters reports: Washington “long opposed setting any timetable for its troops to withdraw, but relented in recent months,” unable to overcome Iraqi resistance.

Throughout the negotiations, the press regularly dismissed the obstinate stance of the Maliki government as regrettable pandering to public opinion. US-run polls continue to report that a large majority of Iraqis oppose any US military presence, and believe that US forces make the situation worse, including the “surge.” That judgment is supported, among others, by Middle East specialist and security analyst Steven Simon, who writes in Foreign Affairs that the Petraeus counterinsurgency strategy is “stoking the three forces that have traditionally threatened the stability of Middle Eastern states: tribalism, warlordism, and sectarianism. States that have failed to control these forces have ultimately become ungovernable, and this is the fate for which the surge is preparing Iraq . A strategy intended to reduce casualties in the short term will ineluctably weaken the prospects for Iraq ’s cohesion over the long run.” It may lead to “a strong, centralized state ruled by a military junta that would resemble the Baathist regime Washington overthrew in 2003,” or “something very much like the imperial protectorates in the Middle East of the first half of the twentieth century” in which the “club of patrons” in the capital would ‘dole out goods to tribes through favored conduits.” In the Petraeus system, “the U.S. military is performing the role of the patrons — creating an unhealthy dependency and driving a dangerous wedge between the tribes and the state,” undermining prospects for a “stable, unitary Iraq .”

The latest Iraqi success culminates a long process of resistance to demands of the US invaders. Washington fought tooth and nail to prevent elections, but was finally forced to back down in the face of popular demands for democracy, symbolized by the Ayatollah Sistani. The Bush administration then managed to install their own choice as Prime Minister, and sought to control the government in various ways, meanwhile also building huge military bases around the country and an “embassy” that is a virtual city within Baghdad – all funded by congressional Democrats. If the invaders do live up to the SOFA that they have been compelled to accept, it would constitute a significant triumph of nonviolent resistance. Insurgents can be killed, but mass nonviolent resistance is much harder to quell.

Within the political class and the media it is reflexively assumed that Washington has the right to demand terms for the SOFA. No such right was accorded to Russian invaders of Afghanistan , or indeed to anyone except the US and its clients. For others, we rightly adopt the principle that invaders have no rights, only responsibilities, including the responsibility to attend to the will of the victims, and to pay massive reparations for their crimes. In this case, the crimes include strong support for Saddam Hussein through his worst atrocities on Reagan’s watch, then on to Saddam’s massacre of Shiites under the eyes of the US military after the first Gulf War; the Clinton sanctions that were termed “genocidal” by the distinguished international diplomats who administered them and resigned in protest, and that also helped Saddam escape the fate of other gangsters whom the US and Britain supported to the very end of their bloody rule; and the war and its hideous aftermath. No such thoughts can be voiced in polite society.

The Iraqi government spokesman said that the tentative SOFA “matches the vision of U.S. President-elect Barack Obama.” Obama’s vision was in fact left somewhat vague, but presumably he would go along in some fashion with the demands of the Iraqi government. If so, that would require modification of US plans to ensure control over Iraq ’s enormous oil resources while reinforcing its dominance over the world’s major energy producing region.

Afghanistan, Pakistan …

Obama’s announced “vision” was to shift forces from Iraq to Afghanistan . That stand evoked a lesson from the editors of the Washington Post: “While the United States has an interest in preventing the resurgence of the Afghan Taliban, the country’s strategic importance pales beside that of Iraq , which lies at the geopolitical center of the Middle East and contains some of the world’s largest oil reserves.” Increasingly, as Washington has been compelled to accede to Iraqi demands, tales about “democracy promotion” and other self-congratulatory fables have been shelved in favor of recognition of what had been obvious throughout to all but the most doctrinaire ideologists: that the US would not have invaded if Iraq’s exports were asparagus and tomatoes and the world’s major energy resources were in the South Pacific.

The NATO command is also coming to recognize reality publicly. In June 2007, NATO Secretary-General Jaap de Hoop Scheffer informed a meeting of NATO members that “NATO troops have to guard pipelines that transport oil and gas that is directed for the West,” and more generally to protect sea routes used by tankers and other “crucial infrastructure” of the energy system. That is the true meaning of the fabled “responsibility to protect.” Presumably the task includes the projected $7.6-billion TAPI pipeline that would deliver natural gas from Turkmenistan to Pakistan and India , running through Afghan’s Kandahar province, where Canadian troops are deployed. The goal is “to block a competing pipeline that would bring gas to Pakistan and India from Iran ” and to “diminish Russia ’s dominance of Central Asian energy exports,” the Toronto Globe and Mail reported, plausibly outlining some of the contours of the new “Great Game.”

Obama strongly endorsed the then-secret Bush administration policy of attacking suspected al-Qaeda leaders in countries that Washington has not (yet) invaded, disclosed by the New York Times shortly after the election. The doctrine was illustrated again on October 26, when US forces based in Iraq raided Syria , killing 8 civilians, allegedly to capture an al-Qaeda leader. Washington did not notify Iraqi Prime Minister Maliki or President Talabani, both of whom have relatively amicable relations with Syria , which has accepted 1.5 million Iraqi refugees and is bitterly opposed to al-Qaeda. Syria protested, claiming, credibly, that if notified they would have eagerly apprehended this enemy. According to Asia Times, Iraqi leaders were furious, and hardened their stance in the SOFA negotiations, insisting on provisions to bar the use of Iraqi territory to attack neighbors.

The Syria raid elicited a harsh reaction in the Arab world. In pro-government newspapers, the Bush administration was denounced for lengthening its “loathsome legacy” ( Lebanon ), while Syria was urged to “march forward in your reconciliatory path” and America to “keep going backwards with your language of hatred, arrogance and the murder of innocents” ( Kuwait ). For the region generally, it was another illustration of what the government-controlled Saudi press condemned as “not diplomacy in search of peace, but madness in search of war.”

Obama was silent. So were other Democrats. Political scientist Stephen Zunes contacted the offices of every Democrat on the House and Senate Foreign Relations Committees, but was unable to find any critical word on the US raid on Syria from occupied Iraq .

Presumably, Obama also accepts the more expansive Bush doctrine that the US not only has the right to invade countries as it chooses (unless it is a “blunder,” too costly to us), but also to attack others that Washington claims are supporting resistance to its aggression. In particular, Obama has, it seems, not criticized the raids by Predator drones that have killed many civilians in Pakistan .

These raids of course have consequences: people have the odd characteristic of objecting to slaughter of family members and friends. Right now there is a vicious mini-war being waged in the tribal area of Bajaur in Pakistan , adjacent to Afghanistan . BBC describes widespread destruction from intense combat, reporting further that “Many in Bajaur trace the roots of the uprising to a suspected US missile strike on an Islamic seminary, or madrassa, in November 2006, which killed around 80 people.” The attack on the school, killing 80-85 people, was reported in the mainstream Pakistani press by the highly respected dissident physicist Pervez Hoodbhoy, but ignored in the US as insignificant. Events often look different at the other end of the club.

Hoodbhoy observed that the usual outcome of such attacks “has been flattened houses, dead and maimed children, and a growing local population that seeks revenge against Pakistan and the US .” Bajaur today may be an illustration of the familiar pattern.

On November 3, General Petraeus, the newly appointed head of the US Central Command that covers the Middle East region, had his first meeting with Pakistani President Asif Ali Zardari, army chief General Ashfaq Parvez Kayani, and other high officials. Their primary concern was US missile attacks on Pakistani territory, which had increased sharply in previous weeks. “Continuing drone attacks on our territory, which result in loss of precious lives and property, are counterproductive and difficult to explain by a democratically elected government,” Zardari informed Petraeus. His government, he said, is “under pressure to react more aggressively” to the strikes. These could lead to “a backlash against the US ,” which is already deeply unpopular in Pakistan .

Petraeus said that he had heard the message, and “we would have to take [Pakistani opinions] on board” when attacking the country. A practical necessity, no doubt, when over 80% of the supplies for the US-NATO war in Afghanistan pass through Pakistan .

Pakistan developed nuclear weapons, outside the Non-Proliferation Treaty (NPT), thanks in no small measure to Ronald Reagan, who pretended not to see what his ally was doing. This was one element of Reagan’s “unstinting support” for the “ruthless and vindictive” dictator Zia ul-Haq, whose rule had “the most long-lasting and damaging effect on Pakistani society, one still prevalent today,” the highly respected analyst Ahmed Rashid observes. With Reagan’s firm backing, Zia moved to impose “an ideological Islamic state upon the population.” These are the immediate roots of many of “today’s problems – the militancy of the religious parties, the mushrooming of madrassas and extremist groups, the spread of drug and Kalashnikov culture, and the increase in sectarian violence.”

The Reaganites also “built up the [Inter-Services Intelligence Directorate, ISI] into a formidable intelligence agency that ran the political process inside Pakistan while promoting Islamic insurgencies in Kashmir and Central Asia ,” Rashid continues. “This global jihad launched by Zia and Reagan was to sow the seeds of al Qaeda and turn Pakistan into the world center of jihadism for the next two decades.” Meanwhile Reagan’s immediate successors left Afghanistan in the hands of the most vicious jihadis, later abandoning it to warlord rule under Rumsfeld’s direction. The fearsome ISI continues to play both sides of the street, supporting the resurgent Taliban and simultaneously acceding to some US demands.

The US and Pakistan are reported to have reached “tacit agreement in September [2008] on a don’t-ask-don’ t-tell policy that allows unmanned Predator aircraft to attack suspected terrorist targets” in Pakistan , according to unidentified senior officials in both countries. “The officials described the deal as one in which the U.S. government refuses to publicly acknowledge the attacks while Pakistan ’s government continues to complain noisily about the politically sensitive strikes.”

Once again problems are caused by the “ignorant and meddlesome outsiders” who dislike being bombed by an increasingly hated enemy from the other side of the world.

The day before this report on the “tacit agreement” appeared, a suicide bombing in the conflicted tribal areas killed eight Pakistani soldiers, retaliation for an attack by a US Predator drone that killed 20 people, including two Taliban leaders. The Pakistani parliament called for dialogue with the Taliban. Echoing the resolution, Pakistani foreign Minister Shah Mehmood Qureshi said “There is an increasing realization that the use of force alone cannot yield the desired results.”

Afghan President Hamid Karzai’s first message to president-elect Obama was much like that delivered to General Petraeus by Pakistani leaders: “end US airstrikes that risk civilian casualties.” His message was sent shortly after coalition troops bombed a wedding party in Kandahar province, reportedly killing 40 people. There is no indication that his opinion was “taken on board.”

The British command has warned that there is no military solution to the conflict in Afghanistan and that there will have to be negotiations with the Taliban, risking a rift with the US , the Financial Times reports. Correspondent Jason Burke, who has long experience in the region, reports that “the Taliban have been engaged in secret talks about ending the conflict in Afghanistan in a wide-ranging ‘peace process’ sponsored by Saudi Arabia and supported by Britain .”

Some Afghan peace activists have reservations about this approach, preferring a solution without foreign interference. A growing network of activists is calling for negotiations and reconciliation with the Taliban in a National Peace Jirga, a grand assembly of Afghans, formed in May 2008. At a meeting in support of the Jirga, 3,000 Afghan political and intellectuals, mainly Pashtuns, the largest ethnic group, criticized “the international military campaign against Islamic militants in Afghanistan and called for dialogue to end the fighting,” AFP reported.

The interim chairman of the National Peace Jirga, Bakhtar Aminzai, “told the opening gathering that the current conflict could not be resolved by military means and that only talks could bring a solution. He called on the government to step up its negotiations with the Taliban and Hizb-i-Islami groups.” The latter is the party of the extremist radical Islamist warlord Gulbuddin Hekmatyar, a Reagan favorite responsible for many terrible atrocities, now reported to provide core parliamentary support for the Karzai government and to be pressing it towards a form of re-Talibanization.

Aminzai said further that “We need to pressure the Afghan government and the international community to find a solution without using guns.” A spokeswoman added that “We are against Western policy in Afghanistan . They should bury their guns in a grave and focus on diplomacy and economic development. ” A leader of Awakened Youth of Afghanistan, a prominent antiwar group, says that we must end “Afghanicide — the killing of Afghanistan .” In a joint declaration with German peace organizations, the National Peace Jirga claimed to represent “a wide majority of Afghan people who are tired of war,” calling for an end to escalation and initiation of a peace process.

The deputy director of the umbrella organization of NGOs in the country says that of roughly 1,400 registered NGOs, nearly 1,100 are purely Afghan operations: women’s groups, youth groups and others, many of them advocates of the Peace Jirga.

Though polling in war-torn Afghanistan is a difficult process, there are some suggestive results. A Canadian-run poll found that Afghans favor the presence of Canadian and other foreign troops, the result that made the headlines in Canada . Other findings suggest some qualifications. Only 20% “think the Taliban will prevail once foreign troops leave.” Three-fourths support negotiations between the Karzai government and the Taliban, and more than half favor a coalition government. The great majority therefore strongly disagree with the US-NATO focus on further militarization of the conflict, and appear to believe that peace is possible with a turn towards peaceful means. Though the question was not asked, it is reasonable to surmise that the foreign presence is favored for aid and reconstruction.

A study of Taliban foot soldiers carried out by the Toronto Globe & Mail, though not a scientific survey as they point out, nevertheless yields considerable insight. All were Afghan Pashtuns, from the Kandahar area. They described themselves as Mujahadeen, following the ancient tradition of driving out foreign invaders. Almost a third reported that at least one family member had died in aerial bombings in recent years. Many said that they were fighting to defend Afghan villagers from air strikes by foreign troops. Few claimed to be fighting a global Jihad, or had allegiance to Taliban leader Mullah Omar. Most saw themselves as fighting for principles – an Islamic government — not a leader. Again, the results suggest possibilities for a negotiated peaceful settlement, without foreign interference.

A valuable perspective on such prospects is provided by Sir Rodric Braithwaite, a specialist on Afghanistan who was UK ambassador to Moscow during the crucial 1988-92 period when the Russians withdrew (and the USSR collapsed), then becoming chair of the British Joint Intelligence Committee. On a recent visit, Braithwaite spoke to Afghan journalists, former Mujahideen, professionals, people working for the US-based “coalition” – in general, to “natural supporters for its claims to bring peace and reconstruction. ” In the Financial Times, he reports that they were “contemptuous of President Hamid Karzai,” regarding him as another one of the puppets installed by foreign force. Their favorite was “Mohammad Najibullah, the last communist president, who attempted to reconcile the nation within an Islamic state, and was butchered by the Taliban in 1996: DVDs of his speeches are being sold on the streets. Things were, they said, better under the Soviets. Kabul was secure, women were employed, the Soviets built factories, roads, schools and hospitals, Russian children played safely in the streets. The Russian soldiers fought bravely on the ground like real warriors, instead of killing women and children from the air. Even the Taliban were not so bad: they were good Muslims, kept order, and respected women in their own way. These myths may not reflect historical reality, but they do measure a deep disillusionment with the `coalition’ and its policies.”

Specialists on the region urge that US strategy should shift from more troops and attacks in Pakistan to a “diplomatic grand bargain — forging compromise with insurgents while addressing an array of regional rivalries and insecurities” (Barnett Rubin and Ahmed Rashid in Foreign Affairs, Nov.-Dec. 2008). They warn that the current military focus “and the attendant terrorism” might lead to the collapse of nuclear-armed Pakistan , with grim consequences. They urge the incoming US administration “to put an end to the increasingly destructive dynamics of the Great Game in the region” through negotiations that recognize the interests of the concerned parties within Afghanistan as well as Pakistan and Iran, but also India, China and Russia, who “have reservations about a NATO base within their spheres of influence” and concerns about the threats “posed by the United States and NATO” as well as by al-Qaeda and the Taliban. The immediate goal should be “Lowering the level of violence in the region and moving the global community toward genuine agreement on the long-term goals,” thus allowing Afghans to confront their internal problems peacefully. The incoming US president must put an end to ” Washington ’s keenness for `victory’ as the solution to all problems, and the United States ‘ reluctance to involve competitors, opponents, or enemies in diplomacy.”

It appears that there are feasible alternatives to escalation of the cycle of violence, but there is little hint of it in the electoral campaign or political commentary. Afghanistan and Pakistan do not appear among foreign policy issues on the Obama campaign’s website.

Iran

Iran, in contrast, figures prominently — though not of course as compared with effusive support for Israel ; Palestinians remain unmentioned, apart from a vague reference to a two-state settlement of some unspecified kind. For Iran , Obama supports tough direct diplomacy “without preconditions” in order “to pressure Iran directly to change their troubling behavior,” namely pursuing a nuclear program and supporting terrorism (presumably referring to support for Hamas and Hezbollah). If Iran abandons its troubling behavior, the US might move towards normal diplomatic and economic relations. “If Iran continues its troubling behavior, we will step up our economic pressure and political isolation.” And as Obama informed the Israeli Lobby (AIPAC), “I will do everything in my power to prevent Iran from obtaining a nuclear weapon” – up to nuclear war, if he meant what he said.

Furthermore Obama will strengthen the NPT “so that countries like North Korea and Iran that break the rules will automatically face strong international sanctions.” There is no mention of the conclusion of US intelligence with “high confidence” that Iran has not had a weapons program for 5 years, unlike US allies Israel, Pakistan, India, which maintain extensive nuclear weapons programs in violation of the NPT with direct US support, all unmentioned here as well.

The final mention of Iran is in the context of Obama’s strong support for Israel ’s “Right to Self Defense” and its “right to protect its citizens.” This commitment is demonstrated by Obama’s co-sponsorship of “a Senate resolution against Iran and Syria ’s involvement in the war, and insisting that Israel should not be pressured into a ceasefire that did not deal with the threat of Hezbollah missiles.” The reference is to Israel ’s US-backed invasion of Lebanon in 2006, with pretexts that are hardly credible in light of Israel ’s regular practices. This invasion, Israel ’s fifth, killed over 1000 Lebanese and once again destroyed much of southern Lebanon as well as parts of Beirut .

This is the sole mention of Lebanon among foreign policy issues on Obama’s website. Evidently, Lebanon has no right of self defense. In fact who could possibly have a right of self defense against the US or its clients?

Nor does Iran have such rights. Among specialists, even rational hawks, it is well understood that if Iran is pursuing a weapons program, it is for deterrence. In the conservative National Interest, former CIA weapons inspector David Kay speculates that Iran might be moving towards “nuclear weapons capability,” with the “strategic goal” of countering a US threat that “is real in Teheran’s eyes,” for good reasons that he reviews. He notes further that “Perhaps the biggest agitator of all in this is the United States , with its abbreviated historical memory and diplomatic ADD.” Wayne White, formerly deputy director for the Near East and South Asia in State Department intelligence, dismisses the possibility that Supreme Leader Khamenei and the clerical elite, who hold power in Iran, would throw away the “vast amounts of money” and “huge economic empires” they have created for themselves “in some quixotic attack against Israel with a nuclear weapon,” if they had one. The probability of that is virtually undetectable, he points out.

White agrees that Iran might seek weapons capability (which is not the same as weapons) for deterrence. He goes on to suggest Iran might also recall that Saddam Hussein had no nuclear weapons program when Israel bombed its Osiraq reactor in 1981, and that the attack led him to initiate a program using nuclear materials it had on hand as a result of the bombing. At the time, White was Iraq analyst for State Department intelligence, with access to a rich body of evidence. His testimony adds internal US intelligence confirmation to the very credible evidence available at once, later strengthened by reports of Iraqi defectors, that the Israeli bombing did not terminate, but rather initiated, Saddam’s pursuit of nuclear weapons. US or Israeli bombing of Iranian facilities, White and other specialists observe, might have the same effect. Violence consistently elicits more violence in response.

These matters are well understood by informed hardliners. The leading neoconservative expert on Iran , Reuel Marc Gerecht, formerly in the CIA Middle East division, wrote in 2000 that:

Tehran certainly wants nuclear weapons; and its reasoning is not illogical. Iran was gassed into surrender in the first Persian Gulf War; Pakistan, Iran’s ever more radicalized Sunni neighbor to the southeast, has nuclear weapons; Saddam Hussein, with his Scuds and his weapons-of-mass- destruction ambitions, is next door; Saudi Arabia, Iran’s most ardent and reviled religious rival, has long-range missiles; Russia, historically one of Iran’s most feared neighbors, is once again trying to reassert its dominion in the neighboring Caucasus; and Israel could, of course blow the Islamic Republic to bits. Having been vanquished by a technologically superior Iraq at a cost of at least a half-million men, Iran knows very well the consequences of having insufficient deterrence. And the Iranians possess the essential factor to make deterrence work: sanity. Tehran or Isfahan in ashes would destroy the Persian soul, about which even the most hard-line cleric cares deeply. As long as the Iranians believe that either the U.S. or Israel or somebody else in the region might retaliate with nuclear weapons, they won’t do something stupid.

Gerecht also understands very well the real “security problem” posed by Iranian nuclear weapons, should it acquire them:

A nuclear-armed Islamic Republic would of course check, if not checkmate, the United States ‘ maneuvering room in the Persian Gulf . We would no doubt think several times about responding to Iranian terrorism or military action if Tehran had the bomb and a missile to deliver it. During the lead-up to the second Gulf War, ruling clerical circles in Tehran and Qom were abuzz with the debate about nuclear weapons. The mullahs…agreed: if Saddam Hussein had had nuclear weapons, the Americans would not have challenged him. For the “left” and the “right,” this weaponry is the ultimate guarantee of Iran ’s defense, its revolution, and its independence as a regional great power.

With appropriate translations for the doctrinal term “Iranian terrorism,” Gerecht’s concerns capture realistically the threat posed by an Iran with a deterrent capacity (Iranian military action is quite a remote contingency).

While as usual ignored as irrelevant to policy formation, American public opinion is close to that of serious analysts and also to world opinion. Large majorities oppose threats against Iran , thus rejecting the Bush-Obama position that the US must be an outlaw state, violating the UN Charter, which bars the threat of force. The public also joins the majority of the world’s states in endorsing Iran ’s right, as a signer of the NPT, to enrich uranium for nuclear energy (the position endorsed also by Cheney, Rumsfeld, Wolfowitz, Kissinger and others when Iran was ruled by the tyrant imposed by US-UK subversion). Most important, the public favors establishment of a nuclear-weapons- free zone in the Middle East , which would mitigate and perhaps eliminate this highly threatening issue.

Popular Influence

These observations suggest an interesting thought experiment. What would be the content of the “Obama brand” if the public were to become “participants” rather than mere “spectators in action”? It is an experiment well worth undertaking, and there is good reason to suppose that the results might point the way to a saner and more decent world. Posted byBulatlat.com

Macroasia lodges complaints in Ombudsman vs Brooke’s Pt. barangay officials

November 20, 2008

By Celeste Anna R. Formoso

MACROASIA CORPORATION (MC) has recently filed administrative charges in the Office of the Ombudsman for the preventive suspension of Brooke’s Point barangay Ipilan chairman Jonathan Lagrada and three others for allegedly causing “undue injury to the government and grave abuse of authority.”

A statement obtained by the Palawan Times said MacroAsia filed administrative cases against Lagrada, Jane Araullo, Wilfredo Rodriguez and Cresencio Ura – all officials of barangay Ipilan on grounds that they are “stopping a mining firm from pursuing its legal exploration activities, as covered by a Minerals Production Sharing Agreement (MPSA) granted by the national government, and which was duly concurred by the municipal government.”

The cases were filed at the office of the Deputy Ombudsman for Luzon in Manila by MacroAsia Corporation representative and complainant Marivic T. Moya, the statement said.

The MC beseeched the Ombudsman to preventively suspend the respondents for vehemently violating Republic Act 3019, or the Anti-Graft and Corrupt Practices Act; and appealed that it be allowed to pursue its legitimate mining activities pursuant to the MPSA.

Moya’s complaint cited that in September 2008, upon orders by Lagrada, the barangay chairman of Ipilan, blocked scheduled survey activities of the company that were supposedly carried out by its contractor JCP Geo-Ex Services, Inc.

“The firm was accredited by the Mines Geosciences Bureau (MGB) to provide exploration services for mining companies,” the statement said.

MacroAsia believes that the move of Lagrada and the others was a “wanton disregard of barangay resolutions no. 05 and no. 27, dated April 2 and November 19, 2007 respectively, which authorized and endorsed the company to pursue its mining activities.”

Both resolutions, which were approved before his term, are being questioned by Lagrada, a staunch supporter of the “no to mining” fight of non-government organizations (NGOs) and some religious sects.

“The continuous refusal of the respondent Jonathan Lagrada to allow the conduct of survey by MacroAsia, without valid and justifiable reason or court order, and obviously attended with evident bad faith, and with grave abuse of authority, causes undue injury to the operation of MacroAsia which is now suffering financial and capital losses due to the unjust actions of the respondents preventing the enforcement of a legitimate contract signed by the MacroAsia and the Republic of the Philippines, as well as of the barangay resolutions created by duly constituted authorities,” Moya said.

“We have long kept silent and tried to endure all these unfair acts against us, hoping our detractors will eventually become reasonable enough to appreciate our company’s legitimate goals. But it has already reached a point where the sense and logic of our purpose is fast becoming unworthy to pursue, if we do not assert our legal and legitimate rights now,” she added.

Lagrada, in a phone interview with the Palawan Times, shrugged off the administrative cases filed against them as “pure harassment’ by MacroAsia.

“It’s pure harassment because MacroAsia will really do everything to make us stop our fight against mining,” he said, adding that he has not received any copy of the filed cases, neither has he received any other document as of press time.

“I am ready to face them,” Lagrada said firmly.

Brooke’s Point has become a favorite hub of anti and pro-responsible mining rallies and other campaign efforts due to the impending operation of three large-scale mining companies in the town, namely Ipilan Nickel Corporation (INC), Leebach and MacroAsia Corporation.

MacroAsia, a publicly-listed corporation, is part of the Lucio Tran group of companies which is the lead organization for the group’s mining activities, apart from its core aviation industry services business.

MacroAsia was granted with a MPSA by the government on December 2005 to pursue its mining activities in Brooke’s Point after the Palawan Council for Sustainable Development (PCSD) issued the firm, on June 2005, with a clearance that its target of operations conform to the Strategic Environmental Plan (SEP) of the province.(ThePalawanTimes)

Halloween 2008 – The Horror of Foreclosures

November 1, 2008

As Halloween neared in 2006, the looming mortgage crisis was already apparent and now two years later the horror of it all hasn’t gone away. It keeps getting worse. We’ve spent the last few months talking about the possibility that two million people might lose their homes by early next year. Now it turns out the total for this year and the next could turn out to be more than six million.

BY CARL BLOICE
BlackCommentator.com
INTERNATIONAL
Posted by Bulatlat

As Halloween neared in 2006, the looming mortgage crisis was already apparent and now two years later the horror of it all hasn’t gone away. It keeps getting worse. We’ve spent the last few months talking about the possibility that two million people might lose their homes by early next year. Now it turns out the total for this year and the next could turn out to be more than six million. August saw a record number of homeowners in distress, over 300,000 homes were at some stage of mortgage default and 91,000 families or individuals lost their homes, Further, about 12 million homeowners – one out of every six – are reported to have zero or negative equity in their homes.

An estimated 7,000 people are losing their homes every day.

The number are scary enough but it’s not hard to imagine the fear and anxiety that grips the individuals and families that have lost, or are about to lose, their living space and with it – for most – their financial resources built up over their working lives. Millions of people who have never missed a mortgage payment are threatened with the loss of the value of their homes. As economist Dean Baker recently noted, ‘A whole cohort of workers is now facing retirement with no wealth.’

‘The landscape looks like the Roman Empire after being attacked by Attila the Hun,’ Alan Mallach, a senior fellow at the National Housing Institute and former visiting scholar at the Federal Reserve of Philadelphia, told The Washington Independent earlier this month. ‘It’s really bad out there.’

It was Alan Greenspan, the former head of the Federal Reserve and someone who played a major role in getting us into this mess, who said increasing, home ownership was a way of giving people a stake in the economy and to secure their loyalty to it. Home possession has been touted as a key element in the Bush Administration’s supposed ‘ownership society.’ Today, many of those caught in the vise of the ‘credit crunch’ are feeling left out of the economy, abandoned as the powers-that- be scamper around trying to save the banking system.

And, it’s not just homeowners that are affected.

When the sheriff in Chicago recently announced he was suspending evictions of people being ordered out of their dwelling it was mostly renters he was concerned about, people living in apartment buildings that had been foreclosed upon. ‘You can decide who is right
or wrong here, but the fact is things are getting desperate out there for a lot of people,’
commented CNN anchor Campbell Brown, referring to the sheriff’s decision’ but ‘families are being literally kicked to the curb. And our national leaders, our politicians in Washington and our presidential candidates don’t seem at all close to figuring this out.’

Without question, everybody – homeowners, renters and the dispossessed –has a stake in the efforts to stave off a further deterioration in the country’s economy. Still, we must look on with dismay as official Washington turns a blind eye to this burgeoning foreclosure catastrophe. ‘Between the Fannie and Freddie rescue and the Paulson Plan,’ one official told me, ‘we probably own two-thirds of the mortgages in America,’ wrote Robert Kuttner, co-editor of the American Prospect magazine October 8. ‘But `we’ in this case is the Treasury Department, peopled by former officials of Goldman Sachs, who demonstrate far less concern for the distressed homeowners than for the bondholders.’

As the powers-that-be steadfastly fail to summon up the political will (courage) to effectively confront the foreclosure crisis, efforts are being stepped up to divert attention from its actual cause and direct blame away from those responsible. The most pernicious of these efforts is the assertion that working class people of color are responsible for the situation.

‘A funny thing has happened on the way to the forum,’ wrote Sasha Abramsky in the Guardian (UK) last week. ‘As the institutions of super-capitalism continue to implode, a number of conservative commentators have started to lay the blame for the mess on poor people. Now, that might seem strange given that poor people control approximately no major financial institutions. And it might seem unfair in light of the unprecedented redistribution of wealth away from the working and middle classes and toward the wealthy these past several years.’

‘It might even seem bizarre given the fact that millions of desperate men and women signed onto utterly manipulative, usurious, `creative’ mortgages during the sub-prime gold-rush years, and, as a result, ended up losing what little capital they had accumulated over lifetimes of hard work as well as losing the roofs over their heads. To stretch a point, one could even view such a suggestion as offensive, since so many banks got into trouble by bundling mortgage securities that only preserved their value and generated profits so long as enough poor people signed on for the ride and agreed to be screwed.’

But it’s even more pernicious than that. Every since I begin writing about mortgages and foreclosures two years ago, I have received warnings from readers that some people were trying to blame African Americans and other people of color for the mortgage mess. Over
time, the spread of that racist canard has picked up steam. In the final days of the Presidential campaign it has become standard fare in propaganda of the political rightwing and the Republican Party. Through some strange demented logic, some on the right have tried to blame the economic meltdown on immigrant workers.

Let’s be clear: working class African Americans, Latinos and Asians are not the source of this crisis; they are its victims. The perpetrators of the massive con game played with the nation’s economy at stake are the banks and mortgage companies and the agencies of
government that encouraged them in their nefarious activity. President Bush was only partly right; the country didn’t ‘build too many houses,’ it built more houses than people could afford and the only way to get people to purchase them was to entice or trick them
into credit arrangements that could not be sustained.

And make no mistake about it, black people were targeted for ’subprime’ mortgages. Even when they could afford better loan terms they were often directed toward the riskier variety because these were more profitable for the creditors and their agents. ‘Let’s get real here,’ wrote Abramsky. ‘People borrowed because they were presented with offers they couldn’t
refuse. They were told that home ownership was the path to prosperity, and, like everyone else, they wanted their chance to realize their dreams. When they held back from buying property, they found the decks stacked against them. The same people who urged deregulation of the mortgage industry also lobbied for an end to rent controls and curtailments of government-funded public housing.’

Did some people sign up for loans they had no intention of repaying? Yes. Did some people take out risky mortgages for on property they didn’t inhabit for speculative reasons (something that was also touted as a smart move)? Yes. Did some people say yes to the
wink and nod of the mortgage brokers who agreed to don’t- ask-don’t-tell transactions, which were laughingly called ‘liars’ loans’ by the people in the real estate offices? Yes, but they are a tiny portion of the people who, today, see their total personal wealth being foreclosed on. Blaming the millions of individual and families facing foreclosures for their own plight is obscene.

It has begun to dawn on some people that ironic as it may seem, coming to the aid of those facing foreclosures and evictions is a mandatory step in staving off any further collapse of the nation’s economy.

As economist Mark Weisbrot of the Center for Economic and Policy Research, recently noted, ‘Falling house prices are driving the collapse of the financial system.’ But the recently passed bailout legislation ‘does little to avert the defaults and foreclosures that are pushing house values ever downward. Leaving these Americans out of the bailout bill is unwise and unfair, but neither Congress nor the Bush administration has ever shown anywhere near the sense of urgency to rescue homeowners at the bottom of the collapse as they have for the financiers at the top of it.’

‘If a quick consensus is required, why not include provisions to stop the source of bleeding, to aid the millions of Americans that are losing their homes?’ wrote economist Joseph Stiglitz October 1 in a TheNation.com article: ‘Here’s a Better Bailout Plan.’ ‘Why not spend as much on them as on Wall Street? Do they still believe in trickle-down economics, when for the past eight years money has been trickling up to the wizards of Wall Street? Why not enact bankruptcy reform, to help Americans write down the value of the mortgage on their overvalued home? No one benefits from these costly foreclosures.’

‘It’s unacceptable that lawmakers have yet to come out squarely in favor of bold homeowner relief in the bailout bill,’ The New York Times said editorially last month as the Department of the Treasury bailout bill was making it torturous way through Congress.
‘Secretary Henry Paulson, the biggest advocate of bailing out Wall Street, is also a big roadblock to helping hard-pressed borrowers. He wants to keep relying on the mortgage industry to voluntarily rework troubled loans, even though that approach has failed to
stem the foreclosure tide – and does a disservice to the taxpayers whose money he would put at risk in the bailout.’

‘Many of the assets that Mr. Paulson wants to buy with the $700 billion have gone sour because they are tied to mortgages that have defaulted or are at risk of default. Unless homeowners get some help – and it’s a pittance compared to what Mr. Paulson wants to give to bankers – the downward spiral of defaults, foreclosures and tumbling home prices will continue, which could push down the value of those assets even further.’

‘We could make a strong moral argument that the government has a greater responsibility to help homeowners than it does to bail out Wall Street. But we don’t have to. Basic economics argues for a robust plan to stanch foreclosures and thereby protect the taxpayers’ $700 billion investment.’

‘Millions of Americans are losing their homes.

(Already, some 3.6 million have done so since the subprime-mortgage crisis began.), notes economist, Joseph Stiglitz, in a very illuminating article in the November edition of Vanity Fair magazine. He goes on to write, ‘Financial markets produced loans and other products that were so complex and insidious that even their creators did not fully understand them; these products were so irresponsible that analysts called them `toxic.’ Yet financial markets failed to create products that would enable ordinary households to face the risks they confront and stay in their homes.’

And, ‘Throwing the poor out of their homes because they can’t pay their mortgages is not only tragic – it is pointless. All that happens is that the property deteriorates and the evicted people move somewhere else. The most coldhearted banker ought to understand
the basic economics: banks lose money when they foreclose – the vacant homes typically sell for far less than they would if they were lived in and cared for. If banks won’t renegotiate, we should have an expedited special bankruptcy procedure, akin to what
we do for corporations in Chapter 11, allowing people to keep their homes and re-structure their finances.’

Meanwhile, the worldwide economic meltdown continues.

As MIT Professor Noam Chomsky has observed, ‘The immediate origins of the current meltdown lie in the collapse of the housing bubble supervised by Federal Reserve Chairman Alan Greenspan, which sustained the struggling economy through the Bush years by debt-based consumer spending along with borrowing from abroad. But the roots are deeper. In part they lie in the triumph of financial liberalization in the past 30 years –
that is, freeing the markets as much as possible from government regulation.’

Halloween 2007 was the day the world stock markets peaked and it’s been more-or-less downhill every since.

At the start of September, John Authors, investment editor for the Financial Times, wrote, ‘Before Halloween closes the door on October, investors can be forgiven for thinking the horror show engulfing equities has yet to climax.’ (BlackCommentator.com/posted by (Bulatlat.com)

BlackCommentator.com Editorial Board member Carl Bloice is a writer in San Francisco, a member of the National Coordinating Committee of the Committees of Correspondence for Democracy and Socialism and formerly worked for a healthcare union. http://www.blackcommentator.com/295/295_lm_halloween_2008.html

Greenspan Concedes Error on Regulation

October 30, 2008

In his prepared remarks, Alan Greenspan, considered as the infallible maestro of the financial system, said he was in “a state of shocked disbelief” about the breakdown in the ability of banks to regulate themselves. He also warned about the economic consequences of the crisis, saying that he “cannot see how we will avoid a significant rise in layoffs and unemployment.” Consumer spending will decline, too, he said, adding that a stabilization of home prices would be necessary to bring the crisis to its end.

BY MICHAEL M. GRYNBAUM,
The New York Times/Truthout
INTERNATIONAL
Posted by Bulatlat

Facing a firing line of questions from Washington lawmakers, Alan Greenspan, the former Federal Reserve chairman once considered the infallible maestro of the financial system, admitted on Thursday that he “made a mistake” in trusting that free markets could regulate themselves without government oversight.

A fervent proponent of deregulation during his 18-year tenure at the Fed’s helm, Mr. Greenspan has faced mounting criticism this year for having refused to consider cracking down on credit derivatives, an unchecked market whose excesses partly led to the current financial crisis.

Although he defended the use of derivatives in general, Mr. Greenspan, who left office in 2006, told members of the House Committee of Government Oversight and Reform that he was “partially” wrong in not having tried to regulate the market for credit-default swaps.

But in a tense exchange with Rep. Henry A. Waxman, the California Democrat who is chairman of the committee, Mr. Greenspan conceded a more serious flaw in his own philosophy that unfettered free markets sit at the root of a superior economy.
“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”
Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
The oversight committee is holding hearings to determine what gaps in the regulatory structure abetted the crisis that has roiled the world’s financial markets.

Mr. Greenspan appeared alongside Christopher Cox, the chairman of the Securities and Exchange Commission, and John W. Snow, who served as secretary of the Treasury early in the Bush administration.

In his prepared remarks, Mr. Greenspan said he was in “a state of shocked disbelief” about the breakdown in the ability of banks to regulate themselves. He also warned about the economic consequences of the crisis, saying that he “cannot see how we will avoid a significant rise in layoffs and unemployment.” Consumer spending will decline, too, he said, adding that a stabilization of home prices would be necessary to bring the crisis to its end.

Saying that his thinking “has evolved” in the last year, Mr. Greenspan also defended his record. “In 2005, I raised concerns that the protracted period of underpricing of risk, if history was any guide, would have dire consequences,” he said. “This crisis, however, has turned out to be much broader than anything I could have imagined.” (Truthout/posted by (Bulatlat.com)

World Crisis to Adversely Affect China Too – Sison

October 30, 2008

The current GDP of China is reportedly already USD 3.251 trillion. But China is a huge country with a huge population of 1.33 billion. With a per capita income of only around US$ 2,700, China is still a very poor country, a far cry from the US per capita income of US$ 46,000 in 2007. China and the Philippines have per capita incomes of nearly $2,500 and $1,500, respectively in 2007. Both of them are still ranked below the more than 100 countries with higher per capita income and are among the poor countries of the world. But China has more capacity than the Philippines in coping with the crisis and will more than ever regard the Philippines as a profitable client in the vicinity.

BY NOEL SALES BARCELONA
Bulatlat

As the world’s stocks free fall and the world economy slides towards the brink of a recession comparable to the Great Depression of the 1930s, the Peoples’ Republic of China appears to be better prepared than others.

China’s economy grew by 9.9 percent during the first quarter of 2008. During the third quarter, growth only slipped to nine percent, with decreasing demand for Chinese exports being the main reason for the slide.

During the October 4 Kapihan sa Sulo on the melamine milk scandal involving China, Chito Sta. Romana, ABC television producer in Peking (Beijing), shared his insights not only about why the melamine milk scandal in China happened but also about China, its economy and politics.

Sta. Romana concluded that China is Leninist in politics but capitalist in its economy; US-Chinese relations are “tied on the hips”; the economy of China is now expanding and it’s tilting the balance in world economic affairs; and it wanted to bring more muscle to emerging economies in Asia like India and Indonesia so that the “monopoly” of power of America will be lessen or dispersed. Sta. Romana also said that China doesn’t want to become an imperialist, like the US.

Bulatlat interviewed Jose Maria Sison, founding chairman of the Communist Party of the Philippines, regarding his views on China and his comments on the insights shared by his former comrade Chito Sta. Romana.

Bulatlat: Is there such a thing as capitalist-Leninist China?

Sison: The expression “capitalist-Leninist” is an oxymoron. Indeed, China’s economy is capitalist. But it is not Leninist in politics because state power is not in the hands of the working class.

Bulatlat: How do you see the current relationship between China and the US, both in economy and polity? Sta. Romana said, they’re “tied on the hips.”

Sison: In a sense, the two countries are “tied on the hips”. They can gyrate together in the current global economic and financial crisis. China has become dependent on exports to the US, which are now hard hit by the contraction of US consumer demand. And the values of China’s US dollar holdings, US treasury bills and bonds, US corporate bonds and securities are seriously undercut and damaged by the current crisis.

Bulatlat: By 2010 or maybe later, China’s economy is projected to amount more than US$3 trillion. Considering this, what would be the effect of China on the global economy and the capitalist system?

Sison: The current GDP of China is reportedly already USD 3.251 trillion. But China is a huge country with a huge population of 1.33 billion. With a per capita income of only around US$ 2,700, China is still a very poor country, a far cry from the US per capita income of US$ 46,000 in 2007. China and the Philippines have per capita incomes of nearly $2,500 and $1,500, respectively in 2007. Both of them are still ranked below the more than 100 countries with higher per capita income and are among the poor countries of the world.

Bulatlat: Do you believe that China will become a superpower, economically and politically, while it is said to be “refusing to deploy its army the world over” unlike what the US has done? Or is China now a superpower?

Sison: China has a weak economic base for becoming a superpower. Its military strength is limited to a defensive position. In fact, it is the object of military containment as well as economic engagement by the US.

Bulatlat: What do you think would be the moves of the Chinese government with regards the conflicting claims on the Spratly islands? Sta. Romana was quoted as saying that the Chinese government is now willing to buy the islands for US$2 billion or more.

Sison: The Chinese government seems to prefer the diplomatic approach within the ASEAN-China framework of constructive dialogue and cooperative relations regarding the Spratlys. However, the high bureaucrats and big compradors of China and the Philippines are constantly cooking up deals. The rulers of the Philippines are unprincipled and corrupt enough to sell Philippine interest in the Spratly islands to foreign buyers.

Bulatlat: What do you think of the melamine-tainted milk scandal now hounding China, especially since two milk products, which were found to be toxic, Yili and Mengniu were produced by state corporations?

Sison: The most unscrupulous and worst kinds of capitalist criminals are bred in countries in which capitalism has emerged from the dismantling of socialism by corrupt bureaucrats and their partners in the so-called free market. The US food monopolies have seized the melamine incidents to discourage the purchase of Chinese products in the global market.

Bulatlat: Please give your forecast on the effects of the global economic turmoil and the fast-growing Chinese economy on the Philippines and the Philippine revolution.

Sison: The global economic and financial crisis will worsen at least in the next two years and may extend to as long as 10 years. The Chinese economy will be adversely affected. But China has more capacity than the Philippines in coping with the crisis and will more than ever regard the Philippines as a profitable client in the vicinity.

The worsening crisis generates conditions favorable for the advance of the Philippine revolution. (Bulatlat.com)

Financial meltdown and the madness of imperialism

October 23, 2008

Written by Raymond Lotta
Tuesday, 14 October 2008

“The past 10 days will be remembered as the time the US government discarded a half-century of rules to save American financial capitalism from collapse.”

David Wessel, economics editor, Wall Street Journal, March 27, 2008

“Be greedy when others are fearful.”

Warren Buffet, leading investment capitalist, quoted by The Economist, April 5, 2008

[To the possessor of money capital] “the process of production appears merely as an unavoidable intermediate link, as a necessary evil for the sake of money-making. All nations with a capitalist mode of production are therefore seized periodically by a feverish attempt to make money without the intervention of the process of production.”

Karl Marx, Capital, Volume II, “The Circuit of Money Capital”

The US economy is experiencing the most wrenching financial turmoil since the Great Depression of the 1930s. Global markets have been reeling — as massive loans have turned bad, speculative bubbles have popped, and giant financial institutions have tottered.

Financial turbulence originating in the US has slowly expanded and worsened. There is now a global credit crisis. Banks and financial institutions are weighed down by huge losses caused by “non-performing loans.” Lending channels are choked up, as lenders are being called to pay back their loans, to clean up their balance sheets, and fearful that they are “throwing good money after bad” and won’t be paid back. There is real danger of a breakdown of the financial system. The new president of the International Monetary Fund has stated that the current turmoil poses the greatest financial crisis since the 1930s.[1]

The US has been at the center of what is now a global financial storm. Bear Stearns, one of the largest and oldest investment banks in the US, collapsed in mid-March. The Federal Reserve Bank — which regulates and lubricates the US banking system, and which also plays a special role in the world capitalist economy — has stepped in on an unprecedented scale.

The Federal Reserve took responsibility for $30 billion of basically worthless assets held by Bear Stearns. This paved the way for another financial titan, JP Morgan Chase, to take over the firm. In addition, the Federal Reserve has injected huge amounts of funds into the financial system to ward off additional bank failures and to restore international confidence in the US economy and to prevent the financial crisis from becoming a total financial breakdown.

Fortune magazine in its April 14 issue analyzes the stakes this way:

“The fear — a justifiable one — is that if one big financial firm fails, it will lead to cascading failures throughout the world. Big firms are so interlinked with one another and with other market players that the failure of one large counterparty, as they’re called, can drag down counterparties all over the globe. And if the counterparties fail, it could down the counterparties’ counterparties, and so on.” [2]

PART I. A FIRST CUT: UNFOLDING OF THE CRISIS

The financial tornado gathered force in the spring of 2007, starting in the housing sector. The housing boom of the last few years was a boom in mortgage finance. Lenders, and these were not neighborhood finance companies or street-corner usurers but big corporate financial giants, were seeking to make big profits from their ability to tap into foreign capital flooding into the US over the last decade. The Federal Reserve accommodated and encouraged this by keeping interest rates low.

A. Subprime Lending

Enter the world of subprime lending. Subprime loans are loans made to borrowers who would not qualify for a prime mortgage — because they might have “bad credit histories,” etc. And these loans were aggressively marketed, pushed on people through all kinds of deceitful means, with Black and Latino households disproportionately targeted and victimized (see Revolution, “Subprime Mortgage Crisis,” April 13, 2008).

The originators of these subprime loans, along with various financial middle-men, then “securitized” these loans. This means they combined these loans into larger groups of loans, turned them into complex financial products, and then sold them on financial markets. They sought to maximize fees and to “transfer risk” by quickly selling off these loans to other banks and institutional investors (like mutual and pension funds, university endowments, etc.).

But as housing prices turned down and as interest rates went up, homeowners (or those who thought they were homeowners) found themselves strapped with adjustable mortgages requiring larger payments. And many could not afford payments. This triggered a wave of defaults. Investors and institutions that had purchased these mortgage securities (loans that had been grouped into bonds returning interest) found themselves with billions of dollars of near worthless assets. The financial insurers of these loans, yet another layer of “financial middle-men,” could not cover the risks and damage.

B. Global Financial Shocks

In the summer of 2007, fears of big financial losses caused stock market indexes around the world to plummet, including those in the rapidly growing regions of the Third World.

A financial contagion was taking hold.

Over a trillion dollars of funds from around the globe — with much of this from Asia and oil-exporting countries — were invested in the US subprime market. The collapse in the value of mortgage and credit instruments originating in the US weakened the financial balance sheets of banks and other overseas holders of these investments and set off tremors. For instance, in Great Britain, there was a run on the Northern Rock bank; a German bank required a bailout; and a leading French bank was hit hard.

At the same time, financial institutions in the US and elsewhere holding securities of crumbling or dubious value sought to strengthen their overall financial positions. They not only had to “write down,” that is, greatly reduce the value of the bad (“nonperforming”) loans they held. They also had to sell off “healthier” holdings in other parts of the world (investments unrelated to the subprime activities) in order to meet immediate financial commitments. And these sell-offs have had their own destabilizing global repercussions. This was especially the case last year in the stock markets of the Third World.

C. New Dangers and New Risks

By March 2008, the prices of stock of the big Wall Street players involved in this investment activity, firms like Goldman Sachs and Merrill Lynch, had fallen by some 40 percent. And since the onset of the credit crisis, financial institutions in the US have “written down” more than $230 billion in mortgage loans and other assets.[3]

The Federal Reserve has moved to head off financial panic and to stimulate growth. But these moves have aroused new fears in the still unsettled world financial markets. Why?

There are concerns about the Federal Reserve’s and US Treasury’s ability to absorb what might amount to be hundreds of billions of dollars in bad investments. There are concerns about the ability of the Federal Reserve to pump huge amounts of funds into the US financial system to keep it afloat. There are concerns that short-term and ad hoc efforts to slash interest rates and bail out financial firms may stoke inflation and further weaken the dollar.

This dimension of the crisis, the fragility of the dollar, looms large. It has everything to do with empire. The international role of the dollar — as the world’s leading currency for settling transactions, clearing debts, and holding foreign exchange reserves — is a linchpin of US global supremacy. It is also a linchpin of the whole current global economic order.

But the dollar has been battered in international currency markets. In the last few months, it has sunk to new lows against the euro (the currency used in most of Western Europe), against the Japanese yen, and against the Swiss franc.

Now the dollar has declined considerably in value relative to other major currencies since 2000. But this has been cushioned, managed, and kept functional by the ability of the US economy to attract huge amounts of foreign exchange and foreign capital into financial markets, especially to finance US Treasury debt.

And one of the “disaster scenarios” most worrisome to US imperialist policy makers is the danger of a global run on the dollar: private investors and central banks of other countries unloading their dollar holdings for stronger currencies.

D. A Reflection: Transparency and Anarchy

In early April, on the eve of a gathering of the world’s finance ministers and treasury officials, the International Monetary Fund issued a report on the financial damage caused by the collapse of the housing and credit markets. It warned that financial institutions worldwide might face losses approaching $1 trillion over the next two years. [4] This calculation is far above what had been previously estimated. And according to some financial analysts, even this is a gross understatement.

The free market is extolled by bourgeois ideologues for its “transparency.” This is the idea that markets, prices, and interest rates convey all necessary information: about supply, efficiency, choice, and reward.

But one of the distinguishing features of this crisis is the incredible and pervasive lack of knowledge among lenders, borrowers, traders, and insurers about the quality and backing of what they borrow from others… and even of what they lend to others! Things are obscured, covered up, and very opaque.

  • There is the anarchy of capitalism, as giant agglomerations of capital battle others for market share and profits, and pursue competitive strategies that have unforeseen effects on the larger system.
  • There is the emergence of a newer banking system operating parallel to the older commercial banks. These are the so-called hedge funds, private equity firms, and investment banks. They move huge amounts of capital in and out of financial markets to take advantage of momentary and slight changes in bond prices, interest rates, and currency exchange rates. They borrow against assets that have a shadow existence, far removed from the actual production of value. They have led in creating new financial instruments, in which all kinds of loans of varying risk are bundled together into interest-yielding bonds and the like. And this newer banking system operates in a more unregulated environment than do the commercial banks.
  • This is a highly competitive, turbo-charged financial world, where huge blocks of capital seek quick gains at the expense of others. In this setting, speculation, fraud, and deception become part of survival strategies. One example of this in the unfolding of the financial crisis: financial agencies that rate the risk of things like mortgage-backed securities earn higher fees for providing favorable ratings on these new “financial products.” So they lied and deceived investors about real risk. This led to mis-pricing and to baseless expectations of return on investments.

E. A Reflection: A House … Is Not Always a House

As we descend from the skyscrapers of finance to ground level, the human toll comes into clearer view. At the start of 2008, nearly 1.3 million homes in the US were in some phase of foreclosure. That works out to more than one in every 100 US households. According to Moody’s Economy.com: “not since the Depression has a larger share of Americans owed more on their homes than they are worth.” [5]

Think about it. Something as basic and essential as shelter is commodified. A house becomes an investment; its purchase underwritten by tradable financial instruments; and the lure of homeownership then engulfed by the devastating trade winds of the market. And what happens? People’s savings are wiped out. Their creditworthiness is damaged if not destroyed. And many face the prospect of homelessness.

The problem is not that people don’t need houses. Nor is it that society doesn’t have the resources or knowledge to build houses. The problem is that capital stands as a barrier to meeting human need.

PART II: A SECOND CUT: DEEPER CAUSES AND IMPLICATIONS

Where all this financial turmoil might lead cannot be predicted. A gigantic, speculative credit bubble has burst. Problems in US lending markets and the US banking system have brought on an economic slowdown in the US This in turn is triggering a global slowdown. Consumer goods exporters of Asia that have relied heavily on trade with the US are especially vulnerable. And so too are countries in Eastern Europe that have borrowed heavily to finance growth.

Here is one tiny snapshot of the fallout and pain from the financial crisis. The US housing slump has led to the loss of some 100,000 construction jobs, many that had been filled by undocumented immigrants. That has dramatically slowed the growth of money sent back home by these workers. After nearly quadrupling to $24 billion in 2006 from $6.6 billion in 2000, these earnings sent home grew only 3 percent in 2007, the slowest rate of growth in 20 years. [6] Families in Mexico have come to depend on these remittances for food and clothing and other basic essentials.

The buildup and collapse of this latest speculative bubble, and intensifying financial fragility that could lead to massive breakdown, are in fact outward expressions of deeper processes and transformations at work in the world capitalist economy.

We need to take a step back.

A. Globalization and Financialization

For the last 15 years, world capitalist expansion has pivoted on a particular international dynamic and structure. This has involved heightened financialization and parasitism in the advanced capitalist countries — with the United States at the epicenter of this process; and the fuller integration of low-cost, export-producing countries of the Third World into the world capitalist market — with China at the epicenter of this process.

The turning point in this process was the collapse of the social-imperialist Soviet Union in 1990-91. With the implosion of the Soviet bloc, the main geopolitical obstacle to US imperialist freedom of action was removed. At the same time, and very much in connection with this, imperialist globalization accelerated. (This is analyzed in considerable depth in Notes on Political Economy: Our Analysis of the 1980s, Issues of Methodology, and the Current World Situation, 2000, RCP Publications.)

Over the last 15 years, a globally integrated cheap-labor manufacturing economy, with huge labor reserves from China, India, and other parts of the Third World, along with labor from the former Soviet bloc, has been forged. The globalization of production has had enormous effects on world accumulation: raising profitability for imperialist capital, acting to compress wages, and lowering inflationary pressures. The integration of cheap-labor manufacturing into world production is now so deep that in the US, fully half of imports (mostly consumer goods) come from the Third World.

A revealing statistic: a University of California study looked into who gains when an iPod manufactured by national firms in China is sold in America for $299. Only $4 stays in China with the firms that assemble the devices, while $160 goes to American companies that design, transport, and retail iPods. [7]

When we speak of capitalist accumulation, we are referring to the competitive production of surplus value (the source of profit) based on the exploitation of wage labor; and the investment and reinvestment of profit on an expanding, cost-cheapening, and technologically more productive basis.

When we speak of “financialization,” we are referring to three particular features of the larger structure of capitalist accumulation in this period of imperialist globalization: a) the growing political and economic power of the financial layers of the capitalist class; b) the vast expansion of financial activities and of financial services, like organizing and financing corporate takeovers, insuring investments against risk, creating new financial instruments, etc.—activities in which profit-making involves the siphoning, centralization, and reinvestment of surplus value through financial channels; and c) the increasing separation of finance from production.

This process of financialization has gone the furthest in the United States, and it is a major factor in US imperialism’s ability to preserve and extend its dominance in international financial markets. [8]

Financialization is also a means through which wealth, and effective control over productive forces, is centralized by the imperialist countries — even as production has grown more geographically dispersed and increasingly carried out within subcontractural networks in the Third World.

Financialization involves efforts to squeeze out more “value” from already created value. One measure of this is that in 2006, the daily volume of trading in foreign exchange markets and in derivatives (financial instruments) added up to $11.4 trillion — which almost equals the annual value of global merchandise exports that year. In terms of the shifts in the structure of the US economy, the financial sector’s share of total corporate profits has risen from 8 percent in 1950 to 31 percent last year. [9]

B. Financialization and Production

As far removed as finance may be from processes of production, and as elaborate and multi-layered as its operations have become, finance cannot break free of the sphere of production. Even as it objectively seeks to do so — and even as the disjuncture between the two spheres (production and finance) grows — it is the underlying conditions and profitability of production that set the overall conditions for the accumulation of capital.

Imperialism is a worldwide system of production and exchange. It is the structure of social production —it is the global production of surplus value based on exploitation of people — that is at the foundation of this whole system. And in relation to the production of surplus value, “financialization” is both parasitic and functional. It is parasitic in the sense that financialization drains value from production.

But financialization is functional to the workings of global capitalism in the sense that it facilitates the gathering of money capital into ever-larger agglomerations of capital and finds new profit-yielding channels in which to rapidly invest it … and just as quickly to withdraw it! Global capital faces all kinds of financial uncertainties and risks on its competitive global playing field as it moves through different channels, or circuits, of production. And the “risk-management” techniques provided by the global financial system are actually vital to the accumulation of capital, to the success of “risk-taking,” in the turbo-charged globalized economy. [10] That’s why, for example, money jumps into Thai real estate markets one day, and pulls out and goes into ethanol production in Brazil the nex t…  and then back to mortgage securities.

And there is something else: the inflows and outflows of short-term and speculative capital also act as a perverse means of imposing discipline on and restructuring capitals — a major manufacturing firm can be starved of credit or threatened with a leveraged buyout. And this kind of “financial discipline” has been imposed on whole countries in the Third World—aided, abetted, and orchestrated by the US-dominated International Monetary Fund.

All this is part of the reason that financial instability is a constant feature of capitalism in its more globalized and financialized forms of existence.

Financialization and the globalization of production have been tightly bound up with each other. It can be put this way: there is a relationship between sweatshop labor in Guangdong province in China, the recycling of China’s export earnings into the US Treasury and US financial markets, and the credit-financed expansion in the US of the last decade. Or, to put it more graphically, there is a link between the agony of superexploited labor in the bowels of the new industrial zones of the Third World, the feverish search for high and quick returns at the top of the financial pyramids, and the chaos of the housing markets with people losing their homes in the US.

This is an extreme concentration of the nature of world capitalism. This world is highly bound together by production, trade, and finance. The requirements of life (consumer goods) and the requirements of production (machines and raw materials, etc.) are socially produced, that is, they involve the collective and interconnected efforts of wage-laborers in factories, warehouses, and so forth. But this wealth, the technology and means of producing it, and knowledge itself—all this is privately controlled and deployed by a small capitalist class.

C. Barriers, Contradictions, and Shifting Tectonic Plates

What we are witnessing now is that a particular dynamic of growth, marked by intensified financialization, is generating new contradictions and new barriers to sustained accumulation.

The level of debt to economic output in the US is at an all-time high. The financing of the trade and government deficits of US imperialism (that is, providing credit for purchases of imports and having investors buy Treasury debt) depends on a steady and growing inflow of capital from abroad. But the weakening of the dollar and the emergence of competitor currencies, like the euro, increasingly threatens these mechanisms. And very crucial to this has been the process where dollars earned by countries like China through trade with the US, are then recycled back into the US economy through purchase of Treasury bonds and other investments.

In the US, the financial sector is seriously strained and is a flashpoint of heightened global financial instability, if not breakdown, leading to a major economic slump.

Here we come to a basic point of this analysis: A financial crisis has broken out because of the severe imbalances built up between the financial system — and its expectations of future profits — and the accumulation of capital, that is, the structures and actual production of profit based on exploitation of wage-labor.

The imperialist state is intervening to head off further damage and to discipline and restructure the financial system. But the very complexity of the “financial packages” created during the speculative boom — with their bundled-up loans and long strings of finance — are producing new challenges for policy-makers. As one Yale economist put it, perhaps unintentionally echoing a phrase from Marx: “like the sorcerer’s apprentice, we have created things we do not understand and cannot easily control.”11

This explosive uncertainty is developing against a larger international canvas. Major shifts are taking place in the world capitalist economy. The European market recently eclipsed the US market in size. China’s growing demand for raw materials to fuel its export economy is making it a new player in the scramble for resources and control over them. And China’s increasing importance as a supplier of capital to the US is giving it new leverage. Russia is reemerging as a world imperialist player, owing in part to its vast energy reserves and rising oil and gas prices.

At the same time, and at this very moment of financial crisis, US imperialism’s freedom of maneuver is severely hobbled — and this includes its ability to stimulate the economy through fiscal and monetary policy. The United States has never run such large current account deficits and no single country’s deficit has ever bulked as large relative to the global economy.

D. The Military Fix

Which brings us to one of the “dirty little secrets” of the financial crisis: the military needs and the military costs of empire…and “greater empire.”

There is a brute fact of imperialist accumulation. The whole imperialist system rests on the domination of vast swaths of the globe through savage force, with the US military colossus playing a special role. The US military helps “create the conditions” for US domination, pro-US client regimes in the Third World, and conditions for investment by US corporations.

In the Bush era, US imperialism has been attempting to parlay its military might into a new world order. This involves a restructuring of global political and production relations that will enable it to resolve or mitigate some of the problems and tensions it faces — and to lock in its global supremacy over rivals and potential rivals for decades to come.

The US share of world production has declined to about 20 percent, down from 30 percent forty years ago. But US imperialism is compensating for this by pressing its military advantage as sole imperialist “superpower” (since the collapse of the Soviet Union).

In a recent study, Chalmers Johnson has calculated that defense-related spending for fiscal 2008 will exceed $1 trillion for the first time in history. Leaving out the wars in Iraq and Afghanistan, defense spending has doubled since the mid-1990s. [12]

Militarization is also embedded in the US economy. It is a key structural component of growth, scientific research, and technological prowess of US imperialism. And because of its sheer size, it also plays a role in the attempts of the US imperialist state to “manage” and stimulate the economy.

But the recent wave of militarization has put enormous financial strains on US imperialism. It has produced huge deficits that cannot be sustained without the inflow of capital into the US And the wars for “greater empire” are incurring astronomically greater costs than military and government planners had anticipated. Not least because of the setbacks and difficulties US imperialism has encountered in Iraq and Afghanistan.

This is a sharp contradiction for US imperialism — because in many ways it is staking the future of empire on these wars; but these wars have become more costly to wage. And it is the height of hypocrisy for Democrats to now blame the Iraq war for financial crisis — as they consistently voted for war-spending authorizations, to the tune of $500 billion.

PART III: CONCLUSION

This is a financial crisis of historic proportions. And like many other events in the world, this crisis points to the fundamental irrationality and cruelty of the system. It also shows the vulnerability of imperialism to sharp turns that could open up new possibilities for revolutionary advance.

But things unfold in complex, unpredictable, and historically conditioned ways. And as serious and potentially destabilizing as this crisis may become, it is also possible that US imperialism could turn this crisis to its advantage.

We live in an age of “endless war” and environmental devastation. We live in an ever-more globalized capitalist system that thrives on the toil and agony of the great bulk of humanity but that cannot escape the anarchy that lies at its very foundations.

There is necessity and freedom for the imperialists. And so too for the people.


Footnotes

[1] Quoted in Steven R. Weisman, “Financial Regulators Suggest Tighter Controls,” The New York Times, April 12, 2008.

[2] Allan Sloan, “On the Brink of Disaster,” Fortune, April 14, 2008, p. 82. A useful discussion of derivatives, hedge funds, and the like is found in “The Predators’ Ball Resumes: Financial Mania and Systemic Risk,” Interview with Damon Silvers, Multinational Monitor, May-June 2007.

[3] S. Tully, “What’s Wrong With Wall St. and How to Fix It,” Fortune, April 14, 2008, p. 72; Reed Abelson and Louise Story, “G.E. Earnings Drop, Raising Broader Fears,” The New York Times, April 12, 2008.

[4] Sean Farrell, “Financial turmoil could cost $1trn, warns IMF as global growth comes under threat,” Independent.co.uk, April 9, 2008.

[5] Data from RealityTrac.com, January 29, 2008; Moody’s Economy.com, Feb. 21, 2008.

[6] The New York Times, Jan. 24, 2008.

[7] Cited in Charlemagne, “Winners and losers,” The Economist, March 1, 2008, p. 56.

[8] Among informative studies of financialization, neoliberalism, and dollar hegemony are David Harvey, A Brief History of Neoliberalism (London: Oxford, 2005); Andrew Glyn, Capitalism Unleashed (London: Oxford, 2006); Kevin Phillips, American Theocracy (New York: Viking, 2006); Ramaa Vasudevan, “Finance, Imperialism, and the Hegemony of the Dollar,” Monthly Review, April 2008; and C.P. Chandrasekhar, “Continuity or Change? Finance Capital in Developing Countries a Decade after the Asian Crisis,” Economic and Political Weekly, Dec. 15, 2007.

[9] See Chandrasekhar, “Continuity or Change,” pp. 37-38; The New York Times, Dec. 11, 2007.

[10] On financialization as a means to contain financial disorder and to impose neoliberal discipline, see Christopher Rude, “The Role of Financial Discipline in Imperial Strategy,” in Leo Panitch and Colin Leys, eds., Socialist Register 2005: The Empire Reloaded (London: Merlin Press, 2004). [back]

[11] David Dapice, “Bad Spell on Wall Street,” Policyinnovations.org, January 24, 2008. [back]

12. Chalmers Johnson, “Why the US has really gone broke,” mondediplo.com (English edition), February 5, 2008.

[This articles was also published (on April 18, 2008) on countercurrents.org. Raymond Lotta is author of the books, America in Decline and Maoist Economics and the Road to Revolutionary Communism.]

Economics and Society 101: Keynesian and Marxist perspectives on the US crisis

October 22, 2008

By ARTHUR BOQUIREN

The United States economic crisis of 2008 illustrates that while the US prescribes laissez faire or free trade, the US actually implement a corrupted or bastardized version of Keynesian economics in its homeland. Adam Smith originally formally prescribed laissez faire or free market economics in his book, The Wealth of Nations.

However, throwing aside the flowery words or capitalist niceties, it is not through laissez faire but through arms that the US and many capitalist countries accumulated the wealth that they enjoy today. Colonialism and neo-colonialism are actually monopolies or oligopolies on trade and economies of colonies and semi-colonies. In the colonies and semi-colonies, the economies dominated by monopolies and oligopolies are misrepresented by capitalism as free markets.

Monopolies refer to markets dominated by a single firm or entity while oligopolies refer to markets dominated by a few. The single firm or the few firms are actually a firm or firms of the colonizers enjoying privileges from the elite of developed countries. On the other hand, free markets are supposedly economies in which no firm exercise effective monopoly or influence on prices. In economic parlance, all economic agents in a free market are supposedly “price-takers.”

Leading analysts believe that today’s US economic crisis will become a difficulty, worse than the US great depression of the 1930s. In the 1930s, real US gross national product (GDP) at their 2000 values went from $865.2 billion in 1929 to $790.7 billion in 1930, to US$739.9 billion in 1931, to US$643.7 billion in 1932, and to US$635.5 billion in 1933.

As a US government response, US President Hoover created the Reconstruction Finance Corporation to boost economic activity by lending money in 1932. In 1935, US President Roosevelt created the Home Owners’ Loan Corporation to buy $3 billion in bad mortgages from the banks. Many believe the actions were instrumental in arresting the downward slide of the US GDP such that GDP in 2000 value increased to US$704.2 billion in 1934, and US$766.9 billion in 1935.

GDP increased to their 1929 value only in 1936. Thus, it can be said that in spite of the US government bailouts in 1932 and 1933, the crisis took at least seven years to be arrested (here we are not even talking of GDP per capita). We can infer therefore that even if the US$700 bailout really materialize, US recovery from today’s crisis may take seven years because the current US crisis is described as a crisis worse than the Great Depression.

The dominant paradigm in today’s theoretical economics has been the New Classical perspective also known as the “rational expectations” economics. However, what is implemented during times of crises is a corrupted version of Keynesian economics. John Maynard Keynes, in his 1930 book, prescribed that state action to promote economic growth can range from the use of fiscal policy, organization of investment, and policies that alter the distribution of income.

The original Keynesian prescriptions has been bastardized or corrupted: modern economists twisted the teachings of Keynes on state action into something limited only to the use of fiscal and monetary policies. In short, government actions are only limited to policies involving government spending and interest rates and do not cover the organization of investments or improving the distribution of incomes which are also Keynesian prescriptions.

Many of the early Keynesians were even mistaken as communists. T he early Keynesians were not communists, of course, as they were staunch defenders of private property. Keynesians believe that private business is inherently not stable because business outlook can be affected by self-fulfilling prophecies. For example, if private businesses have a bleak outlook on the future, the future can actually be bleak as businessmen become afraid to invest. For Keynesians, governments must lead and wake up the “animal spirit” among investors so economic activity can be propped up. For the early Keynesians, the government can organize and lead private business but business must remain private.

On the other hand, a Marxist perspective to the crisis holds that the US crisis emerged because of the inherent nature of capitalism to overproduce or oversupply. Competition leads capitalism to a situation where goods and services are way beyond that can be absorbed by the market. Marxists hold that crises in capitalism are systemic and recurring because of the concentration of wealth and production in the hands of a few. For Marxists, crises of capitalism are actually crises of overproduction even if the immediate origin can be self-fulfilling prophecies. Further, the root of crises is politico-economic rather than purely economic.

Meanwhile, although the country’s financial system may be insulated from the crisis because only less than 1% of the banking system has been exposed to the crisis (but the US crisis can also escalate and its effect on the Philippines can likewise escalate), the country will be significantly by the crisis as more than 23% of Philippine exports are marketed to the US and a significant client of call centers are US firms. Further, a large part of overseas contract workers are employed in the US. This being the case, the expectation is that the Philippines will be hardly hit by the crisis even if Philippine economic growth will be at 3.9% for 2008 (expected earlier at 6%) and 3.4% for 2009 (expected earlier at 6.2%). The economic growth rates, however, will not mean that millions of people will not be hard up. Millions of people in the country will continue to suffer from extreme poverty.

The author maintains a blog at http://www.geocities.com/arturoboquiren and can be contacted through artboquiren2040@yahoo.com and +63927-536-8431. #

Mula US hanggang RP: Krisis sa balikat ng bayan

October 21, 2008

Ilang-Ilang D. Quijano

KAHIT ipinasa ng Kongreso ng US ang $700 Bilyong piyansa para sa nagbagsakang higanteng mga bangko at institusyong pampinansiya sa US, naniniwala ang mga eksperto sa ekonomiya na magtatagal ang pandaigdigang krisis pang-ekonomiya. Isinalba, pansamantala, ang mga “haligi ng kapitalismo.” Pero pinangangambahang magdurusa – sa kagyat at pangmatagalan – ang mga mamamayan hindi lamang ng US kundi ng mundo, kabilang ng Pilipinas.

Pinuri ni Pang. Arroyo ang bailout o Emergency Economic Stabilization Act of 2008 na pinirmahan ni US Pres. George W. Bush noong Oktubre 3. Aniya’y unang hakbang ito sa “mahabang daan” patungo sa pagnormalisa ng mga merkadong pinansiyal. Inudyok niya ang mga mamamayan na “manatili sa landas” habang inaasikaso ng kanyang administrasyon ang mga hakbang para mapangalagaan ang ekonomiya ng bansa.

Pero hindi nagiging matapat ang administrasyong Arroyo sa mga epekto sa mga mamamayan ng tinataguriang “pinakamatinding krisis ng sistemang kapitalismo” sa loob ng 80 taon. Ang inilatag ding mga plano ng kanyang pangkat pang-ekonomiya ay hindi batayang mga repormang pang-ekonomiya, kundi “mala-Bush” na mga solusyong ikalulugi ng mga mamamayan para sa ganansiya ng mga dati nang nakikinabang sa sistema.

Nawala ‘na parang bula’

Positibo si Sek. Margarito Teves ng DoF (Department of Finance) na makatutulong ang bailout para maiwasan ang pandaigdigang resesyon na pinangangambahan maging ng IMF (International Monetary Fund). Ayon sa IMF, may 25 porsiyentong tsansa na bumaba sa tatlong porsiyento ang tantos ng paglago (growth rate) ng pandaigdigang ekonomiya sa 2008 at 2009 o katumbas ng resesyon.

Gayunpaman, ayon kay Paul Quintos, ekonomista at executive director ng Eiler (Ecumenical Institute for Labor Education and Research), pumasok man sa pandaigdigang resesyon o hindi, tiyak ang “pagbagal ng produksiyon, paglaki ng disempleyo, pagtumal ng pamilihan, at pagtindi ng kahirapan ng mga mamamayan.”

Dulot ang pagkabangkarote ng tatlo sa limang pinakamalaking bangko sa pamumuhunan – Bear Stearns, Lehman Brothers, at Merrill Lynch – ng pagputok ng artipisyal na bula sa real estate. Para lumobo ang halaga ng pag-aaring pampinansiya ng US at makapag-engganyo ng pagkonsumo, nag-alok ang malalaking bangko ng US ng mababang interes sa mga pautang sa pabahay. Inengganyong mangutang maging ang maliliit lamang ang kita batay sa pinalobong halaga ng isinanglang mga bahay nila (tinatawag na subprime mortgages). Pero nakapako naman ang sahod kaya’t nabigong makapagbayad ang karamihan simula noong 2006.

Unti-unting nalugi ang mga bangko at institusyong pampinansiya di lamang sa US kundi sa buong daigdig na sumugal sa di-kontroladong ispekulasyon. Noong Setyembre 30, naganap sa 30 bansa ang pinakamatarik na pagbagsak ng stock market sa kasaysayan. Sa tantiya ng IMF, aabot sa US$ 945-B ang halaga ng pagkalugi at pagbagsak ng halaga ng mga pag-aari sa US (asset write-downs). Sa iba pang pagtantiya, ayon kay Quintos, maaaring umabot sa $30 Trilyon ang kabuuang halagang “mawawala nang parang bula” sa buong daigdig dahil sa yumanig na krisis.

Malawakang tanggalan

Pagyayabang noong una ni Nestor Espenilla, deputy governor ng Bangko Sentral ng Pilipinas, di-gaanong apektado sa krisis ang lokal na merkadong pinansiyal. Umano’y isang porsiyento lamang ng buong sistema ng pagbabangko sa Pilipinas ang US$ 386 Milyon na exposure sa Lehman Brothers ng pitong bangko at kaya ng mga itong tumindig sa sariling mga paa.

Pero sa press briefing sa Malakanyang kamakailan, sinabi ni Sek. Ralph Recto ng National Economic Development Authority na magiging mas matumal kaysa inaasahan ang buong takbo ng ekonomiya. Mula sa growth target sa GDP na 5.5 hanggang 6.4 porsiyento ngayong taon, naging 4.4 hanggang 4.9 porsiyento na lamang. Ibig sabihin, mas malalim at malawak ang mga epekto sa lokal na ekonomiya ng pandaigdigang krisis pampinansiya kaysa nais aminin ng administrasyong Arroyo.

Noong Agosto 2007 nang unang pumutok ang krisis sa subprime ng US, nawala ang P2-T na halaga-sa-papel ng sapi sa Philippine Stock Exchange, ayon kay Quintos. Sinabi rin niyang bumaba nang 12.3 porsiyento ang lakas ng piso laban sa dolyar ngayong taon at posibleng sumadsad muli sa P50 kada dolyar.

Higit pa sa negatibong epekto sa stock exchange at exchange rate ang inaasahang pagtumal sa pagpasok sa bansa ng dayuhang kapital at pagliit ng merkado para sa iniluluwas na mga produkto at serbisyo sa US. Paliwanag ni Quintos, “pinakamalalang maaapektuhan ng krisis ang mga bansang atrasado [gaya ng Pilipinas] na mahigpit na nakatali sa neokolonyal na relasyong pangkalakalan sa US.”

May 16 porsiyento ng kabuuang eksport ng Pilipinas ang napupunta sa US habang 70 porsiyento ang di-direktang napupunta dito sa pamamagitan ng ibang mga bansang Asya kung saan binubuo (ina-assemble) ang mga kasangkapan bago i-eksport din sa US, ayon sa datos ng Ibon Foundation. Dahil sa mas mahigpit na pagkokonsumo doon, inaasahang liliit ang US$ 9.4-B na direktang kinita mula sa mga eksport sa US noong 2007.

Inaasahan ding tutumal ang mga dayuhang pamumuhunan mula sa US sa pagmamanupaktura, BPO (Business Process Outsourcing), at serbisyong pampinansiya. May 20 porsiyento ito ng kabuuang FDI (foreign direct investment). Mula sa mga merkado sa US ang halos 90 porsiyento ng kita ng BPO na nakasentro sa mga call center.

Ipinagmamalaki pa naman ng administrasyong Arroyo na numero unong tagalikha ng trabaho ang mga Export Processing Zones at BPO. Pero pagsasara ng maliliit na negosyo at malawakang tanggalan ang nakaamba sa mga ito at iba pang apektadong industriya. Mula Hulyo 2007 (hudyat ng krisis sa subprime sa US) hanggang Hulyo 2008 na lamang, 125,000 manggagawa sa pagmamanupaktura ang tinanggal sa trabaho—inaasahang tataas ang bilang nila. Inaasahang apektado rin ang mga ahente ng call center na karamiha’y nasa National Capital Region.

Maging ang pagluwas ng mga OFW (Overseas Filipino Worker), inaasahang babagal. Sa buong mundo, ayon sa International Labor Organization, tinatayang limang milyong manggagawa ang mawawalan ng trabaho dahil sa pagtumal ng pandaigdigang ekonomiya. Noong nakaraang buwan, 159,000 manggagawa ang natanggal sa trabaho sa US—na ngayo’y makikipag-agawan pa ng oportunidad sa mga OFW at iba pang migrante doon.

“Malilimitahan ang bilang ng mga Pilipinong makakahanap ng trabaho sa ibang bansa, ” ani Quintos. Mangangahulugan umano ito ng mas kaunting remitans at mas matamlay ding konsumo sa Pilipinas dahil sa laki ng papel ng remitans sa lokal na ekonomiya.

Solusyon nga ba?

Umaasa ang administrasyong Bush na sasapat ang mahigit US$ 1.3-T inilaan nito para maisalba ang ekonomiya ng US mula sa pagkabangkarote ng malalaking institusyong pampinansiya. Bukod sa US$700-B bailout, naglagak ito ng US$ 29-B para bilhin ang Bear Stearns, US$ 200-B para isalba ang dalawang pinakamalaking nagpapautang sa pabahay na Freddie Mac at Fannie Mae, US$ 85-B para bilhin ang mayoryang kontrol ng papalubog na American Investment Group, at US$ 180-B para pasiglahin ang merkadong pinansiyal.

Umaani ng batikos ang administrasyong Bush dahil sa halip na parusahan ang “kasakiman” (greed) ng mga ispekulador, ginamit pa ang buwis ng mga mamamamayan para sagipin ang mga ito. Gaya ng kung paano, ayon sa Bayan (Bagong Alyansang Makabayan), ginamit ni Pangulong Arroyo ang VAT (Value-Added Tax) para pagtakpan ang palpak na mga polisyang pang-ekonomiya na nagdulot ng piskal na krisis noon. Ngayon, dagdag-buwis at iba pang pampasigla sa ekonomiya (fiscal stimulus) pa rin ang panukala ng administrasyong Arroyo para manatiling nakalutang ang ekonomiya ng bansa sa gitna ng pandaigdigang krisis pampinansiya.

Nanawagan si Teves sa Kongreso na ipasa ng Kongreso ang P1.4-T pambansang badyet na may nakalaang P147.5-B para sa imprastruktura. Ayon kay Recto, “Ang mantra ng Neda ay infra, infra, infra para mapaunlad ang growth rate ng ekonomiya.”

Gayunpaman, nasa depensiba ang gobyernong Arroyo sa paggastos ng pondo para sa imprastruktura na kilalang napupunta lamang sa korupsiyon. Kaya napilitan si House Espiker Prospero Nograles kamakailan na ihayag na hindi gagamitin ang pondo ng mga pulitiko para sa 2010 halalan, kasabay ng pagtatayo ng komite na magmomonitor nito. Tinitingnan naman ni Quintos na “pansamantala” ang epekto ng ganitong pampasigla sa ekonomiya.

Tinutulak din ng DoF ang mga panukalang batas para sa rasyunalisasyon ng insentibo sa buwis ng mga kompanya (fiscal incentives) at buwis sa sigarilyo at alkohol (sin taxes). Inaasahang kikita ng P10-B ang gobyerno sa una, at P12-B hanggang P25-B sa huli. Para pa rin sa dagdag-kita, agresibo nang ibinebenta ng gobyerno ang Petron Corp. at Philippine National Oil Corp. sa minimithing halagang P41-B.

Pero ayon kay Quintos, pabibilisin lamang nito ang pribatisasyon ng pinakamahahalagang asset ng gobyerno na ikadurusa rin ng mga mamamayan sa anyo ng mas mataas na presyo ng langis. Ibig sabihin din ng desididong tutok ng administrasyong Arroyo na pataasin ang kita ng gobyerno, malayong alisin nito ang VAT.

Repormang kailangan

Ngunit ayon sa Ibon Foundation, mas lalong nagiging makabuluhan ang panawagan at paglaban ng mga mamamayan para sa kagyat na lunas mula sa hagupit ng pandaigdigang krisis pampinansiya. Kabilang dito ang pag-alis sa VAT at P125 dagdag-na-sahod ng mga manggagawa.

Lalo pa at inaasahan umanong lumipat ang ispekulatibong kapital sa pangangalakal ng mga komoditi (commodities futures trading) gaya ng langis, mineral, at produktong pang-agrikultura na magtutulak pataas ng presyo ng pagkain at enerhiya. Ngayon pa lamang, dalawang-katlo (2/3) ng populasyon ng mundo ang dumaranas ng double-digit inflation at nasasadlak lalo sa kahirapan. Sa Pilipinas, 2.3 milyon ang nadaragdag sa mahihirap tuwing tataas nang 10 porsiyento ang presyo ng pagkain, ayon sa Asian Development Bank.

Sa halip na sa imprastruktura, bayad-utang, at sa militar mapunta ang kalakhan ng pambansang badyet sa susunod na taon, inirekomenda rin ng Ibon Foundation na ilagak ito sa kritikal na mga serbisyong sosyal na nakakatanggap lamang ng maliit na porsiyento gaya ng kalusugan (2.5 porsiyento), edukasyon (14.5 porsiyento), at pabahay (0.4 porsiyento).

Sinabi naman ni Quintos na ang pangmatagalang mga solusyon sa krisis ay ang “pagbasura sa mga patakarang neo-liberal,” “pagpapatupad ng tunay na repormang agraryo,” at “komprehensibong pambansang industriyalisasyon” na magpoprotekta sa Pilipinas mula sa mga kombulsyon sa sistemang kapitalista na pinaghaharian ng US.

Hanggang mailugar ang mga ito, babalikatin ng mga Pilipino, kasama ng iba pang mamamayan ng mundo, ang krisis ng kapitalismo na nagpapatuloy at tumitindi.(PinoyWeekly)

Davao Gov’t, Farmers Push Ban on Aerial Pesticide Spraying

October 20, 2008

By Yasmin D. Arquiza
VERA Files

(First of two parts)

DAVAO CITY — Once a week, the drone of airplanes shatters the early morning calm in Calinan, a cluster of small farmlands in the hilly terrain around Mount Apo. It is the signal for farmers to rush indoors or take cover and stop feeding livestock, for women to pull down clothes hanging out to dry, and for everyone to stay indoors, windows shuttered.

The small fixed-wing planes, known as crop dusters, are owned by the huge banana plantations nearby, spraying fungicide — a kind of pesticide that destroys fungus — on the banana plants. Residents say anyone caught outdoors during an aerial spray is likely to experience skin itching, eye irritation and nausea. Water exposed to fungicide turns milky white, and vegetables like malunggay curl up or retain a sticky residue.

Because of their rapid expansion, Davao’s big banana plantations are encroaching into the city’s built-up areas and farmlands like Calinan, where small farmers grow crops and fruits such as durian and lanzones that are sold in Davao City markets. Communities around these plantations have been complaining of health problems every time toxic pesticides would drift their way.

Convinced of its ill effects on health and environment, the city government of Davao passed an ordinance in February last year banning the aerial spraying of pesticides. City officials and small farmers have since been locked in a legal battle with the banana companies over the ban.

When powerful banana growers questioned the constitutionality of the ordinance, the lower court upheld the ban, as did the Office of the Solicitor General. It was only in the Court of Appeals where banana companies scored a victory: The CA issued an injunction to stop the ban, allowing them to continue aerial spraying.

Last July, the Davao City government, in alliance with farmers, asked the Supreme Court to break the impasse in what is now considered a landmark case that will test the power of the local government to protect public welfare.


A child protests aerial spraying in Davao. (Photo by Vera Files)

Aerial spraying is done on 1,800 hectares, about one-third the total area of banana plantations in Davao City, said a fact-finding report headed by City Planning and Development coordinator Mario Luis Jacinto. Pilots guided by Global Positioning System devices spray 30 liters of solution per hectare using automated nozzles.

Although the Philippines has no specific law on aerial spraying, government regulations require pilots to observe buffer zones “20 to 30 meters away” from plantations, according to regional officer Estrella Laquinta of the Fertilizer and Pesticide Authority. The rule is meant to spare humans, animals and plants from the ill effects of the spraying. But it is a rule only on paper.

Rosita Bacalso, whose farm is just three meters away from the Cavendish banana plantation of Davao Fruits Corp. (DFC), said she saw white insects swarming toward her coconut trees from the corporate farm when aerial spraying began in 2004. The coconut fronds turned black and began falling off, while the young fruits failed to mature fully. As a result, her usual income of P12,000 from coconuts fell to P3,000 every quarter.

On one occasion, Bacalso recalled, she looked in horror at a glass of water from the tap after heavy rains washed off pesticide residues from the gutter into their water tank. “Murag gatas. Mao ni ang among ginainom (It was milky. Is this what we’ve been drinking)?” she wondered. Since then, the family has been fetching water from the community tank 200 meters away.

Another farmer, Virginia Cata-ag, said members of her family experienced eye irritation, nausea and skin diseases after getting directly hit by pesticide spray. Her house in barangay Sirib is surrounded by a DFC banana plantation, the nearest border just 10 meters away, and the company does not notify them when aerial spraying would be done.

In barangay Dacudao, longtime resident Cecilia Moran said her family had to sell their cows that started getting sick from grazing on pasture land hit by pesticide spray. Leafy vegetables such as malunggay and camote tops curled up or had sticky residue that could not be washed off, forcing them to buy from the market what had once been a daily supply of fresh produce from their own farm.

THE legal battle over the ban on aerial spraying of poisonous pesticides in Davao City, which has reached the Supreme Court, is not the first case in which farmers square off against big agribusinesses over the issue of public health.

But it is the first time that farmers have the city government on their side. The city government in fact went as far as imposing a ban on aerial spraying of pesticides, through an ordinance banana companies say is unconstitutional and which is now the subject of the legal tussle.
“This is a landmark case on health and environment, which highlights the obligation of local government units to protect the public welfare,” said Lia Esquillo, executive director of the Interface Development Interventions (IDIS). The environmental group is assisting local communities in their protest against aerial spraying.

The joint committees on environment, agriculture and health of the city council, in their report, aptly described the controversy as a case of “public health and environment vs. local economy.”

RP banana exprtsBananas provide more than 75 percent of export revenues in the region, making it Davao’s No. 1 dollar earner. The Philippines is the fourth largest exporter of bananas in the world and, together with leading exporter Ecuador, has posted the highest growth rates in the industry in recent years, according to the Food and Agriculture Organization.

The case is not the first one involving controversial pesticide use in banana plantations in Davao. In 1993, banana workers in Davao del Norte were among 16,000 banana plantation workers who filed a class suit in Texas, USA against chemical companies that manufactured the pesticide DBCP, or dibromochloropropane.

A $41.5-million settlement was paid in 1997 by the companies, although refusing to admit fault or liability. They claimed DBCP pesticide, which was found to cause sterility in men, was not used properly.

Aggrieved parties

In the current case, both the farmers and banana companies feel they are the aggrieved party. The companies were the ones who initiated court action to stop enforcement of an ordinance banning aerial spraying of pesticide. They filed a case against the city government with the Regional Trial Court for “violating the equal protection clause of the Constitution” after the local legislation took effect in March last year.

The Pilipino Banana Growers and Exporters Association (PBGEA), Davao Fruits Corp. (DFC) and Lapanday Agricultural and Development Corp. (LADC) said the city ordinance constitutes “unreasonable exercise of police power” because banning aerial spraying would be “tantamount to confiscation of property without due process of law.”

An immediate shift to ground spraying would cost banana companies P882 million in potential losses, the petitioners said. They also questioned the requirement of a 30-meter buffer zone to protect neighboring farms and residents from pesticide drift, saying this would greatly reduce the area of banana plantations.

In September last year, the lower court upheld the validity of the city ordinance. It said the experts presented by the banana growers merely gave “unsupported allegations” and “theoretical analysis” on the health and environmental risks of aerial spraying.

Judge Renato Fuentes gave weight to farmers’ testimonies of “simple lives, gravely affected by a concerted problem, confronting them in their everyday existence.”

The banana companies elevated the petition to the Court of Appeals, which granted in November a temporary restraining order allowing the banana companies to resume aerial spraying.

In January, the court issued a preliminary injunction, citing the “apparent unconstitutionality of the ordinance, albeit inconclusive.” It further stated that the ordinance “seriously invades the appellants’ right that will cause them irreparable injury if not protected.”

Under the new Rules of Court, the CA should have decided the case by July this year, or six months after it granted the preliminary injunction, according to lawyer Raymond Salas of the legal advocacy group Saligan, which is assisting the farmers.

When the CA failed to do so, the city government and the farmers elevated the case to the Supreme Court last July 25, questioning the injunction order, which had effectively prevented the enforcement of the ordinance.

“Mere allegations of unconstitutionality cannot be enough for the Court of Appeals to issue a preliminary injunction,” Salas said.

The farmers, in their appeal, argued that “the conduct of aerial spraying, being a mere method to release toxic substances over an area, is not a right under the law. By concluding otherwise, the Honorable Court of Appeals commits clear and grave abuse of discretion.”

Even the Office of the Solicitor General upheld the action of the city government. In response to the appellate court’s request, Assistant Solicitors General Magtanggol Castro and Charina Soria issued a legal opinion last June 20 that the banana companies had failed to show the ordinance was unconstitutional, and that the city had simply followed the general welfare clause of the Local Government Code.

On the other hand, banana companies found support from the Department of Trade and Industry in Region 11.

DTI Regional Director Merly Cruz said in a position paper submitted to the city council that Davao’s leading banana industry directly employs 12,000 workers in the plantations. Support services such as stevedoring, trucking, packaging and security indirectly link up 100,000 more workers to the industry.

Public nuisance

RP banana industry mapBefore coming out with the ordinance, the city council had created a Technical Working Group, which included representatives from NGOs, affected communities and PBGEA. The city government also created a fact-finding team headed by City Planning and Development Coordinator Mario Luis Jacinto to look into the issue.

After collating all the data, the joint committees on environment, agriculture and health of the city council issued their report, which said in part: “We have heard both sides of the issue: Public health and environment vs. local economy. The two are of great importance to any civilization. But when both factors collide, the policy of the State comes in to shed light and to remind us of the basic framework in which the government is created.”

“Pesticides are poisonous, aerially spraying it is a nuisance, banning its aerial application is a justified response,” the joint committee asserted. “Can anyone imagine an urban area being aerially sprayed with pesticides? What makes the life and safety of the inhabitants of a community in nearby agricultural entities less? To remain indifferent to the plight of those being aerially sprayed with pesticides is inhuman.”

Davao City has the biggest population in the region: 1.3 million people compared to less than one million each for the three Davao provinces and Compostela Valley, according to the latest National Statistics Office figures. Its population density and status as a major urban center have made it a flashpoint in the aerial spraying controversy.

However, the city is not the first to enact legislation against aerial spraying. In 2001, the provincial board of Bukidnon passed its own ordinance against the practice, saying “unstable wind direction” while applying pesticide could pose danger to people, animals and crops. The ordinance noted that “poultries, piggeries, cattle ranches and other agri-based businesses and residential areas abut farm boundaries” of banana plantations.

The city ordinance has sent ripples in the neighboring province of Davao del Sur. During the Earth Day celebration last April, Gov. Douglas Cagas publicly criticized aerial spraying, citing the results of a health study in a village beside a banana plantation.

“Traces of pesticides that are being aerially sprayed were detected in their blood samples and water resources. If this practice continues, I am not providing my constituents a healthy body and environment that they inherently deserve,” he said.

Provincial board member Merlin Bello, who chairs the committee on health and agriculture, said he has attended many community meetings where residents have complained about aerial spraying in banana plantations. He has expressed support for the passage of a similar ordinance in Davao del Sur.

Alan Sanggayan, president of a local association called Lambigit, said their group has submitted a petition to the provincial government calling for a ban on aerial spraying due to health concerns and environmental pollution.

Sanggayan is a member of the Kalagan indigenous community in sitio Budoy in Barangay Guihing, Hagonoy town, where vast areas are devoted to bananas. Successive expansion of the plantations since the 1970s has hemmed in the 700 families living inside the ancestral land claim on all sides, which have to contend with pesticide spray.

Near the market of Hagonoy, a bulletin board indicating the supposed date of spraying is blank, despite regular aerial spraying in the area. Elders of the Kalagan people said they are rarely notified about the schedules. They are also complaining about the more potent nematicide applied on the ground, and the stench of boom spray in other areas.

Organic bananas

Even before the city ordinance was proposed, environmentalists have reported cases of pesticide poisoning from various application methods, expansion into watershed areas, and conversion of rice and fruit farms into banana plantations.

“The aerial spraying issue epitomizes the ills of corporate agriculture,” Esquillo of IDIS said. “Corporate-led plantations and mono-cropping are the real problems.”

She said farmers’ cooperatives in Mindanao are already producing organic bananas, and many have gone into diversified plantations or intercropping to control diseases.

In the farming district of Calinan, farmer Cecilia Moran said most of her neighbors have leased their coconut farms to banana and pineapple growers that practice mono-cropping. Only farmers in the village of Malagos grow bananas under their coconut trees.

Davao businessman Jesus V. Ayala, a longtime industry player, has ventured into the production of upland Cavendish bananas using organic methods through his Tristar group. The company has toured city officials in its plantations, presenting the farm as an environment-friendly model of corporate farms near watershed areas.

The move is in line with the city government’s Jacinto report, which recommended that “long-term use of organic pesticides should be adopted” in banana plantations to eliminate health and environmental risks to surrounding communities.  (PinoyPress.net)

Governments bail out banks

October 13, 2008

Reuters
First Posted 20:59:00 10/13/2008

LONDON—Governments across the world launched multi-billion dollar bailouts on Monday to shore up tottering global banks and Britain called for a new Bretton Woods agreement to reshape the world financial system. The slew of bank bailouts worth hundreds of billions of dollars were designed to stave off the world’s worst financial crisis in nearly 80 years, accompanied by declining global economic growth and the threat of widespread recession.

“Only by global action can we fully restore the confidence that is needed and build the international financial order,” said British Prime Minister Gordon Brown.

He called on world leaders to create a new “financial architecture” to reflect the global reach of economics and banking, in much the same way that the current international economic system was set up at a conference in Bretton Woods, New Hampshire, in 1944.

In the United States, focus was on Morgan Stanley, whose share price plunged 58 percent in the last week, after Japan’s Mitsubishi UFJ Financial Group said on Monday it had invested $9 billion under revised terms, a move analysts said was likely to bolster still fragile market confidence.

Britain said it would spend up to 37 billion pounds ($63.95 billion) buying into top UK banks, making the UK government the biggest shareholder in Royal Bank of Scotland and the merged Lloyds TSB/HBOS.

France will use two entities to help banks overcome the financial crisis with one offering 300 billion euros in guarantees on interbank lending and the other a Є40 billion fund to take stakes in companies, media said.

Germany will launch a rescue plan including a fund to provide up to Є400 billion ($548.9 billion) in guarantees for banks, according to a draft bill seen by Reuters on Monday.

Bank guarantees provided by the fund will run until December 31, 2009, the draft bill showed.

And the Italian government was to meet later in the day to look at new measures for financial stability.

Japanese Finance Minister Shoichi Nakagawa, meanwhile, said his country would consider guaranteeing all bank deposits if necessary, news agency Jiji reported.

Both Democratic presidential candidate Barack Obama and Republican counterpart John McCain were also preparing to roll out plans to rescue the country from economic uncertainty and rising joblessness.

Euro zone leaders held an emergency meeting on Sunday and French President Nicolas Sarkozy said people could expect a flurry of coordinated announcements from national capitals across Europe later on Monday.

In tandem on Monday, European central banks said they would lend out as much US dollar liquidity as commercial banks need in a further bid to tame money market tensions.

In a joint announcement with the US Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank said they would meet all bids from commercial banks at a fixed interest rate.

Australia and New Zealand earlier guaranteed all bank deposits and Indonesia upped its guarantee to 2 billion rupiah ($203,000) while India pledged more liquidity to help financial markets.

Qatar launched a $5.3 billion plan to purchase shares of its listed banks. Saudi Arabia cut its lending rate on Sunday to provide liquidity to its banks and the United Arab Emirates guaranteed bank deposits.

The moves followed a weekend of crisis talks in the United States and Europe in which governments pledged to support the financial system, which has moved to the brink of collapse as it suffers from both steep losses in the credit market and a lack of trust in lending that has frozen the flow of capital.

The need for bailouts has become particularly trenchant against a background of a global economic slowdown, with many countries facing recession.

The crisis has swept across financial markets, sending many stock markets into free fall. MSCI’s main world stocks index, for example, has lost a quarter of its value since the beginning of October.

But equity investors appeared to be comforted by the government bailouts on Monday. The pan-European FTSEurofirst was up 5.2 percent and Asian shares outside of Japan, which was closed for a holiday, gained around 7 percent.

US stocks index futures pointed to similarly solid gains at the Wall Street open.

“We are arguably now near the end point in terms of the extremely violent sell off in equities and widening in spreads, said Sean Maloney, a bond strategist at Nomura.

Money markets — the heart of the credit crisis — eased but remained tight. Three-month dollar Libor fell to 4.75250 percent from 4.81875 percent on Friday.

Banks deposited a record 155 billion euros overnight at the European Central Bank, rather than lend to each other.

Authorities have been trying to avoid a repeat of the decision to allow Lehman Brothers to go bust.

The Federal Reserve gave its approval on Sunday to the takeover of Wachovia Corp by Wells Fargo & Co. (PDI)

Editorial Cartoon: (JPEPA) Trojan Horse

October 13, 2008

Full of Japoks

Capitalism’s Unsoundness

October 12, 2008

There is a large measure of truth to the observation of an increasing number of analysts that the fundamental reasons for the meltdown we are witnessing today–the fundamental and fatal “unsoundness” of the capitalist system–had long been rigorously and scientifically analyzed 120 years ago, just as it was about to enter its monopoly stage.

BY CAROL PAGADUAN-ARAULLO
Streetwise / Business World
Posted by Bulatlat

Mike Whitney, in “Economic Depression in America” (June, 2008) writes: “The real origin of the problem is…in the prevailing ‘trickle down’ orthodoxy which opposes any increases in wages or benefits for working people… (T)oday’s captains of industry and finance refuse to accept … that if workers aren’t adequately paid for their labor–and wages do not keep pace with production–then the economy cannot grow because consumers do not have the money to buy the things they make.

“Greenspan and his ilk believed that they could prosecute the class war and make up the difference by relaxing lending standards, changing bankruptcy laws, and by creating a nearly endless array of exotic financial products that expanded credit… By crushing the worker the Friedmanites have killed the golden goose. The world’s most prosperous consumer society is in terminal distress and no amount of ‘free market’ gibberish will keep it from crashing.”

That capitalist orthodoxy of profit maximization at the expense of workers and producers in general, has been swallowed hook, line and sinker by the crop of Philippine economic policymakers/managers in a succession of governments post independence. The “sound economic fundamentals” that they crow about is nothing more than this backward feudal (not just agricultural) economy tied to and almost completely dependent on foreign, especially the US, capital and economy.

The remittances of Filipino migrants, foreign loans, foreign investments (direct and speculative) are what keep the Philippine economy afloat, albeit floundering, in the rough seas of debt and deficit. All this time, the economy has been in a state of chronic distress, even as the ruling elite and the government continue to give standard assurances that it can weather any external shocks such as soaring oil and food prices as well as economic downturns in the economies of its biggest trading partners and a slew of host countries for Filipino migrant labor.

Capitalism’s, or more precisely, monopoly capitalism’s latest doctrinal expression is the so-called neoliberal or “free market” policy framework with its regime of liberalization, deregulation and privatization under the popular signboard of “globalization”. In the Philippines, this dogmatic mindset — passed of as conventional wisdom — has wrought record levels of joblessness and intensifying/expanding hunger, poverty and misery; persistent macroeconomic fragility with periodic acute economic/financial crises; intractable social unrest and armed conflicts; the inevitable escalation of military/police crackdowns; and an overall climate of political instability and state repression.

The US and world financial meltdown and economic recession is generating waves of destruction that can engulf the hapless economies of dependent/semicolonial countries such as ours. The Filipino people, especially the masses of the poor, exploited and oppressed, have long been suffering from the economic crunch. With the latest financial turmoil hitting the centers of global capital, the situation is bound to get worse. There can be no easy way out.

If anything can be salvaged from this catastrophic situation, not seen since the Great Depression of the 30s, perhaps it would be by treating it as a wake-up call. This most destructive crisis of finance capitalism should cast serious doubt on, if not shatter, the myth of “sound fundamentals” intoned by our thoroughly brainwashed and/or untruthful economic and political leaders.

We need to break our overweening dependence on foreign capital and economies. Instead we should strive for greater self-reliance and economic as well as political sovereignty so that we can chart an independent course to genuine agrarian reform, national industrialization, economic prosperity, egalitarianism and social justice.

Rough seas are ahead not only for Philippines and other under/maldeveloped countries, but for peoples all over the world. The crisis will not only be in the sphere of the economy but in geopolitics as well.

Grave economic crises have always been followed closely by war, because war has always been a way out of crisis, albeit temporarily, for the monopoly capitalists, imperialist states and their client regimes. This has been the case from the turn of the century, when capitalism qualitatively changed from its free enterprise to monopoly character, to include the Spanish-American War, the two World Wars, the “Cold War” between the US and the Soviet Union and the US-led “war on terror”.

The grounds for the so-called “war on terror” were actually being laid when the economic crisis (slowdown, unemployment, runaway household and federal debt, etc) started. As revealed by US geo-political strategy documents and policy papers of the neoconservative block controlling the White House, this was long before the putative “terrorist attacks” of September 11, 2001 on the US mainland.

Thus the wars in Afghanistan, Iraq, the Balkans, Sudan, Georgia (South Ossetia) and the war being threatened against Iran are all about oil supply, pipelines and their strategic control. We must not forget that in our part of the world as well, that is, with regard to the country conflict over the Spratly Islands, it’s all about oil and other natural resources plus critical ship lanes too.

The crisis of global capitalism will surely intensify political maneuverings and military intervention and aggression as imperialist powers scramble to retain and extend spheres of influence, dumping grounds for goods and capital and sources of vital energy supplies and other resources.

The war of terror will intensify: the US and other countries have started to use other pretexts (natural and man-made calamities, human rights, ethnic struggles, etc) to intervene militarily and eventually invade sovereign countries. This is already happening right here in the Philippines, overtly in Mindanao but more surreptitiously in other parts of the country where armed anti-imperialist revolutionary forces have taken root.

The up side of all this is that conditions are ever more favorable for arousing, organizing and mobilizing the toiling peoples of the world against their exploiters and oppressors and the system that grinds them down and eventually kills them and their dreams.

People everywhere are struggling to survive and to break free from the unjust and inhuman system of global monopoly capitalism that has kept them in shackles, in order to build a social system that promotes their basic interests, assures them of a life free from want, upholds the dignity of honest labor and ushers in a truly liberating future.

There is a large measure of truth to the observation of an increasing number of analysts that the fundamental reasons for the meltdown we are witnessing today — the fundamental and fatal “unsoundness” of the capitalist system — had long been rigorously and scientifically analyzed 120 years ago, just as it was about to enter its monopoly stage.

The logical conclusion: capitalism creates its own gravediggers.(Business World / Posted by Bulatlat)

Published in Business World
10-11 October 2008

Sinking Deeper into Crisis

October 12, 2008

It is true that the financial crisis affecting the US and the other centers of capitalism, including Germany, UK and Japan, would not bring the country down into a recession and crisis. The Philippines is already in a state of crisis, in the first place. What it would do is to sink the country deeper into crisis as the main factors propping up the economy would weaken, and the advanced capitalist countries would accelerate the plunder of the country through ramming through agreements and policies that would help mitigate the impact of the crisis in their own countries while worsening it in ours.

BY BENJIE OLIVEROS
ANALYSIS
Bulatlat

When the series of bankruptcies began on September 15, 2008, the Arroyo government told the public that the exposure of local banks to Lehman Brothers was too small to affect the local economy. Later, President Arroyo assured the people that contingency plans and safety nets are being readied just in case. But now the Arroyo government is talking about “staying the course” as rougher times are ahead.

It is true that the financial crisis affecting the US and the other centers of capitalism, including Germany, UK and Japan, would not bring the country down into a recession and crisis. The Philippines is already in a state of crisis, in the first place. What it would do is to sink the country deeper into crisis as the main factors propping up the economy would weaken, and the advanced capitalist countries would accelerate the plunder of the country through ramming through agreements and policies that would help mitigate the impact of the crisis in their own countries while worsening it in ours.

Loans would be hard to come by as credit tightens. There is currently an international credit freeze as banks refuse to lend even to each other. This credit squeeze is supposedly the target of $700 billion bailout plan of the US and the UK’s £500 billion bailout package. But these would merely keep their banks afloat and would not increase the amount of money available for lending, especially to other countries. The Arroyo government already announced that it would stop its practice of prepaying loans before their dates of maturity as the value of the peso is sinking, and perhaps in anticipation of the tightening of credit.

Remittances of overseas Filipinos would likewise be affected as the job situation in the US worsens. The US has shed 760,000 jobs from January to September 2008, and this would definitely affect Filipinos residing there. The US is the single biggest source of remittances from overseas Filipinos at 49 percent of the total.

Even the temporary source of dollar reserves, portfolio investments is already affected with a net outflow of $636 million during the first half of the year.

The so-called sunshine industry of local employment Business Process Outsourcing, which is current employing around 200,000 graduates and is perhaps the only industry that has still been aggressively hiring before the crisis erupted, would also be affected as 90 percent of its contracts are from US companies.

Passing on the crisis

The timing of the passage of the Japan-Philippines Economic Partnership Agreement (JPEPA) by the Senate was not only insidious – as it was passed late Wednesday night on the last day of session before the Senate goes on a one month recess- it also shows the urgency by which Japan wanted it passed.

Aside from containing unconstitutional provisions, the JPEPA is more for the benefit of Japan than the Philippines. It is aimed at liberalizing trade and investments between both countries. But the trade relations that would be intensified favors Japan more than the Philippines.

According to data gathered by IBON Foundation, in 2003, Japan’s exports to the Philippines amounted to ¥1.0419 trillion, consisting mainly of machinery and industrial goods. On the other hand, Philippine exports to Japan amounted to ¥815.5 billion, consisting mainly of bananas, mangoes, and other fruits and farm products, which are mainly produced by TNCs (Transnational corporations) such as Del Monte and Dole. This translates into a negative trade balance for the Philippines in the amount of ¥226.4 billion. Intensifying trade between both countries would only worsen the country’s trade deficit more.

In terms of investments, Japan wanted to do away with foreign equity limitations. In 2007, Japan was the second biggest investor in the Philippines, with direct investments amounting to P38.587 billion ($836,157,579 at the 2007 average exchange rate of $1=P46.148) . But cumulatively, it is the biggest investor at $3.9 billion as of 2005. With the various tax holidays, fiscal incentives, and the right to repatriate profits freely, Japanese corporations gain more out of investments than the Philippines, which, at most, gains from the foreign exchange they bring in and the minimal employment generated by their corporations. Also included in the agreement, is a provision for “Performance Requirement Prohibitions”, which disallow the Philippine government from setting requirements or conditions to Japanese investors, such as requiring them to use or purchase domestic goods and local services.

The Philippine government is hyping about the supposed opening up of Japan to nurses and other health workers. But they have to undergo language training and qualification requirements. While acquiring these skills they can be hired as apprentices who are reportedly overworked and underpaid in Japan.

This is the first bilateral agreement entered into by the Philippines. With the slow pace of agreements at the World Trade Organization – mainly caused by resistance and disagreements regarding removal of protectionist policies and subsidies being maintained, ironically, by advanced capitalist countries – and the world economic crisis, it is expected that the Philippines would be pressured to enter into more disadvantageous bilateral agreements by other advanced capitalist countries that are likewise frantically searching for fields of investment, which would enable them to take advantage of cheaper costs, including labor, and penetrate more markets to generate higher profits to help them stave off the crisis.

These, on the other hand, would result in higher current account deficits for the country, more bankruptcies of local firms and agricultural producers who would lose out in the competition with giant TNCs, more extraction and destruction of the country’s natural resources, more landlessness and displacements as TNCs grab the land of farmers and indigenous peoples, and more exploitation of workers, all adding up to a worsening of the crisis of the Philippines.

Staying the course

Amid the crisis, the Arroyo government is determined to “stay the course” of high taxes, liberalization, deregulation, and privatization. But for whom?

While the government is pushing forward with the privatization of the remaining assets of the government, such as in the power and energy sectors – as it tries to sell its remaining assets in power generation and transmission and its 40 percent stake in Petron- the US, UK, Germany, Netherlands, and other advanced capitalist countries are taking over their banks and investments houses, and mortgage lending firms.

As the Arroyo government refuses to compel oil companies to rollback pump prices consistent with its policy of deregulation, advanced capitalist countries are talking about regulating their financial sector, even to the extent of setting ceilings on the salaries and benefits of executives, and regulating lending activities.

While the Arroyo government is further opening up the country to the entry of imports and investments to the detriment of local manufacturing and agriculture, advanced capitalist countries are pushing for bilateral agreements favoring their own TNCs.

And as the Arroyo government refuses to repeal the VAT even in the face of high prices, the US has included in its bailout plan, tax rebates for its citizens and the UK is compelling banks that avail of its own bailout plan to extend normal credit lines to homeowners and small businesses.

In justifying the UK bailout plan, Prime Minister Gordon Brown was quoted as saying “This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem.” (Funny how the same argument was used against those opposing globalization.)

More repression

The course that the Arroyo government is stubbornly taking is bringing it in direct confrontation with the Filipino people who are already suffering from the crisis, and are being asked to take more. This would surely make the people more restless and would most probably result in a strong protest movement.

Consistent with its dictatorial ways, the Arroyo government would respond to this with more repressive measures and human rights violations. And it would get ample support from the US, which would also expectedly intensify its “war on terror” to prop up its ailing economy by giving business to its military weapons industry, to impose its will on developing countries to get greater concessions for its TNCs, and to assert its political-military hegemony amid the crisis in the world.

This would only sharpen the contradictions between the oppressed peoples of the world versus the advanced capitalist countries and its client states. Bulatlat

Big Trouble in Detroit:How the U.S. Auto Industry Wrecked Itself

October 12, 2008

This corporate Congress cannot be expected to issue serious demands, set tough conditions, or impose strict rules on the auto companies to ensure their workers receive fair pay and benefits, and prevent their fat-cat executives from making off big while leaving their companies in shambles.

BY RALPH NADER
Counterpunch INTERNATIONAL
Posted by Bulatlat

The Big Three are in big trouble, and they have themselves to thank for it.Ford and General Motors have reported substantial losses in the second quarter amounting to $15.5 billion, and $8.7 billion, respectively, while Chrysler, which was bought off last year by a private equity firm, Cerberus, refuses to reveal its financial standing.

It is no wonder why their lobbyists were spotted schmoozing with members of Congress at the Democratic and Republican National Conventions, liquoring up in their plush suites and private parties while they made their case for direct government loans which, if approved, would likely add to our federal deficit.

Last December, Congress approved a $25 billion loan to automakers and their suppliers under the Energy Independence and Security Act, though it has yet to be funded. That bill includes a modest requirement for automakers to increase their average vehicle fuel efficiency to 35 mpg — a benchmark we should have set decades ago, and would allow the companies to have their way with virtually no oversight or accountability.

This corporate Congress cannot be expected to issue serious demands, set tough conditions, or impose strict rules on the auto companies to ensure their workers receive fair pay and benefits, and prevent their fat-cat executives from making off big while leaving their companies in shambles.

Such blatant giveaways have become the norm in Washington since the corporate stranglehold of Congress and the White House have smothered the forces seeking worker, consumer and environmental justice.??But this recent example should not discount our long history of dealing with corporate failures in more public and effective ways than just ponying up billions on demand at any big corporation’s whim.

In 1979 when Chrysler was on the verge of bankruptcy, the automaker came crying to Congress for a bailout, which they eventually got, but Congress wasn’t as much of a pushover.

Back then, at least the corporate chieftains were grilled by Congress and had to agree to give something back for Uncle Sam bailing them out — good jobs and pensions for their workers, and more efficient cars to reduce reliance on foreign oil and reduce prices at the pump.

Now the CEOs don’t even have to leave Detroit and they get much more money for almost no return commitment to America, while they outsource jobs and pollute our environment.

During discussion on a proposed loan bill to bailout Chrysler in October 1979, Senator William Proxmire (D-WI) who chaired the Senate Banking Committee issued his opposition to Chrysler’s request and noted: “We let 7,000 companies fail last year — we didn’t bail them out. Now we are being told that if a company is big enough… we can’t let it go under.” He went on to call the proposed deal “a terrible precedent.”??Raising the government’s demand for performance standards, President Carter’s Treasury Secretary William Miller told Chrysler officials, “it’s going to be so awful, you’ll wish you never brought the whole thing up.”

Today, we rarely hear such candid opposition to corporate orders shouted at their congressional servants who lack the fortitude to put serious restraints and conditions on mismanaged, reckless big business and their overpaid CEOs seeking tax-payer salvation.

As a part of the Chrysler deal in the late Seventies, the government took out preferred stock warrants and after the company turned itself around and repaid its loan seven years early, the government ended up cashing out, receiving $400 million in the appreciated stock.

And Congress made clear to Chrysler that it had specific conditions the company had to meet before receiving the loan guarantee. It forced the company to contribute $162,500,000 into an employee stock ownership trust fund geared to benefit at least 90 percent of its employees, design more fuel efficient autos to help reduce consumption of foreign oil, and prohibit wages and benefits from falling below a level set three months before the legislation was passed.

Today, congressional actions to grant multi-billion dollar loans to the corporations lack the reciprocity some in Congress demanded 30 years ago. Before Congress irresponsibly dips into the public piggy bank, this time it would be wise to look back at how the government once dealt with Chrysler’s dilemma, require clear benchmarks to deliver on the next generation of green collar jobs, improved fuel efficiency and gain a substantial return on its investment, not just in monetary value, but in the longterm viability of the domestic motor vehicle fleet.

Congress needs to call on the auto industry to innovate their way out of this morass into which they’ve engineered themselves into. A sensible strategy would be to issue stock warrants to the government, like in the 70s, which would create an incentive for Congress to keep pressure on the auto industry to improve. Public Congressional hearings are a must.

Will Congress echo its actions of 30 years ago when it scrutinized corporate demands, grilled company executives, and imposed conditions to ensure fair compensation and safety for workers? Or will Congress continue down the road of corporate servitude, refusing to stand up for workers, consumers, taxpayers and the environment in its session-ending stampede and flight away from auto industry accountabilities? (Counterpunch/posted by Bulatlat)

Ralph Nader is running for president as an independent.

Swimming Lessons for Washington and Wall Street?The Predators’ Bailout

October 12, 2008

If I recall correctly, the very same US Congress that is considering bailing out the big financial corporations that got the economy into its current mess because of their greed and the government’s willingness to forgo any regulation of their doings (and the doings of their sister companies in the energy sector) made it almost impossible for individual working people in the US to declare bankruptcy. Yet, they are enabling these giants of the Wall Street economy to get out of their financial catastrophes by making us foot the bill. Furthermore, they have the nerve to tell us it is for the good of the country. Now, I don’t know about you, but I don’t think I can honestly recall the last time the White House, Congress or Wall Street did anything for the good of the country that I know.

BY RON JACOBS
Counterpunch INTERNATIONAL
Posted by Bulatlat

Let me get this straight. The Congress is meeting with the Treasury Secretary Henry Paulson this week. Mr. Paulson, who works for the White House, says he has a plan to save the US economy. That plan involves bailing out the same companies that got the economy into the mess it is in today. The money for the bailout plan is going to come from the people who are already paying for two pointless, brutal and expensive occupations in Iraq and Afghanistan.–the US taxpayers. More precisely, the US taxpayers who make between $25, 000 and $150,000 a year–the people the government likes to call the middle class. These people are already making less in real wages than they were ten years ago and many of them are facing foreclosures and other financial problems of their own.

If I recall correctly, the very same US Congress that is considering bailing out the big financial corporations that got the economy into its current mess because of their greed and the government’s willingness to forgo any regulation of their doings (and the doings of their sister companies in the energy sector) made it almost impossible for individual working people in the US to declare bankruptcy. Yet, they are enabling these giants of the Wall Street economy to get out of their financial catastrophes by making us foot the bill. Furthermore, they have the nerve to tell us it is for the good of the country. Now, I don’t know about you, but I don’t think I can honestly recall the last time the White House, Congress or Wall Street did anything for the good of the country that I know.

Sure, they started a war against Afghanistan under the pretense that they were going to chase down and capture the guys who organized those planes flying into the World Trade Center and the Pentagon. That’s gone real well. I mean, look at Afghanistan now. The Pentagon is sending more troops and the White House and Congress are giving the okay. Dozens of civilians are dying in US air strikes as the occupiers fight a growing guerrilla army. They also started a war in Iraq that has done nothing but brought greater misery to that country and its people. It has also caused over 30,000 US casualties, with over 4000 of those casualties being dead men and women whose families are still not sure what they died for. Oh yeh, the price of fuel at the pump has increased by almost four dollars in some places across this land and the number of jobs has decreased steadily. That is, of course, unless you look at the military. Those job openings continue to grow.

But somebody must have benefited from this, right? And we all know who they are. The energy industry has raked in historically huge profits, all the while claiming that they deserve them while insisting that they get further tax breaks. Tax breaks which Congress willingly grants. The war industry has also made a bundle. Some companies, like General Dynamics, have doubled their net earnings just in the past four years. Others, like Haliburton, have used their insider connections to capture dozens, if not hundreds, of no-bid contracts that involve several documented cases of outright fraud and corruption. Yet, they continue to obtain the contracts and avoid prosecution. Then, there are those so-called security contractors, whose employees murder Iraqi citizens, media workers, and even Iraqi employees of the US-installed regime in Baghdad and face no penalties. Meanwhile, the contractor corporations themselves reap huge profits while also selling their services to agencies stateside that are involved with immigration and disaster management. So, uniformed thugs who answer to no one are now performing police duties here in the US. It’s like the Pinkertons of old in the employ of the Rockefellers, Carnegies and the government they ran back then.

Anyhow, back to that financial bailout and the arrogance assumed by those who are proposing it and those who will vote for it. Every time I hear about a CEO of some corporation that fails getting a multimillion dollar compensation package I can’t help but wonder: why is it that these guys get paid for doing their job so poorly that the company they manage fails? I know that in every job I have ever had that if I don’t do my job correctly than I get fired, plain and simple. If I’m lucky I might get a small unemployment check for a few months, but usually when a worker gets fired there is no compensation whatsoever. So, it pisses me off that these guys, from Lee Iacocca to the folks who ran Fannie Mae and Freddie Mac into the sewer not only get what the rich people call a parachute, but that they genuinely think they deserve one. I say push them out of the plane and let them try to fly. That’s what happens when people who work for a living lose their jobs.

The government isn’t any better, either. What could arguably be called the worst presidential administration in history will be leaving Washington next January. Yet, when those men and women hop on their chartered planes and head out of town, will they have to wonder where their next meal is coming from? Of course not. Almost every single one of them will fetch a nice retirement check for the rest of their lives. In addition, many of them will continue to receive the best health care in the world and hand us the bill. Others will go directly back into the business they were in before they joined the government. Naturally, those businesses will most certainly be better off than when these men and women left them to work in what I loosely term public service. After all, I’m not convinced that there is much servicing the public going on in DC any more. It’s more like servicing the wealthy and their bank accounts. As for Congress, these folks can spend two years in DC kissing corporate ass and hanging out in K Street offices and then go back to their other life with a lifetime pension and that same health care referred to previously. Bet the average reader can’t depend on a package like that.??It’s time Wall Street and Washington DC start practicing for itself what it preaches to the rest of us. No more bailouts and no more fat no-bid contracts. No more wars fought by other people’s kids for the war industry’s profits and the politicians’ egos. No more pay raises and no more free health care. No more taxpayer-funded travel and no more free gas. No more compensation packages unless they do a good job. Either that, or share the wealth and make health care universal, wars illegal, and fuel affordable.

It’s time we tell these folks: Bail your own selves out. Or, if you can’t, then start swimming. That’s what you expect us regular folks to do. (Counterpunch/posted by Bulatlat)

Ron Jacobs is author of The Way the Wind Blew: a history of the Weather Underground, which is just republished by Verso. Jacobs’ essay on Big Bill Broonzy is featured in CounterPunch’s collection on music, art and sex, Serpents in the Garden. His first novel, Short Order Frame Up, is published by Mainstay Press. He can be reached at: rjacobs3625@charter.net

Transport Leader Says Gov’t Should Go After ‘Legal Loot’ of Oil Companies

October 12, 2008

The militant Pagkakaisa ng mga Samahan ng mga Tsuper at Operators Nationwide (Piston or Unity of Drivers and Operators’ Associations Nationwide) said that the government should go after what it described as “legal looters” of motorists’ money – the giant oil companies.

BY NOEL SALES BARCELONA
Bulatlat

The militant Pagkakaisa ng mga Samahan ng mga Tsuper at Operators Nationwide (Piston or Unity of Drivers and Operators’ Associations Nationwide) said that the government should go after what it described as “legal looters” of motorists’ money – the giant oil companies.

The call comes after Bureau of Customs (BoC) Commissioner Napoleon L. Morales boasted about the BoC’s achievements in running after oil smugglers after the Court of Tax Appeals (CTA) junked the temporary restraining order (TRO) filed by BSJ Fishing and Trading, Inc. to prevent the implementation of the Commissioner’s visitorial powers in its facilities at the Navotas Fish Port Complex.

Due to the lifting of the TRO, the BOC has been able to seize P2 million (US$42,018.57) worth of suspected smuggled oil, said Morales in a press briefing at the weekly Kapihan sa Sulô last Saturday, Oct. 11.

Steve Ranjo, president of Piston, however said the P2 million worth of suspected smuggled oil seized by the BoC is just a fraction of the amount being looted, legally through the continuous implementation of the Downstream Oil Industry Deregulation Act of 1998 and the value-added tax (VAT) on oil products.

“It’s common knowledge among transport organizations that there is some oil being smuggled and sold domestically. Morales himself said, in a meeting with Energy Secretary Angelo Reyes, that billions of pesos’ worth of oil were illegally transported to the Philippines. But it’s only a pittance compared to the billions of pesos being extracted from the motorists’ pockets because of the uncontrolled increases in petroleum prices” Ranjo said in an interview.

He added that it is the BoC’s job to go after the smugglers and seize contrabands, but said the issue of high oil prices goes beyond smuggling.

“The government should probe deeply into the matter of speculation on oil prices, over-taxation on oil such as VAT, and the inutility of government agencies in controlling soaring oil prices, despite their knowledge of how speculation increases pump prices,” Ranjo said. (Bulatlat.com)

JPEPA Ratification Puts Philippines in More Danger vs Global Crisis

October 12, 2008

Contrary to President Arroyo’s statement that the ratification of Japan-Philippines Economic Partnership Agreement (JPEPA) will protect the country from the global financial crisis, it will make the country more vulnerable to economic shocks.

BY IBON FOUNDATION
Posted by Bulatlat

Contrary to President Arroyo’s statement that the ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA) will protect the country from the global financial crisis, it will make the country more vulnerable to economic shocks.

JPEPA and similar free trade deals further opens the local economy to more foreign plunder and drags the country to the global crisis worsened by trade and investment liberalization, said IBON research head Sonny Africa. Bilateral deals like JPEPA enable beleaguered countries like Japan to pass their crisis to other economies in the region through more liberalization.

Even as Japan claims that it is on the way to recovery, its economy has been grappling with stagnant growth and high unemployment for nearly two decades and is aiming to further open up other economies to cope with its internal problems. The emerging scenario of a US economic slowdown, financial disorder, soaring energy and food prices only make its situation more urgent.

The experience of the country with similar free trade deals such as the GATT-WTO, which the Senate ratified in 1994, has proven that no amount of safety nets could protect the economy and the people’s livelihood from the harmful effects of liberalization.

According to IBON research head Sonny Africa, it is ironic that the Senate ratified the JPEPA even as the WTO talks broke down precisely because of questions on the supposed development gains to be achieved from trade and investment liberalization. “When will this government learn from the harmful effects of liberalization on the economy?” he asked.

The approval of JPEPA surrenders Philippine sovereignty and will reinforce the country’s backwardness. The country will be further prevented from implementing economic policies essential for its development and will be obliged to give similar disadvantageous terms in pending deals with the US, European countries and others.

“There is no real gain for the Philippines and especially the poorest and most marginalized sectors with JPEPA. In agriculture it is the big corporate plantations that will gain and not the country’s millions of small farmers,” Africa added.

To protect and build the domestic economy, the country needs trade protection against imports such as tariff and non-tariff barriers and investment controls, and not free trade deals like JPEPA that only further expose the country and deepen its links to the failing global economy. (Posted by Bulatlat)

Groups Outraged Over JPEPA Ratification

October 12, 2008

At stake in our fight against JPEPA is the protection and preservation of our natural resources and our environment, the defense against the exploitation and oppression of human labor against the Arroyo regime’s pimping of Filipino nurses, caregivers and skilled workers, the rightful claim of indigenous peoples to their ancestral domains, of farmers and workers to the dignity of labor, and the fortification of our citizenship as Filipinos against bilateral measures that intensify the barbaric nature of neocolonialism,” said CONTEND.

BY RONALYN V. OLEA
Bulatlat

Various groups expressed outrage over the ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA). The Philippine Senate ratified the treaty late at night of October 8.

Those who voted for the JPEPA were Miriam Defensor Santiago, Manuel Roxas III, Edgardo Angara, Rodolfo Biazon, Alan Peter Cayetano, Jinggoy Estrada, Juan Ponce Enrile, Gregorio Honasan, Panfilo Lacson, Loren Legarda, Ramon ‘Bong’ Revilla Jr., Miguel Zubiri, Manuel Villar Jr., and Lito Lapid.

Only four senators voted against the approval of the treaty. They were Aquilino Pimentel Jr, Ma. Consuelo ‘Jamby’ Madrigal, Francis Escudero, and Benigno ‘Noynoy’ Aquino Jr.

Members of the NO DEAL! Movement trooped to the Japanese embassy in Manila, Oct. 10 to show indignation over the JPEPA.

The NO DEAL! Movement is a broad alliance of organizations and individuals opposed to unequal economic agreements.

Betrayal

In a news article posted at the website of the Catholic Bishops’ Conference of the Philippines (CBCP), Kalookan Bishop Deogracias Iñiguez said, “Of course it’s very disappointing because the Senate decided to pass the JPEPA even if there were several provisions that would be detrimental to the Filipino people.”

Iñiguez is the chairperson of the Public Affairs Committee of the CBCP.

Six other bishops have earlier called on the Senate to reject the bilateral agreement. They were Cagayan de Oro Archbishop Antonio Ledesma, Manila Auxiliary Bishop Broderick Pabillo, Bishops Rolando Tirona (Infanta), Antonio Tobias (Novaliches) and Infanta Bishop-Prelate Emeritus Julio Labayen.

Meanwhile, the Health Alliance for Democracy (HEAD), an organization of health professionals, said, “The senators who ratified the patently onerous trade agreement have placed health personnel everywhere, even those not seeking work in Japan, in a very disadvantageous and vulnerable position.”

Dr. Geneve E. Rivera, HEAD secretary general, said, “Pro-JPEPA senators have institutionalized the commodification of health workers and professionals in a trade deal. They should be made accountable for this betrayal.”

Rivera added, “Parang ‘Bagsak-presyo’ ng mga nurses. (It’s like a rummage sale of nurses). This is the message that the Arroyo government and pro-JPEPA senators is sending to the world.”

Rivera said, “All health personnel working across the globe should make these pro-JPEPA senators feel their wrath by denouncing them in public and in the coming elections.”

No shield

The NO DEAL! Movement belied claims of Mrs. Gloria Macapagal-Arroyo and Trade Secretary Peter Favila that the JPEPA will cushion the impact on the country of the worsening US and global economic crisis. Arnold Padilla, NO DEAL! Movement spokesperson said, “The JPEPA will result in the further destruction and underdevelopment of the national economy. The short- and long-term impacts of the global economic crisis on the Philippines will be further magnified as the JPEPA starts its devastation of local jobs and livelihood and marginalize Filipino investors. The supposed benefits that will accrue from the treaty such as increased exports to Japan and more Japanese investment are false as our actual experience in the past decades of export orientation and foreign capital-driven economy clearly show.”

The HEAD also slammed Roxas’ assertion that ratifying JPEPA is both “timely and necessary” to keep the country ‘globally competitive.’ “If this was a race to the bottom, if this was an auction of Filipino nurses to the lowest bidder, then Sen. Roxas is right. Is this what he wants?” said Rivera.

In a statement, the Congress of Teachers for Nationalism and Democracy (CONTEND), called JPEPA as ‘a bankrupt free market solution.’

“If there is one significant lesson that we must learn from the Wall Street meltdown, it is the fact that our fraught economic conditions will never be solved by the so-called free market solution,” said CONTEND.

The group said, “JPEPA is no different from the World Trade Organization (WTO) agreement rammed through the stomachs of the laboring Filipino masses by US imperialism.”

The Philippines became a member of the WTO in 1994. “Fourteen years after that fatal blow on our sovereignty and dignity as a people, we already know better than upping the ante for yet another project of imperialist plunder. At stake in our fight against JPEPA is the protection and preservation of our natural resources and our environment, the defense against the exploitation and oppression of human labor against the Arroyo regime’s pimping of Filipino nurses, caregivers and skilled workers, the rightful claim of indigenous peoples to their ancestral domains, of farmers and workers to the dignity of labor, and the fortification of our citizenship as Filipinos against bilateral measures that intensify the barbaric nature of neocolonialism,” said CONTEND.

Bad precedent

Moreover, Padilla said that JPEPA would set the precedent for more unequal economic agreements for the Philippines. He cited the upcoming negotiations between the Philippines and the European Union (EU) on their Partnership Cooperation Agreement (PCA) as part the EU-ASEAN negotiation process for a free trade agreement (FTA). Padilla maintained, “Certainly, the EU will use the JPEPA as yardstick for trade and investment concessions it will seek from the Philippines in the PCA. The problem is that the country has already surrendered much of its patrimony and economic sovereignty to the Japanese in the JPEPA such as on unrestricted foreign ownership and investment. The Europeans will ask for more, and then the Americans when they negotiate their own FTA with us. What else will be left for the country?”

In its submitted position paper to the Senate, the HEAD had also warned that JPEPA would set a dangerous precedent for its anti-migrant worker provisions, which may be used by other countries who need Filipino health personnel.

Supreme Court

Padilla said they will question the treaty’s constitutionality by filing a petition before the Supreme Court.

Legal experts have pointed out that the JPEPA’s terms on national treatment, most favored nation (MFN), and prohibition of performance requirements violate several provisions of the 1987 Constitution. (Bulatlat.com)

Oil Deregulation Minus the Jargon

October 12, 2008

Deregulation is quite simple but the powers-that-be tend to provide complicated explanations in claiming that it should be given a chance to work despite what is happening in the world market. Indeed, a clear understanding of oil deregulation leads one to oppose it, especially at the onset of unabated oil price hikes and inconsequential rollbacks.

BY DANILO ARAÑA ARAO
Bulatlat

Stripped of all the technical jargon, the deregulation that is characteristic of the downstream oil industry is very easy to understand.

In order for the economy to progress, there is a need to remove all barriers to free competition. The government should not directly compete with local and foreign investors, hence the need to sell to the private sector (i.e., “privatize”) government-owned and controlled corporations (GOCCs) like Petron which competes with private companies like Shell and Chevron.

Unlike in the past, the deregulated regime allows any industrialist to invest in the downstream oil industry. Data from the Department of Energy (DOE) show that there are 601 new industry players competing with the so-called Big Three – Petron, Shell and Chevron.

In removing the regulations that used to prevent free competition, government officials and neoliberal thinkers expect the empowerment of consumers. They argue that under a deregulated regime, consumers are “empowered” in the sense that they now have more choices. If in the past there were only three companies, there are now hundreds to choose from.

For those who believe in the principle of globalization (of which deregulation is one of the tenets, the other two being liberalization and privatization), the measurement of “consumer power” is defined along the lines of increased choices. (i.e., “If the consumer has the choice, the consumer has the power.”)

More companies mean “better and freer” competition which would then result in lower prices and better services for the consumers. The tendency of the capitalist, according to those who argue for deregulation, is to attract as many customers as possible in whatever ways necessary, like creative advertisements, substantial discounts and, of course, lower prices.

The deregulation of the downstream oil industry started in April 1996. The prices of gasoline and diesel then were P9.50 ($0.185 at the 1996 exchange rate of $1=P51.31) and P7.03 ($0.13) per liter, respectively. As a result of oil price hikes in the years that followed, gasoline and diesel reached more than P60 ($1.33 at the July 2008 exchange rate of $1=P44.956) and P50 ($1.11) per liter.

There have been rollbacks since August but these are said to be not enough based on the prices of Dubai crude and the peso-dollar exchange rate. The table below illustrates this point.

Average Retail Prices of Selected Petroleum Products,
Dubai crude prices and Peso-Dollar Exchange Rate
September 2007 and 2008 (in peso per liter except LPG)
Sept. 25, 2007 Sept. 19, 2008 Increase a/
Unleaded gas 40.95 50.96 24.44%
Diesel 35.45 49.94 40.87%
LPG b/ 480-533 598-659 23.64%
Dubai crude
(in US$ per barrel) c/ 75.68 87.01 14.97%
Peso-dollar exchange rate (in peso per US$) d/ 46.1315 46.6922 1.21%
Sources of basic data: Department of Energy; Bangko Sentral ng Pilipinas; and New Zealand Ministry of Economic Development
a/ Percentage increase for LPG based on highest price for the period in review
b/ Dealers’ pick-up price (11 kg)
c/ 2007 price as of September 28
d/ Monthly average for September 2007 and 2008

It is easy to argue that we currently live in an “abnormal” situation due to the continued increase in the price of crude in the world market. The weekly average Dubai crude, for example, reached its highest last July 4 at $137.27 per barrel. As of September 26, it is pegged at $96.68 per barrel.

However, one notices an even more abnormal increase in the pump price of diesel, widely consumed by the transport sector, relative to the increase in Dubai crude.

Twelve years have passed since the implementation of oil deregulation and the only positive effect it had was on the profits of oil companies and increased tax collection of the government, especially with the increase of the value-added tax from 10 percent to 12 percent and its expansion in 2005 to include petroleum products. For 2008, the Department of Finance expects a collection of P73.4 billion ( $1,543,443,519 at the October 10, 2008 exchange rate of $1=P47.556) from the VAT on petroleum products.

Why did the expected lowering of prices of petroleum products not happen in a deregulated regime? Unlike others, petroleum products are said to be “demand inelastic.” This means that the demand for such products is not affected by fluctuations in prices because these are needed by the public.

The transport sector, for example, absolutely needs petroleum products to continue with its operations and it will always procure such products regardless of the price.

In my independent monitoring of the prices of petroleum products, what Petron, Shell and Chevron normally do is to take the lead in increasing prices and the industry players would follow afterwards. The different oil companies normally maintain only a price differential of P0.50 per liter.

Deregulation is quite simple but the powers-that-be tend to provide complicated explanations in claiming that it should be given a chance to work despite what is happening in the world market.

Indeed, a clear understanding of oil deregulation leads one to oppose it, especially at the onset of unabated oil price hikes and inconsequential rollbacks. (Bulatlat.com)

This is a shortened version of the paper presented by the author at the 30th anniversary lecture of IBON Foundation last October 7. His slide presentation (in PDF) may be retrieved from http://www.dannyarao.com/files/arao-downstream-oil-deregulation.pdf.

US ‘War on Terror,’ Intervention in Philippines to Intensify amid Global Economic Crisis – Analysts

October 12, 2008

Analysts of global economic developments deemed that the US-led ‘war on terror’ will intensify and escalate as a result of the US financial and economic crisis.

BY RONALYN V. OLEA
Bulatlat

Analysts of global economic developments deemed that the US-led ‘war on terror’ will intensify and escalate as a result of the US financial and economic crisis.

Rey Casambre, chairperson of the International League of People’s Struggles (ILPS)-Philippine chapter, said that the US financial and economic crisis has clearly turned into a global financial and economic crisis.

Jose Enrique Africa, research head of think-tank IBON Foundation, said, “The US financial crisis sharply reflects the financial crisis of the world capitalist system as a whole.”

Africa said, “The global recession is here, and the economic downturn will be severe. It has emerged in the US but is already spreading to Europe.”

He said it is intrinsic to capitalism for the rate of profit from production to fall. Capitalist drive for profits through speculation, however, is also grossly unsustainable, said Africa.

Interestingly,in his paper for the Forum on Global Financial Crisis of the ILPS Third International Assembly in Hong Kong this June, Jose Maria Sison has already said, “The economic and financial crisis of the US and world capitalist system has worsened to a new and unprecedented level since the Great Depression.”

History

Casambre said, “Historically, wars have resulted from the intensification of global financial and economic crises.”

He said that the World War II was a direct result of the crisis that culminated in the Great Depression of the 30s. “This is because the rivalry of imperialist powers for spheres of influence: sources of raw materials and cheap labor, dumping ground of products and surplus capital, etc. also intensifies with the intensification of crisis. The economic rivalry leads to and is eventually resolved by political, and ultimately military, means,” he said.

Edilberto Villegas, political economist and professor at the University of the Philippines Manila, said that instigating war is the tested way for monopoly capitalism to recover. He said that the recession in the 1990s and the high-tech bubble burst in 2000 resulted to US wars.

Villegas said, “To be able to recover, the US will intensify its military aggressiveness.” He maintained that the speculation on oil and food will become secondary as the demand for oil has declined. “They will again resort to a military solution.”

He said it is the inherent nature of war to destroy and this will rev up military production.

‘War on terror’

Casambre said that the US “war on terror” came in the wake of the economic downturn in the US characterized by manufacturing slowdown, burgeoning national debt and budget deficit, ballooning household debt, among others.

Casambre said further that although the 9/11 bombings were used as a pretext for launching the “war on terror”, it eventually became clear that the war strategy and campaign plans that were executed had been prepared long before 9/11, as early as 1992 when Dick Cheney was the US Defense Secretary under the older George Bush.

“The war on terror, like other wars of aggression and military intervention, somewhat mitigated the US economic crisis then by spurring war production. However, it was the corporations in the military industrial complex that benefited most, enjoying tax cuts on top of fat military contracts, and the economic relief was unsustainable because it did not generate jobs and income for the reserve army of unemployed.”

He said that the invasion and occupation of Afghanistan and Iraq had little to do with the Al- Qaeda, Saddam Hussein and weapons of mass destruction. “The real reasons were control of oil resources and the Middle East and Central Asia regions, which are strategic because of their geographic location south of Russia and west of China.”

Afghanistan, other targets

Casambre added, “This is underscored by recent statements by Democratic Presidential candidate [Barack] Obama that the US should pay more attention to Afghanistan because the real enemy is not the Al-Qaeda but Russia and China.

Villegas said both US presidential candidates have not opposed the US war on terror. He said that Obama merely said that the war in Iraq did not work out. “He [Obama] is not against the war on terror, he just wants to transfer to Afghanistan.”

Villegas said Iran is also a possible target. He said both Obama and Republican candidate John McCain are open to a military approach toward Iran if the latter will not stop developing its nuclear program. The only difference, said Villegas, is that McCain is not open to negotiate while Obama said he will employ diplomacy.

Villegas said the US is implementing a one-sided policy on nuclear development. “It should apply to themselves. The US is the number one manufacturer of nuclear weapons,” he said. He also said the US-backed Israel government is more advanced than Iran when it comes to nuclear weapons.

Villegas said the US only wants to justify possible attacks on Iran and North Korea.

Villegas also said the US is also interested in Central Asia. “They need the oil pipes there, such as in Georgia. They are now setting up military bases.”

Casambre of ILPS maintained, “Ethnic conflicts and ‘liberation’ struggles are also used to instigate proxy wars, such as in Africa, the Balkans and in the former Soviet republics. All these can be expected to escalate and intensify with the intensification of the global economic crisis.

Villegas said that China is seen by the US as an emerging military power. “The US will continue to guard East Asia, with the aim of encircling China. The US does not want to be displaced from the region.”

The US will maintain their forces in Asia, especially in Japan and in the Philippines.

Philippines

Villegas said the Philippines is a strategic point for the US’ implementation of its policy on China.

Casambre said the US crisis will intensify US military intervention in the Philippines. “The Philippines has strategic value to the US in its global geopolitical designs. It is a valuable military outpost guarding the South China Sea where more than half of world trade, including oil, passes. It is at the middle of what US strategists call the “arc of instability” which extends from Northeast Asia, down to Southeast Asia and westward to Central Asia, the Middle East and West Africa. It is also at the middle of the two potential major “theaters of war”: Northeast Asia and the Middle East. It is surrounded by states with large Muslim populations.”

Casambre said that the US will remain interested in the Philippines as it is also rich in still untapped natural resources, including oil and natural gas.

Contradictions, challenges

Sison said, “As the crisis of the world capitalist system worsens, the contradictions among the imperialist powers will sharpen and generate conditions favorable for the rise of revolutionary movements.”

He said that imperialist powers collude with each other against the oppressed peoples and nations in general but they compete with each other for sources of cheap raw materials, markets, fields of investment and spheres of influence. “As a result of the full restoration of capitalism in former revisionist-ruled countries, imperialist countries competing with each other and seeking to redivide the world have increased in number. The world has become more cramped than ever for the competitions and rivalries of the imperialist powers,” he said.

Sison said further, “The US is increasingly resented by other imperialist powers for presuming to have sole hegemony over the whole world and for trying to grab the lion’s share of spoils in every continent. At the same time, it is already overextended and weakening in certain parts of the world. Contradictions are developing between the US and Russia and China jointly or separately. So are those between the US and the European Union. These contradictions involve economic, financial, political, security and other issues.”

Villegas said that anti-imperialist groups must see the weakening position of the US in the economic sphere. “The workers, especially in the US and Europe should organize themselves against monopoly capitalism.”

He said the US cannot control the crisis. “Despite the bailout, the US economy is going down.” He added, While the US may prop up military production, the question is how long can they keep up such wars.

Casambre said that anti-imperialist forces must seriously and scientifically study the global crisis – the developments and implications – in order to explain to the general public what is really happening, expose the contradictions, the unjust, undemocratic and criminal nature of imperialism, in concrete and scientific terms. He said that the Filipino people and peoples of the world must launch protests and other mass actions against imperialist war and plunder and build the broadest anti-imperialist front of all democratic, patriotic, progressive forces everywhere. (Bulatlat.com)

World stocks drop on widespread panic (Scramble for cash sparked)

October 10, 2008

By Kevin Plumberg
Reuters
First Posted 10:50:00 10/10/2008

HONG KONG — Asia stocks dropped sharply on Friday, with Japan’s Nikkei plunging 11.0 percent, while the yen and gold rose on growing fears that no government effort so far has rejuvenated credit markets or kept the global economy from a path to recession.

The Nikkei share average plummeted in early trade, and the Osaka stock exchange had to halt trading after a circuit breaker was tripped.

Overnight Wall Street stocks crumbled in the final minutes of trade, with the S&P 500 falling 7.6 percent.

Selling in equity markets was brutally swift, taking the MSCI index of Asia-Pacific stocks excluding Japan down 3.5 percent to the lowest since June 2005.

Government bond futures soared as the rapid decline in Asia stocks forced investors to buy the nearest safe haven despite fears of a supply glut that have recently weighed on US Treasuries.

“Equity and fixed income markets seem to be stuck in a negative feedback loop as the lack of interbank lending and funding and waning investor confidence keep pushing one another,” UBS currency strategists said in a note to clients.

The 10-year Japanese government bond future was up 0.4 point to 138.89 and the 10-year US Treasury note futures were up more than a full point

The US dollar fell to the lowest since March against the yen, at 98.55 yen

Spot gold prices were up 2.0 percent to $923.30 an ounce to the highest since July.

US crude oil futures fell about 3.0 percent to a fresh 12-month low in electronic trade on Friday on concerns the growing global financial crisis would send demand for fuel slumping.

By 0033 GMT, US crude for November delivery was at $83.99 a barrel, down $2.59 from Thursday’s settlement, having earlier fallen to as low as $83.81.

(PDI)

IMF readies bailouts for countries

October 10, 2008

By Lesley Wroughton
Reuters
First Posted 08:40:00 10/10/2008

WASHINGTON — The International Monetary Fund said on Thursday it was ready to lend to countries hit by the global credit crunch, and had activated an emergency financing mechanism first used in the 1990s Asian crisis.

The Fund already sent a mission to Iceland, where the government has seized control of its largest bank, and has warned that the worst financial crisis since the 1930s Great Depression could inflict lasting economic harm on the world.

“Yesterday I activated emergency procedures of the IMF to respond quickly,” IMF Managing Director Dominique Strauss-Kahn told a news conference. “We are ready to answer any demand by countries facing problems,” he said, adding that no country is immune from the crisis.

The IMF chief said the IMF was willing to provide financial assistance not only to emerging and developing nations, but also to Western countries.

“Nobody knows if some … advanced economies will not also be in need of some help by the IMF,” he said, adding that countries needing to borrow will face more streamlined conditionality than normal and funding will be made available quickly. “Very quickly means two weeks at most,” he added.

After several years of no major crises in emerging economies, the move puts the IMF’s board of member countries and staff on alert that the Fund will have to respond quickly if a country needs financial help.

It also puts the global financial firefighter more at the forefront of the current financial crisis following months of being on the sidelines.

Panic over toxic, illiquid US mortgage loans has sapped confidence in financial institutions, forced governments to pledge hundreds of billions of dollars of taxpayer money and pushed Western and other central banks to deliver their first coordinated interest rate cut.

Speaking ahead of IMF and World Bank meetings of world finance leaders in Washington this weekend, Strauss-Kahn said the main task for policy-makers was to restore confidence and calm global markets.

Group of Seven finance ministers and central bank chiefs also meet in Washington on Friday to consider their options.

The IMF’s emergency facility was created in 1995 as a way of speeding up the approval of loans to countries in peril.

It was first used in 1997 to help the Philippines, Thailand, Indonesia and South Korea end crushing runs on their currencies during the Asian financial crisis.

The IMF, which played a central role in the bailouts of countries in Asia and Latin America in the 1990s, relied on lending to fund its operations. But with fewer crises over the years, it had faced a growing income deficit, prompting an agreement in April to sell some of its gold stocks and invest profits in government and corporate bonds.

The IMF has about $200 billion immediately available to lend to countries in need but can tap other sources. This is small compared to the trillions of dollars central banks and governments have poured into the financial system over the past few weeks.

UNDER PRESSURE

Emerging markets are under pressure again after strains in the United States and Europe spread. Investors are fleeing their securities for safer assets, foreign banks are cutting lending and the countries’ exporters are braced for weaker demand from Western consumers.

Strauss-Kahn renewed calls for more coordinated steps to calm panicky markets beyond the unprecedented simultaneous action of central banks on Wednesday to cut interest rates.

He said the global economy was on the cusp of recession but with quick and forceful action, the spreading crisis could be contained.

“All kinds of cooperation has to be recommended. All lonely acts have to be avoided, if not condemned,” he said.

His calls for more coordination were backed by World Bank President Robert Zoellick who said he hoped a meeting of Group of Seven industrial nations on Friday will indicate they “are getting ahead of the curve.”

He said while countries will take different actions, tailored for their own circumstances, they should coordinate beyond just the G7 members to target the same basic problems.

“The actions need to be coherent and reinforcing,” he said, referring to Wednesday’s simultaneous rate cut by central banks.

(PDI)

Davids vs Goliaths: Face off in Mindanao mines

October 3, 2008

By Edwin G. Espejo

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FILIPINO partners of foreign mining firms are slowly beginning to realize that inviting prospective offshore investors is proving to be more than they could handle than all shades of activists opposed to mining operations in the country.

These differences are taking deep roots in the boardrooms where giants in the global mining industry are slowly building up their interests and investments in Philippine mining companies.

What’s your take on the Mindanao crisis? Discuss views with other readers

Asiaticus Management Corporation (Amcor) president Vicente Jayme Jr. said the difference goes beyond clashes over management style and cultural sensitivities.

“We have altogether different objectives which resulted into the delay of our exploration activities,” Jayme said, referring to Australian mining giant BHP Billiton with which he and his Filipino group have a joint venture agreement to explore ore deposits at the Pujada Nickel Project in Davao Oriental.

Trouble began when Filipino partners of Amcor questioned the priorities of BHP Billiton, which owns 40 per cent of the company.

“We have been waiting for them (BHP Billiton) over the last seven years to make good of their commitment to pour in investment for the project exploration,” he said in an interview at the break of the first Mindanao Mining Forum held at the Waterfront Insular Hotel in Davao City two days ago.

His fellow company official, Amcor Vice President Lauriano Barrios, said he is getting the impression that big foreign mining companies are only engaged in “mine banking.”

By claiming stakes in Philippine mining projects, he said these mining giants are already amassing huge profits in the stock markets. “They are building up their capital at our expense,” Barrios said.

While acknowledging that their case is mere microcosm of clashing interests between Filipino and foreign investors, Jayme said each and every mining corporation has its own peculiarities.

He has a point.

At the Sagittarius Mines Incorporated (SMI) in Tampakan, South Cotabato, an internecine corporate war is also brewing.

Xstrata Copper, a subsidiary of Xstrata Plc, is engaged in a bitter and costly war to hold off a bid of investors from taking control over the 34 per cent stake held by its partner, another Australian mining firm Indophil Resources Ltd., after it foiled an attempt by Hongkong-based Stanhill Consortium to get into the corporate picture.

Filipino corporate conglomerate Alsons Group is now trying to buy Indophil’s stake at Tampakan Copper and Gold Project.

With ore deposits of over 12.8 million tons of 0.6 per cent copper and 15.2 million ounces of 0.2 grams per ton of gold, The Tampakan Copper and Gold Project is reportedly the biggest of its kind in Asia. This potential find has sent the share prices of Indophil Resources Ltd., at the Australian Stock Exchange from AUS$0.35 per share to 1.32 per share at the time Stanhill made its offer in June this year.

The corporate war in SMI has spilled over to the corporation itself. The ensuing corporate shakedown following the takeover of Xstrata people in the management of SMI has heightened the opposition to the mining operations of the company.

A former consultant of SMI said, since Xstrata gained control over the project, nothing good has come out for the company in the local media.

Filipino partners of Philex Gold in Surigao are likewise moving to buy out the 50 per cent interest of Anglo American Plc following divergent views with the foreign mining firm “on a number of assumption and conclusions made in (its) feasibility studies such as metal prices, treatment and refining charges, engineering and owner’s costs and capital contingency.”

Jayme, whose father is former public works and finance secretary Vicente Jayme Sr. during the Aquino administration, said some global mining companies are using their “proprietary rights” over mining technologies and stacks off cash to hold Filipino mining interest hostage.

He said they finally decided to rescind their contract with BHP Billiton “because of our commitment to the communities.”

If need be, they will do it on their own sans BHP Billiton, he pointed out.
Technologies, he revealed, are no longer the private domains of these foreign mining firms.

“We have made several consultations with Chinese and Japanese mining firms and they are willing to help us out,” Jayme said.

BHP Billiton is the world’s biggest diversified mining company and holds varying amount of stakes over scores of mining claims all over the world. Xstrata Plc, on the other hand, is the world’s fourth largest mining firm while Anglo American Plc is among the world’s leading mining giants.

Barrios said with BHP Billiton having so much and so many interests in mining all over the world, exploring nickel at the Pujada project has become the least of its priorities.

“What about us? We cannot wait for them forever. Ginugutom nila ang mga (They are starving the Filipino) investors,” he rued.

Jayme refused to characterize the ongoing boardroom wars in many local mining firms with foreign partners as a product of birthing pains following the passage of Republic Act (RA) 7942 or the Philippine Mining Act of 1995.

RA 7942 was crafted to ostensibly resuscitate the mining industry in the country which, during the pre Martial Law era, was Asia’s biggest and most developed.

Until recently, Mindanao has been largely untapped as past mining operations were heavily concentrated in Luzon and Visayas. Since the passage of the law, there are already over 64 mining applications from 26 mining firms in the South Cotabato-Cotabato-Sultan Kudarat-Saragani-General Santos City (Soccsksargen or Central Mindanao Region) area alone.

With the Supreme Court (SC) in 2004 upholding the constitutionality of the RA 7942, which allows foreign corporations to wholly own mining firms and claims in the country, there is no telling where these intra-corporate wars are headed to.

Jayme is not straightforwardly asking the government to intervene and review its policy on the development of the mining industry in the country. But he has these parting words: “Support what is Filipino that belongs to the Filipinos.” (SunStar)

US Senate votes on new bailout

October 2, 2008

Thursday, October 2, 2008

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WASHINGTON – In a surprise move to resurrect US President George W. Bush’s $700-billion Wall Street rescue plan, Senate leaders scheduled a vote on the measure for Wednesday but added a tax cut plan already rejected by the House of Representatives.

Sen. Harry Reid, leader of the Democratic majority, who sets the Senate agenda, and Republican leader Mitch McConnell disclosed the plan Tuesday. The Senate plan also would raise federal deposit insurance limits to $250,000 from $100,000 per account, as suggested by both presidential nominees a few hours earlier.

The move to add tax legislation – including a set of popular business tax breaks – risked a backlash from House Democrats insisting they be “paid for” with savings elsewhere.

By also adding legislation to prevent more than 20 million middle-class taxpayers from feeling the bite of the alternative minimum tax, the step could build momentum from House Republicans for the Wall Street bailout. The presidential candidates, Sens. John McCain, the Republican, and Democrat Barack Obama, intend to fly to Washington for the votes, as does Sen. Joe Biden of Delaware, the Democratic vice presidential candidate.

The alternative minimum tax was created in the 1970s to bring in money from very rich people who avoided heavy taxes through legal loopholes; inflation and escalation in salaries over the decades have put millions of middle-class wage-earners in the range of the increased tax unless it is changed.

The surprise move to have a Senate vote on Wednesday capped a day in which supporters of the imperiled multibillion-dollar economic rescue fought to bring it back to life, courting reluctant lawmakers with a variety of other sweeteners, including the plan to reassure Americans their bank deposits are safe.

Wall Street, at least, regained hope. The Dow Jones industrials average rose 485 points, one day after a record 778-point plunge after the US House rejected the plan worked out by congressional leaders and the Bush administration.

Before Reid and McConnell’s move, lawmakers, Bush and the two rivals to succeed him all rummaged through ideas new and old, desperately seeking to change a dozen House members’ votes and pass the $700-billion plan.

The tax plan passed the Senate last week, on a 93-2 vote. It included the alternative tax relief, $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana, and some $78 billion in renewable energy incentives and extensions of expiring tax breaks. In a compromise worked out with Republicans, the bill does not pay for the AMT and disaster provisions but does have revenue offsets for part of the energy and extension measures.

That was not enough for the House, which insisted that compensation from other expenses be supplied to offset the energy and extension parts of the package.

The Senate move seems aimed at “jamming” the House into accepting the deficit-financed tax cuts. Conservative Democrats will not like the idea, but some Congress-watchers suspect most Democrats might be willing to go along.

Still, the House is where the problems are, and leaders there were scrounging for ideas that might appeal to a few of the 133 Republicans and 95 Democrats who rejected the proposal on Monday.

Senate Banking Committee Chairman Christopher Dodd, a Democrat, told reporters, “I’m told a number of people who voted ‘no’ yesterday are having serious second thoughts about it.” He added, however, “There’s no game plan that’s been decided.”

The idea drawing the biggest support was to raise the federal deposit insurance limit, now $100,000 per account, to $250,000. Several officials, including presidential nominees John McCain and Barack Obama, endorsed the change.

So did the agency that runs the program.

Within hours of the candidates’ separate statements, Federal Deposit Insurance Corp. chairman Sheila Bair asked Congress for temporary authority to raise the limit by an unspecified amount. That could help ease a crisis of confidence in the banking system, Bair said.

She said the overwhelming majority of banks remain sound but an increase in the cap would help ease a crisis of confidence in the banking system as well as encourage banks to begin more lending.

Other ideas include extending unemployment insurance benefits, typically a Democratic goal, but one that appeals to some Rust Belt Republicans. Another Democratic-backed idea would double the property tax deduction taken by people who do not itemize their taxes. And another calls for more spending on transportation infrastructure projects, which would create more jobs.

Monday’s House vote was a stinging setback to leaders of both parties and to Bush. The administration’s proposal, still the heart of the legislation under consideration, would allow the government to buy bad mortgages and other deficient assets held by troubled financial institutions. If successful, advocates of the plan believe, that would help lift a major weight off the already sputtering national economy.

The proposal ignited furious responses from thousands of Americans, who flooded congressional telephones. The House voted 228-205 against the plan. Some lawmakers reported a shift in constituent calls pouring into their offices Tuesday after the record stock market decline. Many callers, they said, want Congress to do something without “bailing out Wall Street.”

Bush renewed his efforts, speaking with McCain and Obama and making another statement from the White House. “Congress must act,” he declared.

Though stock prices rose, more attention was on credit markets. A special rate that banks charge each other shot higher, further evidence of a tightening of credit availability.

Bush was talking about everyday Americans on Tuesday, not banks or other financial institutions. And no supporters were using the word “bailout.”

The president noted that the maximum $700 billion in the proposed bill was dwarfed by the $1 trillion in lost wealth that resulted from Monday’s stock market plunge.

“The dramatic drop in the stock market that we saw yesterday will have a direct impact on retirement accounts, pension funds and personal savings of millions of our citizens,” Bush said. “And if our nation continues on this course, the economic damage will be painful and lasting.” – AP (PStar)

Gloria: Focus is on insulating RP

October 1, 2008

PRESIDENT Arroyo yesterday said her economic team is working hard to insulate the country’s economy from the financial crisis in the United States.

Arroyo said the economic team is focusing on managing the inflationary pressure to avert any continued hike in prices of commodities, and in sustaining economic growth to “continue to generate jobs and deliver the tax revenues we need to fuel our investment,”

She said the government is also strengthening the banking system to improve the fiscal health, encourage investment, sustain the economic growth and insulate the economy from the volatility in the world market.

“We have been working hard to make sure that food supplies remain stable. We’re working hard to make sure that there is food on the table of every Filipino. We have also been introducing measures to lift the burden of high fuel prices from our people,” Arroyo said.

However, details of the programs were not mentioned.

Arroyo convened her economic team Tuesday night in Malacañang to further discuss measures and to assess the impact on the economy of the developments in the US including the rejection of the US House of Representatives on the $700 billion bailout package.

Expected to attend the meeting were Budget Secretary Rolando Andaya Jr., Finance Secretary Margarito Teves, Trade Secretary Peter Favila, Bangko Sentral governor Amando Tetangco, Planning Secretary Ralph Recto, Agriculture Secretary Arthur Yap, and Energy Secretary Angelo Reyes.

Andaya foresees that if the US Congress continues to reject the bailout plan, the current economic crisis could worsen and be far worse than the Asian financial crisis of 1997.

He said this would mean among others, that the interest rates would go up and exports would shrink. The US is the biggest trading partner of the Philippines.

“Mas concern namin kung ano ang effect. What will be the negative effects if a bailout does not materialize? Of course, down the line new taxes would be one of the options,’ he said.

Sen. Mar Roxas called on the Bangko Sentral, the DOF and other government financial institutions not to keep the public “out of the loop” about the unraveling global financial crisis.

“Lack of information only causes uncertainty among the public. As long as the BSP and DOF communicate clearly with the people – from sophisticated investors to ordinary depositors – we are containing speculation,” he said.

Roxas, chair of the committee on trade and commerce, said more importantly, the economic managers must take stock of any impact of the financial crisis on the real economy, which may happen within a few months unless plans to plug these are put in place.

Roxas said that instead of panicking or taking imprudent actions, the government and private sector institutions should take this challenge as an opportunity to plan strategically for the future.

“We already know that global markets are changing in an increasingly dynamic and interconnected way. We all know that we cannot be in ‘business-as-usual’ mode forever,” he said. – Jocelyn Montemayor (Malaya)

======================

My Take:

What’s the detail?

Just asking.

Bailout rejected

October 1, 2008

Shock vote sends global markets sliding

NEW YORK/WASHINGTON — US lawmakers rejected a $700 billion bailout plan for the financial industry in a shock vote that sent global markets sliding as the world credit crisis claimed more banks.

By a vote of 228-to-205 the House of Representatives rejected a compromise plan that would have allowed the Treasury Department to buy up toxic debt from struggling banks.

The plan’s defeat sent US stocks down sharply, with the Dow Jones industrial average briefly falling more than 700 points, its biggest intraday drop ever.

Shares had already been under pressure following sharp declines in Asian and European shares on fears the crisis was spreading. Global money markets remained frozen, even as central banks poured in cash in an attempt to boost liquidity.

Capping three hours of debate on Capitol Hill, House majority leader Steny Hoyer of Maryland had warned lawmakers that the cost of inaction would be an economic calamity beyond Wall Street.

“A meltdown would begin, it is true, on a few square miles of Manhattan, but before it was over, all of us know, no city or town in America would be untouched,” Hoyer said.

When the contentious bailout plan was announced by the Bush administration last week, some House Republicans balked at spending so much taxpayer money just before US elections.

Republican House members voted against the bailout by a more than 2-to-1 margin. A majority of Democrats voted in favor.

US President George W. Bush was scheduled to make a statement on the rescue package at 12:45 GMT Tuesday (8:45 p.m. in Manila) after meeting on Monday with economic advisers including Federal Reserve Chairman Ben Bernanke to consider the administration’s next move.

“I was disappointed in the vote that the United States Congress (had) on the economic rescue plan,” Bush told reporters in Washington. “Our strategy is to continue to address this economic situation head-on and we’ll be working to develop a strategy that will enable us to continue to move forward.”

The Senate returns on Wednesday and the House on Thursday after a break for the Jewish New Year holiday of Rosh Hashanah. No laws can be passed in their absence but their staffs could work on a revised plan.

The showdown on the bailout proposal came too late for Wachovia Corp, which agreed to sell most of its assets to Citigroup Inc. in a deal brokered by the Federal Deposit Insurance Corp.

The Dow Jones industrial average was down more than 4 percent and the broader S&P 500 index was down nearly 6 percent. Oil fell $8 a barrel.

Earlier, European shares dropped to a three-and-a-half year closing low with bank shares weighing heavily.

“Investors are fearful, frenetic, especially when it comes to banking shares. They want to get out now and see the after effects from afar,” said Frank Geilfuss, head analyst at Bankhaus Loebbecke.

Around the world, investors were dumping assets they regarded as risky. World stocks were down sharply, while gold and US Treasuries surged in the rush to safety.

The world’s central banks, led by the US Federal Reserve, announced a $330 billion expansion of currency swap arrangements, which allows them to increase the amount of money they can provide in their home markets, effectively throwing more money at the crisis.

Earlier, the governments of Belgium, the Netherlands and Luxembourg moved to partly nationalize Belgian-Dutch group Fortis NV with an injection of more than $16 billion, and German lender Hypo Real Estate Holding AG secured a credit line from the German government and banks of up to 35 billion euros.

British mortgage lender Bradford & Bingley Plc was brought under the government’s wing, shares of French bank Dexia tumbled on a report that it might need emergency capital, and bank rescue deals also emerged in Iceland, Russia and Denmark.

“The contagion is spreading to mainland Europe and everyone’s asking, ‘Who’s next?’” said Mark Sartori, head of European sales trading at Fox-Pitt, Kelton in London.

As investors raced for safe havens, Asian stocks trimmed deep early losses after Wall Street’s biggest fall since the crash of 1987.

“It’s hard to imagine what’s going to happen. It’s kind of scary,” said Masayoshi Okamoto, head of dealing at Jujiya Securities in Tokyo. “In particular, European banks were putting up a front that nothing was wrong, but now they’re falling one after another.”

Shares in Asia recovered from early lows but were still down about 3 percent.

Oil fell on fears of further economic slowdown, and the Japanese yen hit a 4-month high.

Investors worried that a collapse in financial markets would tip the United States economy into a painful recession that drags the rest of the world down with it.

“We do not rule out a US recession being deep and long and having a severe global impact,” said Gerard Lyons, chief economist at Standard Chartered in London. – Reuters (Malaya)

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My Take:

Just watched the “Illuminati” documentary.

And it makes me think about the possibility that the Illuminati’s are going bankrupt and they wanted to use the American taxpayer’s money to cushion their fall and retain their grasp on the money.

The thought makes me shiver.

Just thinking aloud.

Capitalism Has Proven Karl Marx Right Again

September 27, 2008

Time for a Marxist interlude. Inherent contradictions of capitalism, anyone? Intrinsic instability? Or perhaps we could risk the simple rhetorical questions Herr Marx somehow forgot to ask. To wit: have you ever seen a poker game in which no-one can ever lose? And would you, in your right mind, ever trust such a game?

BY IAN BELL
INTERNATIONAL
Posted by Bulatlat

Time for a Marxist interlude. Inherent contradictions of capitalism, anyone? Intrinsic instability? Or perhaps we could risk the simple rhetorical questions Herr Marx somehow forgot to ask. To wit: have you ever seen a poker game in which no-one can ever lose? And would you, in your right mind, ever trust such a game?

Capitalism works, so we are assured. This counts as, and possesses the worth of, an article of faith. What is actually meant – and I suggest you find a history book if you doubt me – is that capitalism “works” by failing periodically, and failing catastrophically. Strangely, no-one is ever to blame, far less arrested, for these acts of freakish nature.

Nevertheless, amid the unconscious, accidental poetry of dismal economics you will find the phrase “moral hazard”. It means that you have to be stupid or mendacious to reward stupidity and mendacity. The “system” functions best when there are punishments as well as rewards. If, that is, the system functions.

So it was with Lehman Brothers, fourth largest (until the weekend) of American investment banks. Those masters of the universe had let it be known that they were “too big” to fail. Apostles of the free market, advocates of “light touch” (zero) regulation, they despised state interference until the state – meaning the general population – seemed the lender of last resort. Disabused of that notion, they went bust. Some would call that capitalist efficiency.

Henry “Hank” Paulson, US Treasury Secretary, would be one of those. As a former Goldman Sachs demi-god he saw no contradiction between past life and present when refusing to hand free money to Lehman.
Bear Sterns was one thing; Fannie Mae and Freddie Mac (just $5.4 trillion of American mortgage liabilities) another. But an example was to be made of the erstwhile “fourth largest” to keep hazard at bay and maintain a moral core. Pour encourager les autres, you understand.

The fun part, for a journalist, involves paper. Lehman, like its sibling institutions, had a lot of that. “On paper” the bank had $639bn in assets and $613bn in debts. Sustainable, you might have thought. But what did those assets truly amount to, and what did those debts actually mean? Some $40bn to $60bn of the latter are now defined as “toxic” (bad); Lehman has posted a $2.8bn quarterly loss (very bad); and no-one has a clear idea of what the supposed assets might really be worth (incomprehensibly bad).

This part of the paper trail begins and ends – Karl Marx would have been entirely at home – with the selling of insupportable debt to the very poor. It turned, as the first flickering of a bright idea, on the suckering of the disadvantaged, the exploitation of the simple desire for a home, and the fantastic belief that debt can be shuffled eternally. Lehman and Merrill Lynch ($50bn to Bank of America, itself “embattled”) and the rest treated sub-prime reality as a paper concept, pixels on a screen.

These notions were then repackaged, “securitised”, with good debt and bad bundled together like a job lot of tat in a car-boot sale. These “instruments”, sold and resold and sold again, then became the excuse
for still more borrowing, still more debt. Low interest rates – step forward Alan Greenspan and Gordon Brown – kept the party going for a decade. But the poor are a funny lot. They persist in failing to have
money. Hardly worth the pieces of paper on which their names are written, the saps.

In a rational world – not this one – everything just described would count as bonkers. It would be funny, in a Carry On Banking sort of way. People would laugh at the very idea of wealth conjured from thin air and reality as a distraction for hapless civilians. But it has all come to pass. In some quarters they are wondering if the Lehman episode has brought a sorry year to a conclusion. I suggest that they review the autumn of 1929. And then look east.

Wall Street, 80 years ago, did not crash in a day. Week after week, people would tell one another that the crisis was over. Things were looking up. Happy days were here, or there, again. Instead, things went from bad to worse to hellish while the central banks allowed feral markets to hunt down capitalism’s sickly runts. The people claiming to be in charge of Halifax Bank of Scotland this week will know what I mean. A “correction” becomes a purge in the blink of an eye.

Part of capitalism’s problem – there’s more where this came from – is its preference for paper before people. Those who talk seriously of the “real” economy give a flavour of the attitude. They even suggest that one can “decouple” financial markets from the planet occupied by food, heat, jobs, families, petrol prices, children and money you can spend in a shop. They base their behaviour on the assumption that lived reality is a concept best reserved for computer models. Then the clever sums fail to add up.

Britain fell for this fantasy in a very big way. A succession of Thatcher’s Chancellors assured us that times would be better in a post-industrial service economy. Making things, things you could touch and use, was suddenly the oldest of old hats. Financial “services” were the modern alternative in a society that could no
longer get away with paying coolie wages to its proletariat. Besides, you can’t flog credit cards to peasants.

The result is that Britain is uniquely vulnerable to the firestorm. Lehman’s London outpost has just “shed” 5000 jobs. A quarter of a million more inhabit the sprawl they still call the City. Scotland, skull for skull, perhaps has greater exposure, its insurers agog over the travails of American International Group, “the world’s largest” (if broke) in their field. The paper industries that fed GDP that fed the housing market that fed the credit boom that fed Circularity, not to mention sheer deceit, will be themes for months to come.

Those currents of history of which Herr Marx was so fond become apposite, at this point. Wars and impressive munitions have distracted us from the end of the American century. Gore Vidal said it best when he observed that the empire fell, bar the shouting, when the US became the world’s largest debtor nation. That remains the case. We depend on a reserve currency itself dependent on an economy
that is, by any measure, bust. All those creative manoeuvres with collateralised debt obligations mask a fundamental truth: America is broke.

India is not, however. Brazil is not. China, with $1 trillion in foreign, mostly greenback, currency reserves does not have a sub-prime problem. It has a dollar problem. If there is to be – if there is – a catastrophic failure within the US system, Beijing stands to lose a bundle. If hey act to support Washington, however,
the Chinese – and the Indians, the Koreans, the Arabs and the rest – will want assets you can trust and test in return.

It’s what known as a fire sale. In the reasoning of Karl Marx, never actually mistaken about the tendencies of economic actors, it stands as a definitive crisis. The world just changed, ready or not. (Posted by Bulatlat)

Big Banks Go Bust: Time to Reform Wall Street

September 27, 2008

We must go further in fixing the financial sector – most importantly by downsizing it. The financial sector accounted for more than 30 percent of corporate profits in 2004. Back in the 1950’s and 1960’s, the country’s period of most rapid growth, the financial sector accounted for less than 10 percent of corporate profit.

BY DEAN BAKER
The Campaign for America’s Future/Truthout
INTERNATIONAL
Posted by Bulatlat

With the demise of Fannie Mae, Freddie Mac, IndyMac, Bear Stearns and now Lehman Brothers, we’ve been treated to the failure of more major financial firms than during any year since the Great Depression. The sight of rich bankers getting the boot might be lots of fun if it were just a spectator sport. Unfortunately, we are in the game with these clowns.

As a result of their incompetence, irresponsibility and greed, the housing bubble was allowed to grow to dangerous proportions. Its collapse threw the economy into recession, putting millions of people out of work and lowering the wages of those who still have their jobs. The plunge in house prices has destroyed much of the life savings for tens of millions of people nearing retirement.

Meanwhile, the bankers who messed up and destroyed the companies who hired them are still multimillionaires. Most of them are still in their old jobs getting multimillion-dollar pay packages. This is a sector that badly cries out for reform, and there is no better time than now to put it into place.

The first target for reform should be the outrageous salaries drawn by the top executives at financial firms. The crew that lost tens of billions at Citigroup, Merrill Lynch and the rest have received tens of millions, possibly even hundreds of millions, in compensation for their “work” over the last few years.

There is a general problem in corporate America of stockholders being unable to effectively organize to rein in top management. This problem is most serious in the financial industry.

Thankfully, the credit crisis gives us the tools we need to rein in executive pay. Currently, the major surviving investment banks (e.g. Merrill Lynch, Morgan Stanley, Goldman Sachs) are operating on life support. They are drawing money at below-market interest rates from the Federal Reserve Board’s discount window. This privilege (for which they pay nothing) can easily be worth billions of dollars a year.

These banks are also operating with an explicit guarantee from Fed Chairman Ben Bernanke to their creditors that he will honor their loans in the event that an investment bank, like Bear Stearns, goes belly up. This guarantee is enormously valuable. Investors who make loans to Merrill Lynch or Morgan Stanley don’t have to worry about the health of these companies because Bernanke has said that, if necessary, he will use public money to pay them back.

While we don’t want a chain reaction of banking collapses on Wall Street, the public should get something in exchange for Bernanke’s generosity. Specifically, he can demand a cap on executive compensation (all compensation) of $2 million a year, in exchange for getting bailed out. For any bank that is not on board, Bernanke could make an explicit promise to their creditors – if the bank goes under, you will get zero from the Fed.

This can be an effective way to restore sanity to the salaries paid on Wall Street. And, this can be a good example for setting executive pay more generally. Any time a company comes to the public for a handout, like tax breaks for oil companies or low-interest loans for auto companies, the $2 million cap on all compensation goes into effect.

This is important directly because much of the country’s wealth has been steered into these folks’ pockets, but also because the outrageous compensation packages on Wall Street distorted pay structures throughout the economy. Presidents of universities often get over $1 million a year, and even top executives at private charities can often earn near $1 million a year. These salaries seem low when compared to their counterparts in the corporate world, but they are outrageous when compared to the paychecks of typical workers.

Of course, we must go further in fixing the financial sector – most importantly by downsizing it. The financial sector accounted for more than 30 percent of corporate profits in 2004. Back in the 1950’s and 1960’s, the country’s period of most rapid growth, the financial sector accounted for less than 10 percent of corporate profit.

The financial sector performs an incredibly important function in allocating savings to those who want to invest in businesses, buy homes or borrow money for other purposes. But shuffling money is not an end in itself. The explosion of the financial sector over the last three decades has led to a proliferation of complex financial instruments, many of which are not even understood by the companies who sell them, as we have painfully discovered.

The best way to bring the sector into line is with a modest financial-transactions tax. Such taxes have long existed in other countries. For example, the United Kingdom charges a tax of 0.25 percent on the purchase or sale of share of stock. This is not a big deal to someone who holds their shares for ten years, but it could be a considerable cost for the folks who buy stocks in the morning that they sell in the afternoon.

Comparable taxes on the transfer of all financial instruments (e.g. options, futures, credit default swaps, etc.) could go a long way in reducing speculation and the volume of trading in financial markets. Such a tax could also raise an enormous amount of money – easily more than $100 billion a year. This would go a long way toward funding national health care insurance or a major green infrastructure project.

And, this tax would be hugely progressive. Middle-income shareholders might take a small hit; but it would be comparable to raising the capital gains tax rate back to 20 percent, where it was before it was cut to 15 percent in 2003. The real hit would be on the big speculators and the Wall Street boys, the folks who gave us the housing crisis. Given what the Wall Street crew has done for us, this is change that we can believe in. (Posted by Bulatlat)

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of “The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer” (www.conservativenannystate.org). He also has a blog, “Beat the Press,” where he discusses the media’s coverage of economic issues. You can find it at the American Prospect’s web site.

On the current global financial crisis

September 27, 2008

Written by Prof. Jose Ma. Sison

I wish to comment on the gravity of the current financial crisis of the world capitalist system and on the impact of this in the various major contradictions in the world, with special attention to the people’s resistance in Asia, Africa and Latin America and in the imperialist countries.

Gravity of the global financial crisis

The economic and financial crisis of the US and world capitalist system has worsened to a new and unprecedented level since the Great Depression. This signifies the utter failure of the attempt of the US and other imperialist powers to overcome the problem of stagflation under Keynesianism with the policy shift to neoliberalism. Instead, the latter policy has aggravated and deepened the crisis of overproduction in the real economy and has given free rein to the abuses of finance capitalism.

The states of imperialist and other countries have adopted the policy to press down wage levels and cut back social spending. They have allowed the monopoly bourgeoisie to accelerate the concentration and centralization of productive and finance capital in its hands through the denationalization of underdeveloped economies, privatization of public assets, liberalization of investments and trade and deregulation at the expense of the working people, women, children and the environment-all in the name of “free market” globalization.

The consistent result has been the actual contraction of the world market, as the purchasing power of the working people has declined and has limited the demand for the products of expanded production. Ever intent on maximizing profits by raising the organic composition of capital (constant capital over variable capital), the monopoly bourgeoisie has reduced industrial employment and regular employment in imperialist countries by shifting production to a few other countries, like China, India and the Southeast Asian countries, in order to avail of cheap labor.

The illusion of economic growth has been conjured for the entire world capitalist system through the wanton expansion of money supply and credit. The imperialist states and nearly all other states have gone into unrestrained local and foreign borrowing to cover trade and budgetary deficits. The state and private banks have expanded credit and the private corporations have gone into heavy indebtedness by getting bank loans and issuing corporate bonds. To maintain the US as the biggest consumer market, US households have been given a seemingly endless flow of credit, culminating in the housing bubble and ending in the ongoing mortgage meltdown.

The truth about the US economy is now out. The sordid facts about the con game of the lead economy of the world capitalist system are being exposed. The debts of the US federal government, the private corporations and households are unsustainable and cannot be paid back. And yet the US policy makers continue to expand the money supply and lower the interest rates. The industrial decline and the runaway federal debt of the US have undermined the long-touted role of the US as the engine of global economic growth and the global market of last resort as well as the value of the US dollar as the reserve currency of the world.

The US economy has become dependent on credit provided by certain oil producing countries and by countries supplying consumer goods. It has fallen into a prolonged state of camouflaged recession since 1999 when the high tech bubble was about to burst. Some US economists now describe the US economy as being in a state of inflationary recession and is halfway into an hyper-inflationary Weimar Republic-type of depression that has a high potential of leaping into Great Depression II. The other industrial capitalist economies are being pulled into the vortex of the global financial crisis that the US chiefly has stirred up.

The few other countries from which the US imports cheap consumer goods face decreasing orders, a credit crunch and the declining value of the US dollar. The chronically depressed underdeveloped countries in the third world find themselves in a far worse situation than before. The overwhelming majority of them have become net fuel and food importers. Their peoples are grievously victimized by the manipulated shortages and price gouging by the global and regional cartels directed by the monopoly capitalists in the US and other imperialist powers. The entire world capitalist system can be summed up as being in a state of depression, especially if we fully take into account the actual social and economic conditions of the oppressed peoples and nations.

Consequences of the global financial crisis

The gravity of the economic and financial crisis of the world capitalist system is such that we can expect the worsening and sharpening of contradictions between the imperialist countries and the oppressed peoples and nations, between the imperialist countries and certain countries that invoke national independence, among the imperialist powers themselves and between the monopoly bourgeoisie and the working class in the imperialist countries.

The crisis of the world capitalist system inflicts social devastation at its worst and suffering at its most painful on the oppressed peoples and nations in Asia, Africa and Latin America. It is therefore understandable why we see here the most widespread spontaneous and organized actions of mass protest and the revolutionary armed struggles that seek to end imperialist domination and overthrow the puppet regimes. The main contradiction in the world is that between the imperialist powers and the oppressed peoples and nations.

The extent of existing revolutionary armed struggles is already formidable, as we observe those in Iraq, Afghanistan, Colombia, Peru, Brazil, Nigeria, Philippines, Turkey, India and other South Asian countries. The potential is high for the revolutionary armed struggles to arise in more countries in several continents. The crisis of the world capitalist system generates the favorable objective conditions for the further spread of people’s wars for national liberation and democracy.

Since the end of World War II, many new national states have arisen from the colonies and semi-colonies either as a result of the revolutionary movements for national liberation or as a result of neocolonial compromise. Most of them are now in the clutches of neocolonialism and neoliberalism. But there are some states which invoke bourgeois nationalism or socialism and assert national independence against the imperialists and their agents. Those states born from successful national liberation movements, such as China, North Korea and Cuba, have been the most effective in asserting national independence and preventing US aggression.

We have also seen the Yugoslavia of Milosevic and Iraq of Saddam resisting the worst of imperialist impositions and being subjected to wars of aggression launched by the US. Currently, there are other countries whose governments stand up to imperialist domination and move to nationalize imperialist enterprises. Venezuela of Hugo Chavez is a prime example. As the crisis of the world capitalist system worsens, we are going to see more dramatic events in the contradictions between the imperialist countries and the countries that assert national independence.

The imperialist powers collude with each other against the oppressed peoples and nations in general. But they compete with each other for sources of cheap raw materials, markets, fields of investment and spheres of influence. As a result of the full restoration of capitalism in former revisionist-ruled countries, imperialist countries competing with each other and seeking to redivide the world have increased in number. The world has become more cramped than ever for the competitions and rivalries of the imperialist powers.

The US is increasingly resented by other imperialist powers for presuming to have sole hegemony over the whole world and for trying to grab the lion’s share of spoils in every continent. At the same time, it is already overextended and weakening in certain parts of the world. Contradictions are developing between the US and Russia and China jointly or separately. So are those between the US and the European Union. These contradictions involve economic, financial, political, security and other issues. As the crisis of the world capitalist system worsens, the contradictions among the imperialist powers will sharpen and generate conditions favorable for the rise of revolutionary movements.

Within imperialist countries, contradictions are surfacing between the monopoly bourgeoisie and the working class. Under the auspices of neoliberalism, the wage and living conditions of the working class have deteriorated drastically. Job security for most workers has evaporated. Worker youth, women and immigrants are discriminated against, exploited and oppressed. Social benefits won over a long period of time have been gravely eroded. Trade union and other democratic rights have been undermined and curtailed.

As the crisis of the world capitalist system worsens, the monopoly bourgeoisie will try to further exploit and oppress the workers. It will pit one section of the working class against another. For the purpose, it will use chauvinism, racism, religious bigotry and fascism. But it is precisely the escalating exploitative and oppressive acts of the monopoly bourgeoisie that will drive the workers to fight back and wage revolutionary struggle. The class struggle in the imperialist countries has never been eliminated. It has only been suppressed for quite a long while. It is now resurgent.

[Prof. Jose Maria Sison is chairperson of the International Coordinating Committee of the International League of Peoples’Struggle (ILPS). The foregoing article (original title: “Implications and consequences of the global financial crisis to the people’s anti-imperialist movement”) was written as a contribution to the Forum on Global Financial Crisis, Third International Assembly, held in Hong Kong on 19 June 2008. Visit the author’s site to read more analyses on various issues.]

3 oil minnows face Customs audit

September 25, 2008

The Bureau of Customs will start reviewing the oil importation and shipment records of three small oil companies as part of a drive to boost revenue collection.

The bureau’s Post-Entry Audit Group, headed by Customs Assistant Commissioner Rolando Ligon Jr., will notify Eastern, Flying V and Unioil about the audit.

“We have prepared notices of audit, and we will inform these oil firms that we will conduct a review of their importations for the last year,” Ligon told reporters Wednesday.

He said the audit would also cover the oil importations made by the three oil companies for 2004, 2005 and 2006.

“It does not mean that if you are placed on audit, you are guilty. Let us wait until the audit ends before making any judgment,” Ligon said.

Up next for audit, he added, are oil giants Caltex, Petron and Shell, subjects of the first round of review.

“So far, there has been no evidence of smuggling [against the oil giants], just discrepancy issues,” Ligon said.

Ligon’s team, which Customs Commissioner Napoleon Morales formed to boost revenue collection, was able to collect more than P80 million in additional revenue for the post-entry audit for the last six months.

As of July, the group got P33.5 million (steel), P14.472 million (paper products), P8.631 million (hardware), P3.965 million (motor industry), P3.460 million (electronics), P2.2 million (liquor), P2.7 million (plastic), P1.046 million (general merchandise) and P2.9 million from other classifications.
–Anthony Vargas

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My Take:

Hmmm… Could the giants had a hand on this?  Is this a way of suppressing one rival’s growth and maintaining the tri-grip to the oil monopoly in the country?

Just asking…

Editorial Cartoon: The Fall

September 21, 2008

And the Fallen

RP Exposure To US Financial Crisis To Result In Business Slowdown

September 21, 2008

The exposure of Philippine banks to the global financial crisis, whether significant or not, will result in the contraction of local businesses and job losses because economic liberalization has made the local banking system vulnerable to external factors.
According to research group IBON Foundation, Philippine banks are merely a conduit of foreign capital, and being in a liberalized and deregulated environment, are vulnerable to the current volatility of global finance.

Even as the Bangko Sentral ng Pilipinas has assured the public that only a few local banks have exposure to cash-strapped US investment banks, the impact on local businesses will be felt since majority of investments in the country are dominated by foreign capital, accounting to around 54% of total flows in the country. Thus though not exposed to the bankrupt Lehman Brothers, investments in the country are affected by the jitters of foreign capital.

The local banking system, dominated by foreign banks, will likely be prudent in lending to small local businesses and would instead opt to protect large businesses with foreign capital. Unavailable access to lending would result in business slowdown and possibly lead to more establishment closures. As it is, financial losses have led to a significant number of closures among establishments in the past years.

Business slowdown will worsen the country’s unemployment, which is already at its record high, as business owners will be forced to cut down on their labor force or close shop. Job losses will be first felt in all trade and investment enclaves in the country, both manufacturing and business process outsourcing (BPOs), and then by the few Filipino firms exporting to the US and related markets.

The global crisis will further worsen the Philippines’ own economic crisis as neoliberal reforms have further deepened its links to the US and the global economy. However, the economy would have been less vulnerable if the domestic economy were not overly dependent on trade, foreign loans and capital, and if nationalist economic policies were in place. (end)

IBON will hold an Usapang IBON to discuss the US financial crisis on 24 September, 1-5 pm at the IBON Center 114 Timog Ave.,QC. Speakers are Dr. Ed Villegas (IBON chairperson) and Ms. Rosario Bella Guzman (IBON executive editor). You are cordially invited to the forum.