Beat the Devil | The Nation

"Arafat is guilty of everything that is happening here," Israeli Prime Minister Ariel Sharon declared on television Monday night. "Arafat has made his strategic choices: a strategy of terrorism." In sync with these fierce words, Israeli forces launched attacks close to the Palestinian leader's house and destroyed his helicopters, an onslaught that the US government conspicuously failed to condemn.

So, in the wake of the recent suicide bomb attacks launched by Hamas, the sky is now the limit for Israeli reprisals: the killing of Arafat and, not so far down the road, perhaps forced expulsion of tens of thousands of Palestinians from the West Bank. In other words, untrammeled military repression by Israel's forces, and a deaf ear by the United States to all Palestinian calls for fair dealing. Write FINIS to all efforts over the past thirty-four years to secure a just settlement in Israel and some measure of satisfaction for Palestinian aspirations.

But isn't that exactly what Israelis like Ariel Sharon have wanted all along? Can anyone claim with a straight face that Sharon and those like him actually want a just peace that would see an end to Israeli settlements on the West Bank, the rise of a Palestinian state in any guise other than pathetic little bantustans ringed by Israel's security forces?

There are those in Israel who outlined clearly in November Sharon's plan to force matters exactly along the lines they have now taken.

Alex Fishman is the main commentator on security matters for Israel's largest mass-circulation paper, Yediot Ahronot, a publication with right-of-center politics. Fishman is known for his excellent contacts in the military. On Sunday, November 25, Fishman issued a prediction based on the November 23 assassination by Israel's security services of the Hamas leader Mahmoud Abu Hanoud. It was featured in a box on the newspaper's front page.

It began, "We again find ourselves preparing with dread for a new mass terrorist attack within the Green Line [Israel's pre-1967 border]." Since Fishman was entirely accurate in this regard, we should mark closely what he wrote next. "Whoever gave a green light to this act of liquidation knew full well that he is thereby shattering in one blow the gentleman's agreement between Hamas and the Palestinian Authority; under that agreement, Hamas was to avoid in the near future suicide bombings inside the Green Line, of the kind perpetrated at the Dolphinarium" discotheque in Tel Aviv on June 1.

Fishman stated flatly that such an agreement did exist, even if neither the Palestinian Authority nor Hamas would admit it in public. "It is a fact," he continued, "that, while the security services did accumulate repeated warnings of planned Hamas terrorist attacks within the Green Line, these did not materialize. That cannot be attributed solely to the Shabak's [Israel's security service] impressive success in intercepting the suicide bombers and their controllers. Rather, the respective leaderships of the Palestinian Authority and Hamas came to the understanding that it would be better not to play into Israel's hands by mass attacks on its population centers."

In other words, Arafat had managed to convince Hamas to curb its suicide bombers. This understanding was shattered by the assassination of Abu Hanoud. "Whoever decided upon the liquidation of Abu Hanoud," Fishman continued, "knew in advance that that would be the price. The subject was extensively discussed both by Israel's military echelon and its political one, before it was decided to carry out the liquidation. Now, the security bodies assume that Hamas will embark on a concerted effort to carry out suicide bombings, and preparations are made accordingly."

Ever since September 11 Israel's leaders followed with deep trepidation the building of the coalition against the Taliban and Al Qaeda. The months of studious indifference displayed by the Bush Administration toward the crises in the Middle East suddenly gave way to President Bush's abrupt, post-September 11 statement that he had always nourished the dream of a Palestinian state.

Consequently, the prime task of the Israeli government and of its supporters here has been to turn back any serious pressure for accommodation with even the most modest of Palestinian demands. In parallel, the faction mustered around Deputy Defense Secretary Paul Wolfowitz and Defense Policy Board chairman Richard Perle has been to push for the United States to reopen direct hostilities with Iraq and settle accounts with Saddam Hussein once and for all.

The Wolfowitz-Perle group knows perfectly well that any serious new confrontation with Saddam would probably be a prolonged and bloody affair. There is no Northern Alliance ready and eager for US intervention in Iraq. The Shiites in the south remember well what happened in 1991, when they rose against Saddam and the United States stood by while he methodically slaughtered them. The Kurds know that a post-Saddam regime might move against them, with similar US indifference. If the United States acted as supervisor and guarantor for an invasion by Ahmed Chalabi and his Iraqi National Congress, the military and diplomatic consequences would be both messy and far-reaching.

It's clear that the Wolfowitz-Perle group is equable in the face of such uncertainties, since whatever the ghastly consequences for ordinary people in Iraq, the one outcome that would be certain is that Israel would be confirmed in its status as the United States' prime ally and supporter in the region, even as the post-September 11 coalition with Islamic countries falls apart. Small wonder they rapturously echo Sharon's denunciations of Arafat as a man of terror even though they, being smart people, probably don't need Alex Fishman to explain how the game is actually being played.

These are the stakes. They're far larger than the present tragicomic efforts to assemble a coalition to run Afghanistan, and there isn't much sign thus far that President Bush understands that comic-book advisories such as "You're for us or against us" do not, in this situation, really apply.

Open the November 5 edition of Newsweek and here's Jonathan Alter, munching on the week's hot topic, namely the propriety of the FBI torturing obdurate September 11 suspects in the bureau's custody here in the United States. Alter says no to cattle prods, but continues the sentence with the observation that something is needed to "jump-start the stalled investigation." The tone is lightly facetious: "Couldn't we at least subject them to psychological torture, like tapes of dying rabbits or high-decibel rap?" There are respectful references to Alan Dershowitz (who's running around the country promoting the idea of "torture warrants" issued by judges) and to Israel, where "until 1999 an interrogation technique called 'shaking' was legal. It entailed holding a smelly bag over a suspect's head in a dark room, then applying scary psychological torment.... Even now, Israeli law leaves a little room for 'moderate physical pressure' in what are called 'ticking time bomb' cases."

As so often with unappealing labor, Alter arrives at the usual American solution: outsource the job. "We'll have to think about transferring some suspects to our less squeamish allies," he says.

What's striking about Alter's commentary and others in the same idiom is the abstraction from reality, as if torture is so indisputably a dirty business that all painful data had best be avoided. One would have thought it hard to be frivolous about the subject of torture, but Alter managed it.

Would one know from his commentary that under international covenants--signed and ratified by the United States--torture is illegal? One would not, and one assumes that as with the war against the Taliban's Afghanistan, Alter regards issues of legality as entirely immaterial. Would one know that in recent years the United States has been charged by the UN and also by human rights organizations such as Human Rights Watch and Amnesty International with tolerating torture in prisons, by methods ranging from solitary, twenty-three-hour-a-day confinement in concrete boxes for years on end, to activating 50,000-volt shocks through a mandatory belt worn by prisoners?

Would one know that one of the darkest threads in postwar US imperial history has been the CIA's involvement with torture, as instructor, practitioner or contractor?

Remember Dan Mitrione, kidnapped and killed by Uruguay's Tupamaros and portrayed by Yves Montand in Costa-Gavras's film State of Siege? In the late 1960s Mitrione worked for the US Office of Public Safety, part of the Agency for International Development. In Brazil, so A.J. Langguth (a former New York Times bureau chief in Saigon) related in his book Hidden Terrors, Mitrione was among the US advisers teaching Brazilian police how much electric shock to apply to prisoners without killing them. In Uruguay, according to the former chief of police intelligence, Mitrione helped "professionalize" torture as a routine measure and advised on psychological techniques such as playing tapes of women and children screaming that the prisoner's family was being tortured.

Alter expresses a partiality for "truth drugs," an enthusiasm shared by the US Navy after the war against Hitler, when its intelligence officers got on the trail of Dr. Kurt Plotner's research into "truth serums" at Dachau. Plotner gave Jewish and Russian prisoners high doses of mescaline and then observed their behavior, in which they expressed hatred for their guards and made confessional statements about their own psychological makeup.

As part of its larger MK-ULTRA project the CIA gave money to Dr. Ewen Cameron, at McGill University. Cameron was a pioneer in the sensory-deprivation techniques for which Jonathan Alter has issued his approval. Cameron once locked up a woman in a small white box for thirty-five days, deprived of light, smell and sound. The CIA doctors were amazed at this dose, knowing that their own experiments with a sensory-deprivation tank in 1955 had induced severe psychological reactions in less than forty hours.

Start torturing, and it's easy to get carried away. Torture destroys the tortured and corrupts the society that sanctions it. Just like the FBI today, the CIA in 1968 got frustrated by its inability to break suspected leaders of Vietnam's National Liberation Front by its usual methods of interrogation and torture. So the agency began more advanced experiments, in one of which it anesthetized three prisoners, opened their skulls and planted electrodes in their brains. They were revived, put in a room and given knives. The CIA psychologists then activated the electrodes, hoping the prisoners would attack one another. They didn't. The electrodes were removed, the prisoners shot and their bodies burned. Alter can read about it in Gordon Thomas's book Journey into Madness.

The Israelis? They're still torturing. In July, AP and the Baltimore Sun relayed charges from the Israeli human rights group B'tselem of "severe torture" by police: Palestinian youths as young as 14 being badly beaten, their heads shoved into toilet bowls and so forth. But Israel outsourced too. After Israel finally retreated from its "security strip" in southern Lebanon, run by its puppet South Lebanese Army, the journalist Robert Fisk visited Khiam prison. His report for The Independent, May 25, 2000, began thus: "The torturers had just left but the horror remained. There was the whipping pole and the window grilles where prisoners were tied naked for days, freezing water thrown over them at night. Then there were the electric leads for the little dynamo--the machine mercifully taken off to Israel by the interrogators--which had the inmates shrieking with pain when the electrodes touched their fingers or penises. And there were the handcuffs which an ex-prisoner handed to me yesterday afternoon. Engraved into the steel were the words: 'The Peerless Handcuff Co. Springfield, Mass. Made in USA.' And I wondered, in Israel's most shameful prison, if the executives over in Springfield knew what they were doing when they sold these manacles."

If handcuffs are sold these days to the FBI's subcontractor of choice, at least the executives will know they have Jonathan Alter to explain the patriotic morality of their bottom line.

The new war on terror isn't going to be of much use in combating the present plunge in America's well-being. Well before the twin towers fell to earth the country was entering a fierce decline, and it is assuredly going to get worse.The fall in growth and investment from early 2000 to early 2001 was the fastest since 1945, from 5 percent growth to zero. So fast, indeed, that people are only now catching on to the extent of the bad numbers, and battening down the hatches as bankruptcies begin to rise.

How did we get from the Merrie Then to the Dismal Now? The bubble in stock prices in those last five years sparked an investment boom, as corporations found mountains of cash available, either from the sale of overvalued stocks or by borrowing money from the banks against the high asset value of those same stocks. And as the Lewinsky years frolicked gaily by, there was a simultaneous consumption boom as the richest fifth of the citizenry--the Delta Force of national consumer spending--saved a lot less and spent a lot more.

The shadows were there for those who cared to look for them. In 1998, 1999 and 2000, when the boom was reaching historic proportions, when annual borrowing by US corporations had reached a historic peak as a percentage of GDP, when Fed Chairman Alan Greenspan was vaunting the power of markets, the rate of profits was falling in the nonfinancial corporate sector, significantly so in manufacturing.

The bubble was due to burst. Now, with the market going down, corporations have less money, can borrow less and invest less. Consumers have less to spend and have begun to lose their appetite anyway. Down go the rates of investment and consumption, and the amount of government debt that the Bush Administration can muster as a Keynesian stimulus will be more than offset by a decline in private debt, as people turn prudent and ratchet up their savings.

But the problems go deeper. The corporate investment boom of the late 1990s took place against a backdrop of falling profitability. Who builds new plants when the bottom line is turning sour year by year? Answer: US corporations in the late 1990s. There was no correlate of investment against the rate of return, hence the amassing of overcapacity on a herculean scale. Between 1995 and 2000 retail store space grew five times faster than the population. Earlier this year, Business Week reckoned that only 2.5 percent of communications capacity is being used.

The most notorious sector was telecommunications, where borrowing was vast and stocks insanely inflated, with analysts boiling up ever more ludicrous ways of claiming profitability for their favored stocks. The degree to which stocks rose above profits was greatest in technology, media and telecommunications (TMT). In this sector, the leading edge of the boom, between 1995 and 2000 the value of TMT stocks grew by 6.1 times, but their earnings by only 2.1 times.

The Organization for Economic Cooperation and Development's survey of the United States for 2000 makes for chastening reading. By that year, the final distension of the bubble, the value of Internet companies reached 8 percent of the total value of all nonfinancial corporate assets in the economy. But most of those companies made only losses. Of 242 Internet companies reviewed in the OECD study, only thirty-seven made profits in the third quarter of 1999, the prepeak of the bubble. Their price-to-earnings ratio was 190 to one; precisely two of these accounted for 60 percent of profits. The other thirty-five profitable companies traded on an average p/e ratio of 270 to one; the 205 remaining companies made losses. For 168 of the companies for which data are available, total losses in the third quarter of 1999 amounted to $12.5 billion at an annualized rate, even as their stock-market valuation reached $621 billion.

You want a definition of a bubble? That's it.

So was there really a "New Economy" emerging in the sunset of the century, as proclaimed by so many exuberant choristers? True, the 1995 to 2000 economy did do better than in any five-year period back to the early 1970s. By all standard measures, such as productivity, economic growth, wages, growth of investment, unemployment and inflation, it was a pretty good time. But as Professor Robert Brenner of UCLA, whose Boom, Bubble, Bust: The US in the World Economy is about to be published by Verso, aptly asks, "If the five years 1995 to 2000 truly saw the emergence of a New Economy, manifesting 'extraordinary performance,' as Clinton's Council of Economic Advisers put it, what are we to call the period 1948 to 1973, which excelled the recent period in every respect?" Productivity growth was about 15 percent slower in those five recent years than in the twenty-five years between 1948 and 1973.

Obit writers for the great boom of 1995-2000 usually avert their eyes from the fact that despite all the exuberance of those giddy years, in terms of growth of gross domestic product, of per capita GDP, of wages and productivity, the 1990s as a whole did worse than the 1980s, and the 1980s worse than the 1970s. In other words, the golden end of the twentieth century was a continuance of the long stagnation of the world economy that began in 1973.

For now? On the one hand, overcapacity; on the other, a drop in investment and consumption, driven first by the drop in the market, then by fear. It will be quite a while before anyone feels the need to invest, hence to borrow. Give the rich a tax cut? It won't help. They'll put it in the bank. Government investment? Yes, if it were done on an appropriately vast scale, but only public investments of a sort that Republicans have never countenanced and that vanished from the political platforms of the Democratic Party decades ago. For sure, planes and missiles for the Navy and Air Force, plus the millions in food aid dropped on Afghanistan, plus new computers for the Office of Homeland Security, aren't going to do the trick.