Nation Topics - Economic Policy
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President George W. Bush's effort to repeal the estate tax has revealed contradictions in the nonprofit sector and confusion about what it values and where it stands.
The loudest applause during George W. Bush's first budget address to Congress--a thumping, shouting, jump-to-your-feet outpouring of enthusiasm--erupted in response to his first mention of his proposed $1.6 trillion tax cut. Coming at the end of a masterful but deceitful description, with more concealed trapdoors than a funhouse ride (they have the fun and we get taken for a ride), of how he could do everything from funding Social Security to paying down the debt and have money "still left over," Bush's proposal argued for returning that money "to the people who earned it in the first place."
The country is not buying. The latest Pew Research Center poll finds that only 19 percent of Americans think the current budget surplus should be used for a tax cut, and 79 percent believe the proposed Bush tax cut will most benefit the wealthy. Meanwhile, 60 percent want any surplus used for domestic programs as well as Social Security and Medicare.
Why, then, was the response to Bush's tax cut proposal so enthusiastic? Perhaps for the same reason that the words "campaign finance reform" never crossed Bush's lips, an omission Senator John McCain wryly noted in a CNN interview. The Wall Street Journal reported the morning after the speech that industry groups have formed a coalition to push the tax cuts in what one White House adviser described as "the largest PR campaign this party has ever conducted." The same adviser went on to say that the effort "will test if we can use the power of the White House and congressional control and the lobbying world to work our will."
With the cat thus out of the bag, Bush's budget should be pronounced dead on arrival. Now is the moment for the minority party to put forth a sensible alternative: No new tax breaks for the wealthy. An earlier, bigger check--either in the form of a tax credit or a "prosperity dividend"--for middle- and low-income earners, to jump-start the economy. Prescription drug coverage for seniors and affordable healthcare for all. Investment in schools and teachers' salaries. Investment to combat the growing shortage of affordable rental housing. Electoral reforms that will insure that every vote is counted.
In opposition, Democrats find it difficult to speak with one voice. A few have already thrown in their lot with Bush. Others are looking to deal. Still others seem stuck on paying down the debt as their prime concern. Thus it is vital that progressives in the party--and the increasingly vibrant base of the party that is central to its electoral hopes--speak out independently to force the debate. Here the Progressive Caucus has done well by pushing its prosperity dividend, which would give every American a $300 check in contrast to Bush's tax giveaway to the rich. Responsible Wealth has done remarkable work organizing the statement by about 120 of America's richest men and women against estate-tax repeal. The large coalition of groups convened to fight the tax cuts--under the leadership of progressive unions, civil rights groups and the public interest community--will help stiffen the backbone of faltering legislators. The Campaign for America's Future's plan for creating a progressive leadership organization will help define and broadcast the choice we face.
Bush has benefited, of course, from the continuing press focus on former President Clinton's tawdry unpardonables and his legacy of political timidity and tactical retreat. Now, progressives must force Democrats to shed that defensiveness. The country did not vote for the Bush agenda, and the vast majority will not benefit from it. Time to go on the attack. This is a fight that can be won.
As the proverbial curtain rises on the Bush era in national politics, it's hard to know just how pessimistic progressives should be about the new President's aims and intentions. On a rhetorical level, we were greeted with an inaugural address that with a few minor adjustments could have been given by an incoming president of the NAACP. Look at the substance, however, and we find nominees at the Justice and Interior departments who could have been vetted by the John Birch Society, if not the Army of the Confederacy. The two warring sides of the Republican psyche were neatly illustrated recently at a dinner sponsored by the Philanthropy Roundtable at the Regency Hotel in New York, where two current stars of the Republican rubber-chicken circuit, Weekly Standard editor David Brooks and American Enterprise Institute "research scholar" and Olin fellow Dinesh D'Souza, held forth after a nicely Republican red-meat repast.
Brooks is still riding the wave of his bestselling work of "comic sociology" about America's new elite, Bobos in Paradise: The New Upper Class and How They Got There. His talk, like the book, is mostly affectionate ribbing of this class for its bourgeois consumption habits and bohemian self-image. Though he'd be loath to admit it, Brooks is an old-fashioned liberal Republican, not unlike Poppy Bush before he got the bit of presidential ambition in his teeth and found his principles run over by a Reagan landslide. (Just what Brooks is doing in a party dominated not by Prescott Bush and Elliot Richardson but Dick Armey and Tom DeLay is a question for another day.) A self-confessed Bobo, Brooks has only one problem with this tolerant, secular-minded and self-satisfied elite--its lack of civic consciousness.
There are no poor people in the Bobo world--even illegal Guatemalan nannies are treated as if they are taking care of your children and cleaning your bathroom as a lifestyle choice rather than out of economic necessity. "The new elite," as Brooks explained to the assembled philanthropists, "has no ethic of chivalry." Charitable giving as a percentage of assets has not remotely kept up with the unprecedented explosion of wealth in the United States during the past decade.
The virtues of such selfishness, on the other hand, have never escaped Dinesh D'Souza. The young Indian immigrant made his name in this country giving eloquent voice to the most morally repugnant aspects of Reagan-era Republicanism. He began his career as an obnoxious Dartmouth undergrad, publishing crude racist attacks in the off-campus conservative newspaper, followed by a stint at a Princeton magazine where he delighted in exposing details of female undergrads' sex lives. His first book was a loving appreciation of aspiring ayatollah Jerry Falwell.
D'Souza became a national phenomenon with a book attacking PC culture at universities, which was defensible, if overstated, and an apologia for American racism, which he termed "rational discrimination." With its pseudointellectual patina, D'Souza's work, even more than Charles Murray's, seems designed to offer solace to those who miss the good old days of Jim Crow laws and late-night cross burnings. Segregation, he argued, was designed to protect African-Americans and "to assure that [they], like the handicapped, would be...permitted to perform to the capacity of their arrested development." It would end when "blacks as a group can show that they are capable of performing competitively in schools and the work force."
D'Souza is touring for a new work, The Virtue of Prosperity: Finding Values in an Age of Techno-Affluence. (It is a measure of how well-funded are right-wing arguments that I have so far received four unrequested copies.) The thrust of his argument is the opposite of that of Brooks. Simply put, wealth has no obligations to poverty except to avoid it. As he once argued for the logic of racism, he now speaks for the morality of parsimony. The United States, he asserts, is "probably the best society that now exists or has ever existed."
D'Souza is the kind of moral philosopher who pays more attention to the musings of the Ayn Rand-spouting entrepreneur T.J. Rodgers, who races his BMW over speed bumps while attacking the moral probings of the clergy, than he does to the combined works of John Rawls and Richard Rorty. (Terming the latter "Rip Van Rorty" is what passes for wit in these pages.) Reinhold Niebuhr receives no mention at all.
Of course, it's not exactly hard to find billionaires who think of themselves as altruists regardless of the obscene amounts of wealth they accumulate. But it is much more cost-effective to induce "intellectuals" to say it for them. D'Souza fills this purpose not only by celebrating mass wealth but by abolishing poverty. "Poverty," he argues, "understood as the absence of food, clothing, and shelter, is no longer a significant problem in America." His evidence for this breathtaking claim is that even poor people have refrigerators these days, and many of them are fat. That 30 million Americans still struggle beneath the poverty line and 42 million lack the benefit of health insurance represent, to D'Souza, mere speed bumps on our highway to capitalist utopia.
When Bush père was inaugurated, he too made a great show of what was not yet called "compassionate conservatism." He acknowledged that poor people exist and that somebody should do something about it, but as a society, he warned, we had "more will than wallet." (And anyway, his contributors were demanding a cut in the tax on capital gains.) Dubya closed his inaugural with a similar flourish, in which he promised to work "to make our country more just and generous."
To show that Dubya is even remotely serious about his agenda for the poor, he and his Administration will have to ponder the kinds of questions raised by Brooks about the moral obligations of wealth. That is, after all, about the best one can expect from Republicans. But to the degree that he wishes to prove what his enemies insist to be true--that all this compassionate conservatism is simply a frilly frock in which to clothe the Reaganite Republican values of top-down class war--expect to hear plenty more from Dinesh D'Souza.
Something doesn't add up about the new Treasury Secretary nominated by George W. Bush. The supply-side conservatives who live for more big tax cuts on capital and upper-bracket incomes are actively leery about Alcoa chairman Paul O'Neill. Some grumble that he may be a talented corporate manager but that he's ill equipped for the top economic post in the Bush Administration. Meanwhile, George Becker, president of the Steelworkers union, loves the O'Neill selection. "I'm not an economist, I just go on gut beliefs," Becker said. "But Paul is a person working people and labor people can talk to. He is an industrialist who believes in the United States and has maintained a strong industrial base in the United States. I think this is far better than having another bond trader in that job."
Bush's choice has startled many quarters, including Wall Street, because O'Neill comes to the job from old-line manufacturing and with a reputation for independent thinking, albeit in the moderate Republican manner. Above all, he is not a banker or financier--the first Treasury Secretary since the Carter Administration to originate from the business realm that actually makes things (aluminum, in O'Neill's case). Yet, oddly enough, O'Neill is also a government pro. He spent sixteen years as a systems analyst and budget economist in the federal government, rising to deputy director of the Office of Management and Budget under Gerald Ford, before a brilliant business career at International Paper and Alcoa (both multinational companies are reviled by environmentalists--he's not Ben & Jerry's). But unlike the laissez-faire crowd, O'Neill understands the power of activist government to intervene in the private economy and has demonstrated a taste for doing so. At a minimum, he represents a refreshing shift from the free-market mantra that has ruled at Treasury for the past two decades.
"I negotiated with Paul for years--he's very tough but fair--and we've always been able to get a fair, decent contract," said Becker, whose union represents 22,000 Alcoa workers. "I had people I could talk to in the Clinton Administration too. They would listen and tell me how much they understand our pain. Then they went out and deep-sixed us. I like [former Treasury Secretary] Bob Rubin, but Rubin killed us in steel. He would say, Let the marketplace decide. Except, when financial firms got in trouble, they went to the rescue."
In contrast, as a business executive, Paul O'Neill artfully engineered a worldwide rescue for the aluminum industry and persuaded President Clinton to make it happen. Prices were collapsing in 1993 because the former Soviet republics were flooding the world market with cheap aluminum--devastating US producers like Alcoa. The temporary agreement amounted to a government-negotiated cartel--every producing nation reduced its output to prop up world prices--and it worked. Yet the political deal was done so skillfully that few in the media even noticed. And nobody complained about the scheme's contradicting Clinton's free-trade rhetoric. O'Neill knows where the levers are located and how to pull them.
While it would be nice to imagine that the Bush/Cheney team is sending a message about new ideological priorities with this appointment, their motivation is probably more pedestrian--personal trust, not policy. O'Neill comes from the same "old boy" circle of policy advisers that includes Dick Cheney, Donald Rumsfeld and, yes, Alan Greenspan during the Nixon/Ford years. He is a familiar old friend to all of them, experienced and capable, above all loyal. During George Bush Senior's ill-fated presidency, O'Neill took Alcoa out of the US Chamber of Commerce in order to endorse Bush's deficit-reducing tax increase--the one that got the President into permanent trouble with the party's right-wingers. Around the same time O'Neill proposed a $10-a-barrel tax on oil to force greater energy conservation. He supported Bill Clinton's more modest energy-tax proposal, which failed in 1993. He is quite willing, in other words, to break eggs over the GOP's antitax doctrine.
In another season, these qualities would have made for intriguing possibilities, but O'Neill's strongest asset--he's not from Wall Street--might also become a handicap in present circumstances, because the Bush Administration is assuming power amid a breaking storm--the collapsing stock-market bubble and deteriorating economic growth worldwide. Whether this event turns out to be good luck for Dubya or the ruination of his presidency will depend crucially on the smarts of O'Neill and a team of White House economic advisers that includes former Federal Reserve governor Lawrence Lindsey as principal counselor and, presumably, Stanford economist John Taylor at the Council of Economic Advisers. The old boys from business and finance gathered at the governor's mansion in Texas to throw in their advice, a private conversation that did not include the press and public.
The problem is that none of Bush's lead advisers have displayed any special feel for financial markets--especially markets that are scared and imploding. The conservative financial experts I talked with all delivered the same warning. "O'Neill needs to have a serious banker at his side, someone who has done a lot of financial restructurings and bankruptcies," one of them said. "Because that's what is coming."
O'Neill has been relieved of an obvious first challenge--coaxing the Fed chairman into cutting interest rates--because that job was done for him by the frightened financial markets. Falling stock prices and market interest rates, along with plummeting sales and production, delivered a message of terror--the markets' fear that Greenspan was dangerously behind events. He was thus compelled to start cutting rates. Many market players figure it's already too late, however, and Greenspan's wizard status is swiftly evaporating, at least among those who understand what's happening. So Bush's team will begin by blaming Clinton/Gore for the rising unemployment and corporate bankruptcies, while privately nudging Greenspan to keep on easing credit terms. A deep distrust toward Greenspan lingers in the Bush family--a sense that he broke promises and allowed high unemployment to linger much too long after the 1991 recession, effectively dooming George père's re-election campaign in 1992. This time, they will not wait passively on the chairman's wisdom, and Bush Jr. has real leverage he can apply. The seven-member Federal Reserve Board has two vacancies and a third one expected. The White House can surround Greenspan at the boardroom table by appointing friendly critics and even a possible successor.
A recession that comes early in a new President's term--and is over well before he's up for re-election--can wind up as smart political timing, but Bush may lose his Congressional majority in the process. While Ronald Reagan enacted a radical conservative agenda during his first year in office, his popularity sank as the ugly recession worsened; Democrats picked up twenty-seven House seats in the off-year election of 1982. By 1984, however, it was "morning again in America," and the Gipper won in a landslide. If Bush's advisers are as shrewd as they appear, they will push hard for their big ideas up front and, meanwhile, do whatever they must to reverse the economic bloodletting.
The more ominous possibility facing the Bush presidency is that given neglected realities inherited from the Clinton years, this downturn could renew globalized financial crisis in Asia, Latin America or elsewhere. Only this one could not be blamed on "crony capitalism" or other establishment canards. The $360-billion-a-year trade deficit in the United States has kept Japan and many developing countries afloat in recent years, though a long way from genuine recovery. If the United States becomes mired in recession, Americans will buy far fewer imports, and that will reignite financial failures in the exporting nations. Their panic can flow right back into the US financial system, with banks and brokerages demanding another round of IMF bailouts. O'Neill and company may find themselves standing in a circle of bonfires.
The specter of bad times coming does, of course, add momentum for major tax-cutting legislation--a centerpiece in Dubya's campaign--but it's not obvious how Bush's retrograde measure would actually help the economy (40 percent goes to the very wealthy, as that fellow Gore kept reminding us). Some elements, like abolishing the inheritance tax, may even generate drag on economic activity. The Bush team talks like conservative Keynesians, but in the real world, economic stimulus requires steeply progressive tax cuts--putting money in the hands of people who will promptly spend it. That means quick rate cuts or temporary tax credits that skip over the upper brackets for a change and deliver the money to the bottom half of the income ladder. Democrats are wrong-footed by events too. After several years of indulging in Coolidge-Hoover pieties about paying down the national debt, Democrats must scurry now to come up with a progressive--don't say liberal--tax-cutting proposal of their own. Clintonism is over, and they had better shake out the cobwebs quickly, because their choices on who needs tax relief and who doesn't will define them for the 2002 election and beyond.
The essential handicap in using fiscal policy to restart the economy (one that has always burdened Keynesian economics) is the problem of timing. In the best circumstances, it can take six or eight months to enact a major stimulus package, and even if the tax cuts are postdated to January 1, the money arrives too late to stanch the contraction. If Democrats are alert and public-spirited, they will propose a quick, emergency reduction in paycheck deductions with a commitment to support a second, broader tax measure later in the year. They should also call for stand-still protection for those working people drowning in debts who lose their jobs--a temporary safety net that keeps them out of bankruptcy until the economy revives. These and other measures are, of course, way beyond the present imagination of either party. More likely, the tax bill will turn into a special-interest bidding war in which both parties compete to pay back their accumulated obligations to lobbyists and contributors.
The new Republican majority, already frail and dubious, has been taken hostage by these economic portents even before it assumes power. A "normal" recession of brief duration might be manageable. A longer, more profound unwinding will shake the foundations of Republicans and Democrats alike.
Capitalism is falling apart. Tires explode, utility rates
skyrocket, pharmaceuticals kill patients, telephone service is a mess,
airports are gridlocked, broadcasters rip off scarce airwave spectrum for
free and salmon in the Northwest are becoming transgendered and unable to
breed. Even successful dot-commers are an endangered species.
Yes, Virginia, we do need government regulation. Not to build
socialism but to save capitalism, because the market mechanism left to
its own devices inevitably spirals out of control. Recognition of that
reality has guided this country to prosperity ever since Franklin D.
Roosevelt pulled us out of the Great Depression.
But in recent decades, conservative economists and their fat-cat
corporate sponsors have led us down the yellow brick road of
deregulation. Getting government out of the market would free creativity
and investment, leading us to the magic kingdom of Oz, where all would
prosper. If anything went wrong, the wizard of Oz--a k a Alan
Greenspan--would make it all better.
Well, in real life, Greenspan is a competent fellow, but he knows
better than anyone that, while fiddling with interest rates can modulate
the business cycle, it is hardly an adequate remedy for all of the
problems of a modern economy. Setting the interest rate does not ensure
safe water, air, tires or medicines.
Suddenly we are confronted with a series of crises resulting from the
deregulation craze, from energy policy to telecommunications, from
financial markets to food and drugs. In 1996, the California Legislature
deregulated the energy market. The result is now bordering on the
catastrophic, with utility companies demanding enormous rate increases or
they will declare bankruptcy.
Those are the same utility companies that a scant four years ago
assured Californians that deregulation would lead to sharply lowered
energy prices. Today, the bright spots in California are the publicly run
utilities, which are not part of the deregulation scam and which, in
places like Los Angeles, remain solvent and supply relatively low-cost
The same thoughtless rush to deregulation led the US Congress, also
in 1996, to deregulate the telecommunications industry. The result has
been across-the-board chaos in the once-efficient telephone industry:
mergers of the AOL-Time Warner sort, which seriously threaten to destroy
the free marketplace of ideas through corporate concentration; ballooning
cable costs; the giveaway of valuable airwave spectrum to broadcasters;
and the grabbing of blocks of phone numbers, creating a false area-code
Last year, Congress passed the Financial Services Modernization Act,
which ended a sixty-five-year ban on the merging of banks, insurance companies
and stock brokerages. One consequence is that those companies also can
merge your financial, medical and credit records to market your personal
profile--the most sweeping invasion of personal privacy in the nation's
The deregulation virus is wreaking mayhem everywhere. Last week, the Los Angeles Times carried a devastating investigative story on how the US Food and
Drug Administration transformed itself into a partner of the
pharmaceutical industry instead of its time-honored role as watchdog over
the production of medications. The Times concluded after an exhaustive
two-year investigation that the "seven deadly drugs" that were approved
after this expedited review process was in place are suspected in causing
more than 1,000 deaths.
The mad cow epidemic in Europe and the genetic altering of US foods
are both stark reminders that the rampant changes in economic production
induced by scientific breakthroughs are particularly demanding of
government scrutiny. Yet at a time of such change, the free-market
ideologues have done everything they can to leave the public unprotected.
Those true believers in unregulated markets are abundantly represented
in the forthcoming Bush Administration. They will be buttressed in their
zeal to further dismantle government protection of the consumer by a vast
army of lobbyists, who provide the main financial backing for both
parties. For example, AT&T, which has pushed for much of the
telecommunications deregulation, is the largest donor to the Republican
Party and the second largest to the Democrats. The Financial Service
Modernization Act passed with overwhelming bipartisan support after the
most lavishly funded lobbying effort ever.
What this all adds up to is a compelling argument for mitigating the
corrupting influence of corporate money over our political system.
Passage of the McCain-Feingold campaign finance reform bill would be
one place to start. The revival of the consumer movement is another. We
need more, not less, regulation in the public interest.
Throughout our history, when corporate greed has gotten out of hand,
the public has demanded that government act. Let this be one of those
A decade after economic sanctions were imposed on Iraq, international support for them is eroding rapidly. The Security Council is deeply divided. Air travel has resumed. As winter sets in, Iraq has threatened to stop pumping oil.
The situation in Iraq has been the most visible and elaborate of the sanctions regimes of this decade, and the ethical issues entailed have been particularly acute. But the issues raised by economic sanctions are also much broader. If the cold war's end gave rise to a unipolar "new world order," it also gave rise to a set of new experiments in global governance and the enforcement of international law, notably humanitarian intervention and economic sanctions. Economic sanctions are certainly not novel. Since ancient times, embargoes and siege warfare have been imposed, in the contexts of both trade competition and warfare. Comprehensive embargoes--the economic strangulation of a city or a people--have often been described in terms of the suffering and slow death they bring, particularly to the elderly, the ill and the very young. Michael Walzer, in his Just and Unjust Wars, quotes a passage from an account of the Roman siege of Jerusalem:
The restraint of liberty to pass in and out of the city took from the Jews all hope of safety, and the famine now increasing consumed whole households and families; and the houses were full of dead women and infants; and the streets filled with the dead bodies of old men. And the young men, swollen like dead men's shadows, walked in the market place and fell down dead where it happened. And now the multitude of dead bodies was so great that they that were alive could not bury them; nor cared they for burying them.... And they who were yet living, without tears beheld those who being dead were now at rest before them. There was no noise heard from within the city.
There are those who hold that siege warfare and economic sanctions are simply different things altogether. I am not of this view. I hold that, while the intent of economic strangulation may indeed be very different when the purpose is international governance rather than conquest, the empirical impact on civilian populations is the same; and for this reason, to knowingly impose hardship and harm on the vulnerable, even where there is a "good cause," is morally problematic. The near-comprehensive embargo on Iraq, which continues to exact a devastating toll on its population, demands the most serious kind of ethical scrutiny, regardless of the fact that it is imposed within the context of international governance.
The modern version of economic sanctions as a form of international governance came about at the end of World War I, when the League of Nations envisioned the boycott as an alternative to warfare and as the device that would bring aggressor nations to their knees--but gently, bloodlessly. It would be, as Woodrow Wilson put it, "a peaceful, silent, deadly remedy." The League's boycott of Mussolini did not so much as give him pause, though, and economic sanctions were dismissed, along with the League of Nations, as ineffectual.
But the view of economic sanctions as a nonviolent means to prevent aggression and restore peace did not disappear altogether. It resurfaced in the United Nations Charter, in Chapter VII, which addresses aggression and threats to peace. Article 41 gives the Security Council the option of using economic measures to respond to aggression, and Article 42 provides a military option as well, in the event that other measures fail. Economic sanctions continued to be used by groups of nations or single nations--in particular the United States--to pursue foreign policy, to pressure or to "send a message." Of the more than sixty sanctions cases between 1945 and 1990, the United States initiated more than two-thirds; and in three-quarters of those, the United States acted with little to no participation from other countries.
The cold war paralysis of the Security Council meant that if the United States had tried to persuade the Council to sanction the Soviets or a client state, such a resolution would have been vetoed, and the same would have happened if the Eastern bloc had tried as well. Economic sanctions were used by the Security Council only twice in the next four decades, against Rhodesia and South Africa.
Discussion of economic sanctions among political scientists was far more active. In the 1960s and '70s, Johan Galtung and others noted that to the extent that sanctions were intended to undermine the legitimacy of the wrongdoing state, they were quite ineffectual. In fact, they typically generated a "rally round the flag" effect: In the face of economic sanctions imposed by foreign nations, the population tended to support their leaders far more vocally. Others looked at the logistical and political problems of sustaining sanctions, when some nations were less committed than others or suffered greater economic losses by the imposition. By the 1980s there was a resurgence of interest in sanctions, brought on in part by the Soviet grain embargo following its 1979 invasion of Afghanistan, and considerable discussion of the problem of effectiveness.
How do we know when sanctions are "effective"? Is it when the targeted leader succumbs and complies? Or is there a kind of effectiveness that comes just from creating pressure and changing the calculus of the decision-making process? Or even if neither of these occurs, maybe the goal of sanctions can simply be to "send a message" or impose retribution, in which case they are, as it were, automatically successful.
Until 1990 the question of whether sanctions were ethical or not was rarely raised, although they had been implemented something like 120 times since the close of World War I. The only notable exception was the (presumably hypocritical) claim of the Reagan Administration to be concerned about the humanitarian consequences of sanctions on South Africa. Indeed, there was little reason to be particularly concerned about the ethics of sanctions. Comprehensive sanctions were impossible, again because of the cold war: If the United States embargoes Cuba, Cuba can turn to the Soviets. As a result, the economic sanctions that were imposed were partial and porous. They caused some inconvenience, or caused economic loss in particular areas, but they couldn't shut down an economy or generate widespread and extreme suffering. At the time that Iraq invaded Kuwait, sanctions were seen as a "middle route": They were more concrete than mere diplomatic protests and far less lethal than warfare. It is one of the ironies of our times that a measure that was long understood to be a nonviolent method to achieve peacekeeping has in fact generated more civilian deaths than any weapon of mass destruction.
The 1990s saw the end of the paralysis in the Security Council and, with it, sanctions imposed against eleven countries, most notably Iraq. The Iraq sanctions, in a sense, say less about Iraq than they do about the unipolar world, in which comprehensive measures are now possible. The result of a comprehensive global enforcement of trade restrictions, after massive destruction from bombing, is devastation. In Iraq everything from nutrition to education to agriculture has lost a generation; not to mention the social instability, loss of scientists and intellectuals, and the exodus of the professional class. Iraq has by several measures gone from being a First or Second World country, with considerable wealth and a healthy and highly educated population (the most prevalent health problem for Iraqi children in the 1980s was obesity), to a pre-industrialized economy, in which the middle class has lost everything, the poor have suffered horribly and criminals and black marketeers are doing quite well.
More modest versions of the same phenomenon took place in the sanctions regimes against Haiti and Yugoslavia, where the constriction of the economy meant that the state held greater control over communications and mass media, existing inequities between the wealthy and the poor became far more extreme, and those who suffered worst were those least responsible for the state's policies--infants and young children, the elderly, widows with children, the sick and the handicapped.
So it is not surprising that a great deal of attention is now being paid to the question of sanctions, in particular the situation in Iraq, and that the writings are as diverse and contentious as they are. Iraq Under Siege, edited by Anthony Arnove, offers poignant descriptions and photos of the suffering of Iraqis under the sanctions. With chapters written by Noam Chomsky, Howard Zinn, Voices in the Wilderness and others, it presents the perspective of activists and intellectuals who most vocally oppose the sanctions on Iraq. It offers information on the deterioration of public health and the media portrayal of the issue, as well as an interview with former UN humanitarian coordinator for Iraq Denis Halliday, while it also lodges accusations and stories of US global bullying and callousness on this situation.
Anthony Cordesman's Iraq and the War of Sanctions is a detailed analysis of Iraq's armed forces, with a good deal of useful information about Iraq's weapons capabilities. It also includes features such as a 139-page "table," a day-by-day chronology from July of 1997 to November of 1998, describing in excruciating detail hundreds of excerpts from press conferences, meetings and reports by every conceivable party. All this ultimately demonstrates, according to Cordesman, that Iraqi leaders misstated facts and sought to exploit the growing "sanctions fatigue" in the Security Council (neither of which seem to me surprising, or in need of such elaborate documentation, any more than would the observation that US leaders also misstated facts and used political pressure to retain support for the sanctions in an increasingly uneasy Security Council). Cordesman also goes a bit further than simply focusing on the weapons issues rather than humanitarian concerns. At one point, he makes the fairly odd claim, based on 1997 CIA data, that the infant mortality rate in Iraq did not increase greatly in the 1990s. He maintains that World Health Organization and Food and Agriculture Organization estimates that held otherwise "could not survive minimal peer group review in any normal research effort," and that estimates in the mid-1990s of the human damage due to sanctions came from "a small fringe group of US doctors." In fact, the massive public health crisis in Iraq that has resulted from the sanctions has been documented extensively by UNICEF, the International Red Cross and a host of other organizations. Scholarship on the magnitude of the public health crisis has been published in the Journal of the American Medical Association and the New England Journal of Medicine, as well as in many other medical and public health journals, with the major researchers in this area from Harvard and Columbia universities.
The Iraq sanctions committee of the Security Council has been harshly criticized by activists and ethicists for its burdensome procedures and arbitrary decision-making in granting humanitarian waivers for Iraq's purchase of essential goods for the civilian population. It must be noted that the situation has improved dramatically under the Oil-For-Food program--applications and guidelines are available on the OFF website, submissions can be made electronically and approvals for large classes of goods are granted quickly. But it is nevertheless fascinating to read Paul Conlon's account of the first years of the Iraq sanctions committee's operation, United Nations Sanctions Management: A Case Study of the Iraq Sanctions Committee, 1990-1994. I have never before heard of any bureaucratic apparatus with such an extreme aversion to transparency that the agenda for its meetings was not distributed to its own members and no actual minutes were kept, only summaries. The 6,000 decisions per year were not computerized, making them effectively unavailable, even to the committee's members.
Needless to say, the meetings were closed, and neither vendors nor representatives of Iraq were permitted to attend for the purpose of addressing questions about a proposed contract. No criteria for approval or rejection were formulated, much less made available to Iraq or to companies seeking to sell goods to Iraq. When a contract was rejected, no reasons were given to the applying company (or to its permanent mission to the UN, which presented all proposed contracts of its nationals). Thus, a company or government could not know whether the flaw in a rejected contract was that the goods were prohibited, the quantity was unacceptable, the vendor was unacceptable or someone on the committee was just in a foul mood that day. The committee operated by consensus, which meant that a hold by any of the fifteen members (the Iraq sanctions committee mirrored the Security Council) could block a contract. The situation was not helped by the apparent arbitrariness of the decisions--identical goods, in identical quantity, by the same vendor, could be approved at one time and rejected six months later.
The Permanent Five members of the Security Council, especially the United States, ended up with enormous influence in these proceedings, but, interestingly, for a very different reason from what is the case in the Security Council itself. In the Security Council the P5 hold veto power and the rotating members do not--a fact that has obvious (and enormous) ramifications. In the Iraq sanctions committee the influence had a different source: Because there were virtually no mechanisms of institutional memory, and because each year a third of the committee rotated off , the P5 were the only members who knew what had happened in prior years and prior cases, and could invoke those in arguing each new waiver application. Were ambulance tires approved before? Does beer count as a "foodstuff"? Can an Iraqi diplomat sell his car before returning home, or is that a violation of the sanctions regime?
Conlon tells us that the arbitrariness was not as extreme as it seemed. He says that the committee was broadly guided by the US focus on end-use and end-users, based upon an analysis of which sectors should be given priority. Thus, tires for ambulances would be approved, whereas identical tires for private cars would not. But that did little to clarify to anyone else--Iraq, vendors, other states--what on earth was going on, and it had the overall result of presenting far more obstacles to the flow of humanitarian goods.
The bizarre aspect of the committee's operations was not limited to its extreme commitment to nontransparency. The conflicts of interests and agendas took several forms, as the parties that had pressed most adamantly for restricting Iraqi imports then held responsibility for granting exemptions to it (see my March 22, 1999, Nation article on the operations of the 661 committee). Conlon tells the following story: In 1991 the bombing by the United States and Britain destroyed the windows in a Baghdad building that housed a UN agency, the Economic and Social Commission for Western Asia. The cost of replacing the glass was $56,000. As summer approached, air conditioning was impossible without its replacement, and temperatures were expected to rise to 120 degrees--more or less frying the $4 million worth of UN computer equipment in the building. The UN itself applied for a waiver (all UN agencies, as well as international humanitarian organizations, were required to seek humanitarian waivers from the committee for economic transactions or exports to Iraq), and the United States vetoed the application, on the grounds that the repairs were technically illegal, since they would involve the purchase of $56,000 worth of glass and services from Iraqi glaziers. "During acrimonious debate," Conlon writes, "no delegate [was] impolite enough to bring up the fact that the government taking the hard line in this matter had caused the damage in the first place." The UN Secretariat intervened, and the matter was ultimately resolved diplomatically after special appeal.
By far the most impressive work on the Iraq sanctions is Sarah Graham-Brown's Sanctioning Saddam: The Politics of Intervention in Iraq. It is a thorough and scholarly work, with meticulous documentation of the impact and operations of sanctions, the refugee crisis in Iraqi Kurdistan and the functioning of NGOs. Based on an apparently exhaustive analysis of every reliable source of information on Iraq, Graham-Brown includes discussions of not only the Iraqi political parties but all the Kurdish ones as well, estimates of the amount of smuggling that occurs through various routes, human rights abuses and the mechanisms of state survival, the rationing system and its role in staving off famine while solidifying state control of the existing economy, and on and on. It is a rich and thorough work that does not shy away from identifying the tensions, the confusion, the ambivalence or the raw callousness that has marked the agenda of nearly every party in this interminable nightmare. We might begin with the shifting of blame: "Those in the international community who wish...to see sanctions remain in place, stress the political responsibility of the regime for all the outcomes of sanctions, whether foreseen or not. The regime, on the other hand, continues to use civilian suffering to call for the lifting of sanctions, and to blame on those sanctions all the ills of society." Yet there is more than enough blame to go around. The invasion of Kuwait was rooted in part in Iraqi policies that had led (despite significant gains in health and education) to a deteriorating overall economy alongside an enormous military. At the same time, the Security Council has said precious little about the massive influx of arms into Iraq and Iran--sold to them by members of the P5--during the 1980s.
Graham-Brown suggests that the intractable shortsightedness that has marked the Iraq sanctions regime appears in every domain. As aid agencies, Security Council actors and Iraq continued to treat the humanitarian problems as short-term emergencies and limited imports to emergency relief while prohibiting reconstruction, planning for even six months or a year in advance was impossible, and economic and institutional stability was precluded. This in turn perpetuated the problems of food insecurity, long-term malnutrition and deterioration of infrastructure. Regardless of the emergency relief available, the overall collapse in the economy, industrial production and education devastated the middle class and triggered the flight of professionals and rapid growth in the uneducated and unemployed. It generated a considerable increase in theft, prostitution and begging as means of economic survival and as markers of social deterioration.
In the end, despite the emergence of an elaborate humanitarian-exemptions regime within the sanctions bureaucracy, there is no satisfactory resolution of the fundamental tension between accomplishing the economic strangulation of a country of 22 million people and doing so without widespread humanitarian consequences. "We break their legs, and then we give them crutches," Graham-Brown quotes an aid worker as saying. And, in the end, there is no reason to expect that the strategy of radical disarmament of a single nation will lay the groundwork for lasting peace in the region. Given the local arms buildup (Saudi Arabia, Turkey and Egypt were among the leading recipients of conventional arms between 1992 and 1996, and the arms purchases by Iran and Syria did not diminish), once the sanctions are over, it is hard to think that the leader of Iraq--whether it is Saddam Hussein or someone else--will not be tempted to do some catching up.
The recent books on sanctions also address broader questions that go beyond the situation of Iraq. The Sanctions Decade: Assessing UN Strategies in the 1990s, edited by David Cortright and George A. Lopez, offers an overview of the transformation in the role of the UN, as it imposed economic sanctions with both a frequency and scale that was unprecedented. Using case studies of the countries sanctioned by the Security Council, the authors look at the structural tensions between the Security Council and the member states in this context, as well as the increasing sophistication of institutional processes to implement sanctions along with humanitarian exemptions. In a broader context, they also discuss methods for studying and evaluating sanctions, as well as the emerging discussion about "smart sanctions" (those narrowly targeted to affect only political or military leaders, or particular items, such as arms). The result is a balanced overview of key conceptual issues, the factual background of each of the UN's sanctions episodes of this past decade and the political and institutional processes within which sanctions regimes were framed.
Geoff Simons's Imposing Economic Sanctions: Legal Remedy or Genocidal Tool? poses in stark terms the issue that some have started to raise, particularly in regard to Iraq. The Genocide Convention provides that one form of genocide is to deliberately inflict, on a national, ethnic, religious or racial group, "conditions of life calculated to bring about its physical destruction in whole or in part," with the intent to destroy the group as such, in whole or in part. Simons contends that since ancient times, economic blockades have had this result, and he offers a good deal of factual information and some legal argumentation not found elsewhere in the voluminous literature on sanctions. I am not sure he succeeds in proving that sanctions do constitute genocide--the intent requirement is particularly thorny--but the extent of human loss in the sanctions episodes of the 1990s obliges us to examine that possibility closely.
Two other recent books address economic sanctions in the context of US foreign policy: Economic Sanctions and American Diplomacy, edited by Richard Haass, and Feeling Good or Doing Good With Sanctions: Unilateral Economic Sanctions and the U.S. National Interest, by Ernest Preeg. The Haass collection contains essays on both unilateral and multilateral sanctions episodes, including China, Cuba, Iraq, Libya and Pakistan. The book concludes with a set of observations (and corresponding recommendations) consistent with those made by many others in recent years: The imposition often causes considerable unintended secondary damage; sanctions are most effective when there is broad multilateral support; the more authoritarian the target state, the less likely sanctions are to generate effective internal pressure for change; international support for sanctions regimes tends to flag over time; and so on. Feeling Good or Doing Good With Sanctions also uses case studies, looking at Cuba, Iran, Vietnam, Myanmar and China. Preeg, like Haass and his contributors, sees sanctions as "deeply flawed" and suggests that this is particularly true where they are unilaterally imposed by the United States, to further US political, economic and security interests, without international support. In discussing the "inherent downsides," Preeg reiterates the problems of harming the civilian population and enhancing state control, all while adversely affecting US commercial interests and burdening relations with US allies and trading partners.
What is striking about both books is the degree to which they reiterate the arguments against sanctions from the 1970s and 1980s: Sanctions have political costs, both domestically and internationally; not only that, they don't accomplish what we want them to and are even counterproductive. Equally notable, both books miss the opportunity to point out that many of the truisms about sanctions don't apply to the United States, because of the singular political and economic influence it exercises. Conventional wisdom holds, for example, that unilateral sanctions tend to have little effect because they are necessarily limited and porous. Yet, in the case of Cuba the fact that certain goods are manufactured only in the United States (for example, parts for the US-made water purification system that has been in place since Batista's time, or an implantable defibrillator for heart patients) and that goods patented in the United States are, under US law, subject to embargo (such as a Swedish-made filter for dialysis machines) means that a whole array of crucial products is simply not available in Cuba at all, except by an extraordinary and costly process using intermediaries and sometimes smugglers. Because many of the major pharmaceutical companies in the world are American, these restrictions effectively render unavailable more than half of the new medicines available on the world market, including, for example, pediatric cancer medications. The United States is the only country in the world that can impose a unilateral embargo with such an effect.
Conventional wisdom also holds that unilateral sanctions are difficult to impose and sustain because they lack international support and, arguably, legitimacy. Yet what characterizes the United States, and almost no other country in the world, is precisely the ability to sustain sanctions unilaterally--not only without cooperation from other nations but in the face of widespread international protest and in open defiance of international laws concerning trade and extraterritoriality. The UN General Assembly has just condemned the US embargo of Cuba--with its attendant interference in Cuba's trade with third countries--for the ninth consecutive year, most recently by a vote of 167 to 3. Challenging the extraterritorial consequences of the US legislation, the European Union brought a case before the World Trade Organization; and Canada, Mexico and the EU passed retaliatory legislation. The unilateral embargo against Libya and Iran, which also provided for punitive measures against foreign companies engaged in trade with the target nation, were similarly condemned as extraterritorial. Thus, the United States is the only country in the world whose economic and political influence is so great that it can in fact do con-siderable damage with its unilateral sanctions; it can do so regardless of the rulings or resolutions of the recognized institutions of international governance.
Finally, the United States, more than any other country in the world, provides a graphic illustration of one of the often observed features of sanctions--that they are almost exclusively a tool of powerful nations and coalitions, which do the greatest damage to weaker and smaller nations. In the text accompanying the major database on economic sanctions, Economic Sanctions Reconsidered, the authors note that sanctions do the most severe economic damage to weak and import-dependent economies, while large and diversified economies are virtually immune. The sheer size and diversity of the US economy, its near-universal participation in global trade, the magnitude of the US military and a host of other factors make the United States effectively immune from the effects of embargoes of the sort that we have witnessed in Iraq, Haiti and Yugoslavia. The frequency and ease with which the United States imposes sanctions--with no fear of being subjected to the same sorts of disruption and damage--cannot be separated from this fact.
It is not clear what the future of economic sanctions will be. In this decade they have come to be used for purposes that go well beyond intervention to stop aggression, or "sending a message," or even retribution. We have seen sanctions used instead for the methodical devastation of a nation's infrastructure. At the same time, the United States and Britain no longer have the near-unanimous support of the Security Council that was present in 1990. It remains to be seen what lessons will be learned from a decade of using this deeply problematic instrument of international governance. One hopes they will include the idea that superpowers, above all, require restraint and accountability; and that a superpower that conflates self-interest with global governance, and political hegemony with moral mandate, is every bit as dangerous as a rogue dictator with a weapon of mass destruction.
But as the bankers know, he loves some of us more than others.
The economics of George W.
Let's not begrudge Dick Cheney his $36 million income last year.
Sure, it dwarfs the puny $744,682 reported by the President, but George
W. Bush represents old money, and he knows better than to be too showy,
particularly when you're running for office as a Joe Six-Pack kind of
guy. Better to roll over the income from inherited money into
Cheney didn't have time for such accounting niceties. Bush caught him
right in the middle of a tax year with that Vice President nod, and
remember, Cheney was only supposed to be advising Bush on the best choice
for Veep. How was Cheney to know he'd be forced to recommend himself as
the most qualified?
Still, just because he had become Vice President didn't mean he had to
take a vow of poverty. As Cheney told CBS News at the time, "I'd like not
to give away all of my assets to serve the public." And why should he,
since there's no law limiting the assets of federal office-holders or any
requirement that they give up their acquired wealth? Cheney had only to
look as far as Bush, who merely put his in a blind trust, no questions
Huge financial assets are now the norm for leaders of our
representative democracy, and it wasn't unexpected that the mostly
wealthy members of the Senate recently voted rich people like themselves
an enormous tax cut, albeit not as large as the one Bush wanted for
himself and his pals.
Cheney's assets are only at risk of taxation if he wants to leave a
huge amount to his heirs without paying additional taxes. Soon, even that
will no longer be a problem because Bush and Cheney are sensitive to the
unfairness of the estate tax to ordinary people like themselves, and they
want to eliminate it.
What was at issue during the campaign was not Cheney's assets or his
income but his future stock options in Halliburton Co. These being tied
to the rise and fall of Halliburton stock, presented a potential conflict
of interest because, as Vice President, it was conceivable that he could
influence stock prices. Under considerable pressure, Cheney decided to
donate those stock options to charity, but he was left with a bit more
than a hair-shirt.
Even after taxes, Cheney cleared more than $20 million in 2000. If the
Bush tax cut had been in effect last year, Cheney would've saved another
couple of million, to which he obviously feels entitled.
Don't forget, Cheney was playing catch-up after years in the public
sector, first as a congressman and then as Defense secretary. As it
turned out, he only had about five years in the private sector to cash in
his chips, and he didn't really know much about the energy business. When
he hired on to serve as the CEO of an oil services firm, he knew he would
have to justify the big bucks he was getting paid.
Fortunately for him and Halliburton, it all worked out in the end.
For the Texas-based Halliburton, there initially was some concern.
Only two years ago, with the company's stock floundering, the board of
directors chastised Cheney for the company's poor performance. But then
came the presidential election, and those same directors must have
figured they had died and gone to heaven after Cheney got the Veep nod.
That's when the board of directors turned around and rewarded him with an
incredibly lucrative severance package providing the bulk of his reported
$36 million income in 2000.
Can you blame them? Most of Cheney's working hours last year were
devoted to seizing the White House for the most avidly pro-Big Oil
presidency in US history, and servicing Big Oil is what Halliburton Co.
is all about. That and construction projects around the world that an
anti-environmental Administration now seems all too eager to facilitate.
Quite an impressive record for an executive who was just learning the
business. They knew the guy would be good; after all, as a congressman he
had one of most pro-industry voting records. And it was Defense Secretary
Cheney who had made the decision to privatize logistical support
facilities for the military, which gave Halliburton's subsidiary, Brown &
Root, huge construction contracts for the US military at bases
throughout the world.
Of course, as the former Defense secretary who'd saved Kuwait, where
Halliburton has huge contracts, Cheney was already known to be an
effective player. But how could Halliburton have known Cheney would be
this good? Not only did he help elect another Texas oil guy as President,
but if you look at the short record of the Bush-Cheney Administration,
when it comes to opening the environment for energy exploration, even
that most pristine area in Alaska, these guys know no limits.
Indeed, they must be guffawing down in Texas to have two good old boys
running the White House without a scintilla of shame. It's been oil money
If only George W. Bush were content to merely market nights in the
Lincoln Bedroom or issue some questionable pardons, the public would be
much better off. But no, the new President has taken the art of selling
White House access to an unprecedented level, with disastrous
consequences for millions of Americans.
While the media remain obsessed with trying to prove that the Clinton
Administration was on the take from corrupt fat cats, the Republicans
have unashamedly turned over the federal government to the very
corporations that purchased the dubious Bush electoral victory.
MBNA, the world's biggest credit card dispenser, which hooks your kids
with teaser rates that can quickly balloon to usurious proportions, is
about to get the bill ending bankruptcy protection for little people that
it had in mind when it led the Bush campaign contributor list.
The big corporate givers are all lined up with wish lists in hand.
"There is no longer any countervailing power in Washington; business is
in complete control of the machinery of government," former Labor
Secretary Robert Reich concluded recently.
In less than two months, the Administration has reversed workplace
protection for repetitive stress injury, betrayed Bush's campaign promise
to curtail industry carbon dioxide emissions that cause global warming
and revved up plans for Arctic drilling. For all of his belief in a free
market, the President used the club of the state to force mechanics at
Northwest Airlines back to work.
Not that congressional Democrats are without blame. As the bipartisan
support for the bankruptcy bill demonstrated, corporate contributions are
as compelling as they are pervasive.
Bush has indicated he's eager to sign this atrocious bill--an
identical measure was vetoed by President Clinton--which strips away a
century of protection for small debtors. No longer will holders of
unsecured debt, who average $22,000 a year in income, be given a fresh
start. Under this bill, such debtors who file for bankruptcy will not
have their debt eliminated under the easy-to-use Chapter 7 protection of
the Bankruptcy Code but will be forced to file a repayment plan under the
more rigorous Chapter 13. That places this unsecured debt on the same
level as all other claims requiring payment, such as child support and
alimony, leaving divorced spouses and their children competing with banks
for a claimant's paycheck.
At the same time, Congressional Republicans refused to accept any
amendments restraining the marketing of credit cards or the regulating of
usurious interests rates charged. These largely unscrupulous banking
practices that prey upon the young and gullible, with billions of mailed
solicitations a year, is what often leads people into bankruptcy.
What in God's name is going on? The Bible warns against these money
handler who charge usurious rates: "Let the exacting of usury stop" is
commanded in Nehemiah, where the word "usury" is applied to loans among
Israelites bearing a mere 1 percent interest. On a more secular note, the
California Constitution had placed a 10 percent limit on interest, but that has
been watered down by court decisions.
By those historical standards, the current average charge of 18 percent on
credit cards, often rising more than 24 percent, certainly qualifies as
"exorbitant," to use Webster's definition of usury. Indeed, the common
practice of the banks would seem to fall under the category of criminal
loan-sharking, but just try to find a prosecutor with the guts to
classify a leading bank as organized crime.
The analogy with loan-sharking is valid, given that both credit card
companies and gangsters loan money to people who have no means of
repayment. The gangsters compel repayment with the threat of physical
force, and banks will now have the legal intimidation of the courts.
Because Clinton vetoed this legislation, the banking industry weighed
in heavily for Bush in the last election. MBNA employees accounted for
$240,000 in donations to Bush, compared to $1,500 to Al Gore. The bank's
chairman hosted a $1,000-a-plate dinner for Bush, and the bank
contributed a nifty $100,000 to the Bush inaugural festivities.
Financial institutions, which gave Republicans $26 million in the last
election, have been rewarded with quick passage of the bankruptcy bill
that Clinton rejected. The big difference this time around is that Bush
has already stated that he will sign the bill, so there is no pressure on
Congress to build in even the most minor consumer protections.
This year alone, a million Americans, many of them young people
suckered into financing their education by maxing out their credit cards,
will attempt to use the bankruptcy court as a second chance, only to find
the door closed. They should thank Bush the next time an election rolls