The JvL Bi-Weekly for 021509

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Sunday, February 15th, 2009

Volume 8, No. 3

6 Articles, 27 Pages

(Editor's Note; Our American presidents have long had misgivings about the country's banking system. In 1816, Thomas Jefferson wrote: 'I sincerely believe that banking establishments are. . .more dangerous than standing armies.' In 1836, Andrew Jackson said to bankers: "You are a den of vipers and thieves and i intend to rout you out. . .and will.' Even Henry Ford cautioned, 'It is well enough that people of the nation do understand our banking and monetary system, for if they did I believe there would be a revolution before tomorrow morning."-----Kacirck's, Forgotten Events, 2008 (With thanks to Rosita))

(Editor's note: Vatican rebuts [Prime minister of Germany]Merkel's criticism over holocaust denier. The Vatican has rejected criticism by German Chancellor Angela Merkel that the Roman Catholic Church had not spoken out clearly enough in condemning Holocaust denial. A Vatican spokesman cited a papal address last week, during which Pope Benedict XVI expressed his solidarity with the Jewish people. Merkel had earlier urged the Vatican to clarify unambiguously that there could be no denial that the Nazis had killed six million Jews. The initial controversy was sparked late last month when the Pope lifted the excommunication on British bishop Richard Williamson, who had on Swedish TV denied the existence of gas chambers and said that only 200,000 to 300,000 Jews were murdered during Nazi rule. The Pope's decision to readmit Williamson led to widespread puzzlement and outrage within the Catholic Church and the pontiff's home country Germany. Denying that the Holocaust took place is illegal in Germany and Austria.) (It should be added that the Vatican has now come out unambiguously reaffirming the horrors and extent of the holocaust. Also, the Vatican has demanded that the excommunicated Catholic British bishop, Richard Williamson, was to recant his views on the holocaust before his excommunication would be lifted. This has, in effect, vindicated Prime minister of Germany Merkel's position. Ed.))

1. Fear and Loathing in Davos

2. The Myth of the Efficient Car

3. Holbrooke: Insensitive Choice for a Sensitive Region

4. The Wrong Man for the Job

5. It's Not Going To Be Okay

6. Bush's Shadow Army

1. FEAR AND LOATHING IN DAVOS

BY

JOSEPH E. STIGLITZ

For 15 years, I have attended the World Economic Forum in Davos. Typically, the leaders gathered there share their optimism about how globalisation, technology and markets are transforming the world for the better. Even during the recession of 2001, those assembled in Davos believed that the downturn would be short-lived.

But this time, as business leaders shared their experiences, one could almost feel the clouds darkening. The spirit was captured by one speaker who suggested that we had gone from "boom and bust" to "boom and Armageddon". The emerging consensus was that the International Monetary Fund (IMF) forecast for 2009, issued as the meeting convened, of global stagnation - the lowest growth in the post-war period - was optimistic. The only upbeat note was struck by someone who remarked that Davos consensus forecasts are almost always wrong, so perhaps this time it would prove excessively pessimistic.

Equally striking was the loss of faith in markets. In a widely attended brainstorming session at which participants were asked what single failure accounted for the crisis, there was a resounding answer: the belief that markets were self-correcting.

The so-called "efficient markets" model, which holds that prices fully and efficiently reflect all available information, also came in for a trashing. So did inflation targeting: the excessive focus on inflation had diverted attention from the more fundamental question of financial stability. Central bankers' belief that controlling inflation was necessary and almost sufficient for growth and prosperity had never been based on sound economic theory; now, the crisis provided further skepticism.

While no one from either the Bush or Obama administrations attempted to defend American-style free-wheeling capitalism, European leaders argued for their "social market economy", their gentler form of capitalism with its social protections, as the model for the future. And its automatic stabilisers, with spending automatically increasing as economic woes increased, held out the promise of moderating the downturn.

Most American financial leaders seemed too embarrassed to make an appearance. Perhaps their absence made it easier for those who did attend to vent their anger. The few labour leaders who work hard at Davos each year to advance a better understanding of the concerns of working men and women among the business community were particularly angry at the financial community's lack of remorse. A call for the repayment of past bonuses was received with applause.

Indeed, some American financiers were especially harshly criticised for seeming to take the position that they, too, were victims. The reality is that they were the perpetrators, not the victims, and it seemed particularly galling that they were continuing to hold a gun to the heads of governments, demanding massive bailouts and threatening economic collapse otherwise. Money was flowing to those who had caused the problem, rather than to the victims.

Worse still, much of the money flowing into the banks to recapitalise them so that they could resume lending has been flowing out in the form of bonus payments and dividends. The fact that businesses around the world were not getting the credit they need compounded the grievances expressed at Davos.

This crisis raises fundamental questions about globalisation, which was supposed to help diffuse risk. Instead, it has enabled America's failures to spread around the world, like a contagious disease. Still, the worry at Davos was that there would be a retreat from even our flawed globalisation, and that poor countries would suffer the most.

But the playing field has always been uneven. If developing countries can't compete with America's subsidies and guarantees, how could any developing country defend to its citizens the idea of opening itself even more to America's highly subsidised banks? At least for the moment, financial market liberalisation seems to be dead.

The inequities are obvious. Even if poor countries were willing to guarantee their deposits, the guarantee would mean less than that from the United States. This partly explains the curious flow of funds from developing countries to the US - from whence the world's problems originated. Moreover, developing countries lack the resources to engage in the massive stimulus policies of the advanced countries.

Making matters worse, the IMF still forces most countries that turn to it for help to raise interest rates and lower spending, worsening the downturns. And, to add insult to injury, banks in advanced countries, especially those receiving aid from their governments, seem to be pulling back from lending in developing countries, including through branches and subsidiaries. So the prospects for most developing countries - including those that had done everything "right" - are bleak.

As if all this were not enough, as the Davos meeting opened America's House of Representatives passed a bill requiring US steel to be used in stimulus spending, despite the G20's call to avoid protectionism in response to the crisis.

To this litany of concerns we can add the fear that borrowers, wary of massive American deficits, and holders of US dollar reserves, worried that the US may be tempted to inflate away its debt, might respond by draining the supply of global savings. At Davos, those who trusted the US not to inflate away its debt intentionally worried that it might happen unintentionally. There was little confidence in the none-too-deft hand of the US Federal Reserve - its reputation marred by massive monetary-policy failures in recent years - to manage the massive build-up of debt and liquidity.

President Obama seems to be offering a needed boost to American leadership after the dark days of George W Bush; but the mood in Davos suggests that optimism and confidence may be short-lived. America led the world in globalisation. With American-style capitalism and America's financial markets in disrepute, will the US now lead the world into a new era of protectionism, as it did once before, during the Great Depression?

2. THE MYTH OF THE EFFICIENT CAR

BY

ALEC DUBRO

Let's get something straight about green industry: in its basic form it means we all have to buy new stuff ... lots of it. As an industrial policy that will create jobs and increase spending, it's pretty sound. As an environmental policy, it's largely a fraud.

Nowhere is it more disingenuous than the pursuit of the fuel-efficient car. In their effort to stave off collapse of their industry, auto executives have continually cited their efforts are building the high-efficiency cars of the future. The problem is, there are no cars of the future, and the looming catastrophe of global pollution, including climate change, will never be solved by building more cars - efficient or otherwise.

We'd desperately like to believe that there is a way to preserve our car-centered civilization, while simultaneously placating the gods of atmospheric warming. Even the president-elect believes it, and Obama made fuel-efficient cars a central part of his energy policy. He promised a $7,000 tax credit to hybrid car buyers, aiming for a million plug-in hybrids, getting 150 mpg, by 2015. He wants to put an additional million completely plug-in vehicles by the same year. And he's willing to federal funds up for research, or at least he was before we lost all our money.

Even on its face, this seems like a tepid response to climate change. At the moment there are upward of 250,000,000 registered vehicles in the United States - more than there are licensed drivers. Converting one percent or so of them to greater fuel efficiency is not likely to do very much in the time needed to act. Nevertheless, the hope is that introduction of a new generation of electric and semi-electric will eventually lead to a replacement of our entire fleet of gas-guzzlers. Maybe. But the bigger problem is that increasing fuel efficiency has never led to an overall reduction in pollutants. In fact, efficiency has always led to more production and consumption.



But there's an even more profound problem with building more efficient cars. In 1865, English economist William Stanley Jevons discovered an efficiency paradox: the more efficient you make machines, the more energy they use. Why? Because the more efficient they are, the better they are, the cheaper they are and more people buy them, and the more they'll use them. Now, that's good for manufacturers and maybe good for consumers, but if the problem is energy consumption or pollution, it's not good.

The so-called Jevons Paradox was resurrected in the 1980s by a variety of environmentalists and is occasionally referred to as the Khazoom-Brookes postulate or the more explicative rebound effect. It's been neatly summarized as, "those energy efficiency improvements that, on the broadest considerations, are economically justified at the micro level lead to higher levels of energy consumption at the macro level." Or, in short, you make money on each transaction and lose it in volume.

The rebound effect is not an immutable scientific law, but it's a widely observed phenomenon and has held true in the most energy-intensive consumer activities. The most commonly cited example is in lighting. As the Encyclopedia of Earth puts it, "For instance, if a 18W compact fluorescent bulb replaces a 75W incandescent bulb, the energy saving should be 76%. However, it seldom is. Consumers, realizing that the lighting now costs less per hour to run, are often less concerned with switching it off; in fact, they may intentionally leave it on all night." I know I have at times.

The same effect has occurred with cars. Automobiles have become more efficient over the years. Led by the Japanese, carmakers have increased the fuel to weight ration, decreased damaging vibration and vastly increased reliability. In the 1950s, a car that lived to drive 100,000 miles was a rarity; today they routinely last 150,000. The result? Increasing fuel consumption. And not just because more people in the developing world are buying cars, either. People everywhere are buying more of the better, cheaper more efficient cars and - here's the problem - driving them more. And that was even so when gas peaked there at $8 a gallon in Europe.

The real problem is, though, cars don't move people, cars move cars. The average car or light truck is two tons or so: 4000-plus pounds to move 200 pounds of people. OK, everybody out of the SUVs and F-150s and into a nice, green Prius. However, the curb weight of an unladen Prius is 2765 pounds, which means a ton and a half around to get you and a bag of groceries home. Not good.

Environmentalists like Amory Lovins of the Rocky Mountain Institute and green business advocate Paul Hawken have generated a lot of press with a proposed 100 mpg lightweight, plastic composite called the hypercar. But all the drawings of the hypercar very much resemble...a car. Tires, windows, bodywork, engine and drive train. Even if everything is paper-thin - something the public won't easily warm to -you're still driving five times body weight around.

Even if we were able to produce a 100 mpg, zero pollution vehicle, we'd still need to maintain the infrastructure of roads, bridges, and energy distribution. That means steel, concrete, asphalt and plastics. Just concrete production alone generates as much as 10 percent of all greenhouse gas. In 2007, the U.S. produced 95 million tons of cement by burning fossil fuels and, according to the EPA, is the third largest source of greenhouse gas pollution in the U.S. (Scientific America, August 7, 2008) The production of asphalt - a petroleum product - also creates carbon. As does the production of motor oil, tires, and on and on.

And there's another intractable problem: the very thing that makes tires so useful - comfort, stability, adhesion - also produces immense rolling friction. In order for us to makes cars that are maneuverable and relatively safe, they have to grip the road, which takes buckets of energy to overcome. One reason trains are able to transport people using far less energy per passenger mile is that there are fewer wheels per person and steel wheels have much less rolling friction.

Without divine intervention - which seems to be the basis for most energy reduction schemes - there is simply no way to maintain both the atmosphere and personal transportation. Even if the population were frozen at its present level, even if economic growth stopped the sheer number of people wanting - and under the present regime, need - personal transportation makes any plan to reduce car pollution by increasing efficiency is futile. The personal automobile must be abandoned, and quickly.



It would be better to do this in a measured and humane way, easing both automobile workers and users into a post-car world. It needs a societal consensus, requiring major shifts of goals and expectations, and few of us will take these steps on our own. But this change will eventually happen to us whether we like it or not, perhaps in time to stave off climactic disaster.

There are already attempts at designing a post-car future. City planners have been pushing the "20-minute neighborhood," where home, work, shopping and recreation are all within a 20 minute walk. Places like Portland, Oregon, are encouraging this kind of development with planning codes and tax breaks. These more compact, walkable neighborhoods would seem to point us in the right direction, but so far they're extremely limited. Most people prefer car culture. And that includes Europe, and certainly Asia, as well. Unless the various governments enact explicit and enforceable sprawl restrictions, growth will trump any specific increases in efficiencies.

The one step we ought to take right now is to withdraw our support - financial, political and emotional - from the pursuit of an energy-efficient car. We'd have better luck creating a perpetual motion machine.



3. HOLBROOKE: INSENSITIVE CHOICE FOR A SENSITIVE REGION

BY

STEPHEN ZUNES

Obama's choice for special envoy to Afghanistan and Pakistan, arguably the most critical area of U.S. foreign policy, is a man with perhaps the most sordid history of any of the largely disappointing set of foreign policy and national security appointments.

Richard Holbrooke got his start in the Foreign Service during the 1960s, in the notorious pacification programs in the Mekong Delta of South Vietnam. This ambitious joint civilian-military effort not only included horrific human rights abuses but also proved to be a notorious failure in curbing the insurgency against the U.S.-backed regime in Saigon. This was an inauspicious start in the career of someone Obama hopes to help curb the insurgency against the U.S.-backed government in Afghanistan.

In Asia, in the late 1970s, Holbrooke served as assistant secretary of State for East Asian and Pacific Affairs. In this position, he played a major role in formulating the Carter administration's support for Indonesia's occupation of East Timor and the bloody counterinsurgency campaign responsible for up to a quarter-million civilian deaths. Having successfully pushed for a dramatic increase in U.S. military aid to the Suharto dictatorship, he then engaged in a cover-up of the Indonesian atrocities. He testified before Congress in 1979 that the mass starvation wasn't the fault of the scorched-earth campaign by Indonesian forces in the island nation's richest agricultural areas, but simply a legacy of Portuguese colonial neglect. Later, in reference to his friend Paul Wolfowitz, then the U.S. ambassador to Indonesia, Holbrooke described how "Paul and I have been in frequent touch to make sure that we keep [East Timor] out of the presidential campaign, where it would do no good to American or Indonesian interests."

In a particularly notorious episode while heading the State Department's East Asia division, Holbrooke convinced Carter to release South Korean troops under U.S. command in order to suppress a pro-democracy uprising in the city of Kwangju. Holbrooke was among the Carter administration officials who reportedly gave the OK to General Chun Doo-hwan, who had recently seized control of the South Korean government in a military coup, to wipe out the pro-democracy rebels. Hundreds were killed.

He also convinced President Jimmy Carter to continue its military and economic support for the Marcos dictatorship in the Philippines.

At the UN Holbrooke, as the U.S. ambassador to the United Nations in the late 1990s, criticized the UN for taking leadership in conflict resolution efforts involving U.S. allies, particularly in the area of human rights. For example, in October 2000 he insisted that a UN Security Council resolution criticizing the excessive use of force by Israeli occupation forces against Palestinian demonstrators revealed an unacceptable bias that put the UN "out of the running" in terms of any contributions to the peace process.

As special representative to Cyprus in 1997, Holbrooke unsuccessfully pushed the European Union to admit Turkey, despite its imprisonment of journalists, its ongoing use of the death penalty, its widespread killing of civilians in the course of its bloody counter-insurgency war in its Kurdish region, and other human rights abuses.

In the Former Yugoslavia Holbrooke is perhaps best known for his leadership in putting together the 1995 Dayton Accords, which formally ended the conflict in Bosnia-Herzegovina. Though widely praised in some circles for his efforts, Holbrooke remains quite controversial for his role. For instance, the agreement allows Bosnian Serbs to hold on to virtually all of the land they had seized and ethnically cleansed in the course of that bloody conflict. Indeed, rather than accept the secular concept of national citizenship that has held sway in Europe for generations, Holbrooke helped impose sectarian divisions that have made the country - unlike most of its gradually liberalizing Balkan neighbors - unstable, fractious, and dominated by illiberal ultra-nationalists.

As with previous U.S. officials regarding their relations with Iraq's Saddam Hussein and Panama's Manuel Noriega, Holbrooke epitomizes the failed U.S. policy toward autocratic rulers that swings between the extremes of appeasement and war. For example, during the 1996 pro-democracy uprising in Serbia Holbrooke successfully argued that the Clinton administration should back Milosevic, in recognition of his role in the successful peace deal over Bosnia, and not risk the instability that might result from a victory by Serb democrats. Milosevic initially crushed the movement. In response to increased Serbian oppression in Kosovo just a couple years later, however, Holbrooke became a vociferous advocate of the 1999 U.S.-led bombing campaign, creating a nationalist reaction that set back the reconstituted pro-democracy movement once again. The pro-democracy movement finally succeeded in the nonviolent overthrow of the regime, following Milosevic's attempt to steal the parliamentary elections in October 2000, but the young leaders of that movement remain bitterly angry at Holbrooke to this day.

Scott Ritter, the former chief UN Special Commission (UNSCOM) inspector who correctly assessed the absence of weapons of mass destruction in Iraq and predicted a disastrous outcome for the U.S. invasion, observes that "not only has he demonstrated a lack of comprehension when it comes to the complex reality of Afghanistan (not to mention Pakistan), Holbrooke has a history of choosing the military solution over the finesse of diplomacy." Noting how the Dayton Accords were built on the assumption of a major and indefinite NATO military presence, which would obviously be far more problematic in Afghanistan and Pakistan than in Europe, Ritter adds: "This does not bode well for the Obama administration."



Ironically, back in 2002-2003, when the United States had temporarily succeeded in marginalizing Taliban and al-Qaeda forces, Holbrooke was a strong supporter of redirecting American military and intelligence assets away from the region in order to invade and occupy Iraq. Obama and others presciently criticized this reallocation of resources at that time as likely to lead to the deterioration of the security situation in the country and the resurgence of these extremist groups.

It's unclear, then, why Obama would choose someone like Holbrooke for such a sensitive post. Indeed, it's unclear as to why - having been elected on part for his anti-war credentials - Obama's foreign policy and national security appointments have consisted primarily of such unreconstructed hawks. Advocates of a more enlightened and rational foreign policy still have a long row to hoe.



4. THE WRONG MAN FOR THE JOB

BY

SCOTT RITTER

It was early in October 2001, and I had been invited to New York City on behalf of The History Channel for a show in which I was to discuss the situation in Afghanistan in the aftermath of the Sept. 11 attacks. I was pitted against a seasoned American diplomat who had made his reputation negotiating peace accords in difficult corners of the world. I felt a little out of place, since my area of expertise was arms control and disarmament, and specifically how arms control was being implemented in Iraq. I had written a few scholarly articles about Afghan-Soviet relations, with a focus on the ethnic and tribal aspects of Afghan politics, and in the mid-1980s I had been an analyst with the Marine Corps component of the rapid deployment force, following very closely the Soviet war against the Afghan mujahedeen, so I wasn't totally out of my element.

I fully expected to play second fiddle to the veteran diplomat, and appreciated the opportunity to hear his insights into what clearly was a very difficult situation facing the Bush administration. Osama bin Laden and his al-Qaida organization had used their status as guests of the Taliban government of Afghanistan to formulate and implement their terrorist attacks against the United States. The question confronting the Bush administration was how best to respond. I had spent some time thinking over the problem and came down firmly against the idea of direct military intervention. History had shown that, since the time of Alexander the Great through the Soviet invasion and occupation, outside forces had fared poorly when they tried to impose their will on the diverse grouping of tribes and ethnic groups that made up Afghanistan.

Our fight, in any case, wasn't against the people of Afghanistan. To a certain extent, it wasn't even against the Taliban, since it was al-Qaida, not the Taliban, that had attacked us. Some, including leaders of the Bush administration, were making the case that the Taliban was directly implicated in the attacks since it had provided al-Qaida with a safe haven to plan the events of 9/11. It had yet to be proved that the Taliban was a witting host, however. As a student of the region, I believed that the United States would do well to use tribal concepts of honor to isolate and disenfranchise bin Laden and his Arab outsiders from their Taliban host. If the United States, working through the offices of the Pakistani intelligence services, could convince the Taliban that its hospitality had been abused by al-Qaida-in that the murder of innocents had been committed while under its protection-then Afghan tribal custom and honor and, even more important to the fundamentalist Taliban, Islamic law, dictated that the Taliban revoke the protections and privileges afforded bin Laden and al-Qaida.

I did not believe that the Taliban would impose justice itself, but rather could be convinced, through a combination of logic and economic incentive, to disperse al-Qaida and turn bin Laden and his senior leadership over to a third party, presumably an Islamic nation such as Pakistan or the United Arab Emirates. If a direct approach failed, then covert action, using proxy forces in Pakistan and Iran, would make contact with moderate elements of the Taliban, personified by its foreign minister, to remove the conservative Mullah Omar from power and achieve a more direct result against bin Laden and his cohorts. A new, moderate Taliban leadership would be more than capable of assembling the religious clerics necessary to convene a sharia, or Islamic, court, which would find the actions of al-Qaida to be violations of Islamic law. Also, a loya jirga, or tribal gathering, would revoke the protected status of "guest" enjoyed by bin Laden and his fellow terrorists. The least productive option America could pursue was that of direct military intervention, and I anticipated that the veteran diplomat would concur with that point of view.

What happened, however, was the exact opposite. The diplomat rejected out of hand any sort of diplomacy, arguing that there were only extremists within the ranks of the Taliban. There was, in his opinion, no such thing as a moderate Taliban, and as such the United States had no choice but to lump the Taliban and al-Qaida into a singular target set, and initiate direct military action designed to remove the Taliban from power and destroy al-Qaida in Afghanistan. I responded by noting that it would not be an easy thing to separate the Taliban from Afghan society, since the Taliban was a product of Afghan society, and that any military action against the Taliban would only strengthen the bonds between it and al-Qaida, which was of course the last result the United States should be seeking. The diplomat rejected my argument as simplistic and unrealistic. He argued for a military solution, and, of course, that was the result the Bush administration delivered. The diplomat's name? Richard Holbrooke.

The new secretary of state, Hillary Clinton, has appointed Holbrooke as the U.S. special envoy for Afghanistan and Pakistan. With his extensive experience in peacemaking, including negotiating the Dayton Accords, which brought an end to the horrific fighting in Bosnia-Herzegovina, Holbrooke seems an ideal candidate for the complexities represented by the ongoing situation in Afghanistan, as well as by the related unrest in neighboring Pakistan. The presence of NATO forces in Afghanistan also plays to Holbrooke's perceived strengths, given the role played by NATO in bringing an end to the fighting in the former Yugoslavia. However, at a time when NATO itself questions the viability of the mission in Afghanistan, pushing for a solution emphasizing social and economic stability over military action, the selection of a hawk like Holbrooke is ill-advised. Not only has he demonstrated a lack of comprehension when it comes to the complex reality of Afghanistan (not to mention Pakistan), Holbrooke has a history of choosing the military solution over the finesse of diplomacy. The Dayton Accords, after all, were built on the back of a NATO military presence. This does not bode well for the Obama administration.

It is highly doubtful that Holbrooke will bring anything more to the table than cheerleading. President Obama's stated intention to increase the size of the U.S. military presence in Afghanistan and to more forcefully assert U.S.-imposed "security" through continued military action in the Northwest Frontier of Pakistan is a dangerous scheme, one Holbrooke will enthusiastically support. Reinforcing failure is never a sound solution. Take it from the veteran British military officers who have served in Afghanistan and now advise that there is no military solution to the Afghan problem. Listening to advice like that would go a long way toward developing stability in Afghanistan and Pakistan and neutralizing al-Qaida's ability to organize and operate in those nations. The British recognize that the Taliban is not the problem, but rather part of the solution to what ails Afghanistan.

There will be no peace without a negotiated settlement that includes the Taliban. To accomplish this, leadership is required which recognizes the Taliban as a force of moderation, and not extremism. Holbrooke does not have a record which indicates he would be willing to consider direct negotiations with the Taliban. He tends to seek military solutions to difficult ethnic-based problems, and he is likely to argue for the deployment of even more U.S. troops to that war-ravaged nation. That would be a historic mistake.

Instability within Afghanistan continues to bleed over into Pakistan. As the United States pushes for a more effective military solution, there will be even greater pressures placed on U.S. leadership to become directly involved in Pakistan. The recent events in Mumbai, where Pakistani-based terrorists killed scores of innocent civilians, only underscore the inherent instability of Pakistan, which is fighting its own internal struggle against the forces of Islamic fundamentalism. Increased American military operations against Taliban and al-Qaida forces operating inside Pakistan will be a direct result of any increased U.S. military presence in Afghanistan. Such military operations will only increase the influence of Islamic fundamentalists inside Pakistan, while doing little to halt the efforts of the Taliban inside Afghanistan.

The radicalization of Pakistan has potentially disastrous implications for Pakistani-Indian relations. There is already increased talk about the possibility of war between these two nuclear-armed regional powers. Any conflict between India and Pakistan, nuclear or not, brings with it the likelihood of a breakdown of central authority within Pakistan, and would even further empower radical Islamic fundamentalists. That would bring the possibility that sensitive nuclear material, up to and including a nuclear device, would fall into their control. Such an outcome is the stuff of nightmares.

The cause-and-effect relationship between what the United States does inside Afghanistan and what occurs inside Pakistan cannot be ignored by American policymakers. As such, the goal of any U.S. special envoy to the region should be to stabilize the internal Afghan situation and de-emphasize cross-border military operations into Pakistan. Any effort which embraces the Taliban as part of a new Afghan reality would, by extension, eliminate the need to strike Taliban strongholds inside Pakistan. With the Taliban co-opted as a part of the central Afghan government, the forces of al-Qaida would lose their effectiveness, as any effort to continue to fight in Afghanistan would invariably pit them against their former allies. Reduction of hostilities in Afghanistan would create a similar reduction in hostilities in the Northwest Frontier of Pakistan. This in turn would result in a reduction of events which could be used by fundamentalists to justify radical behavior. And a reduction in radical Islamic fundamentalism would in turn allow for a more stable, moderate Pakistani government operating in a manner not only conducive to peace in Afghanistan but also peace with India and the entire region.

To embrace such a policy, the United States needs to contract the services of a U.S. special envoy capable of visionary thinking, one who possesses the political courage to stand up to a president and a secretary of state and argue against bad policy. I do not believe Holbrooke is such a man. As a result, I fear that the Obama administration will find the situation in Afghanistan and Pakistan continuing to deteriorate to the detriment of American national security, and will increasingly waste time and energy in a period of so many problems at home and abroad. Afghanistan does not need to be one of these problems, but the selection of Richard Holbrooke as U.S. special envoy bodes ill for the prospect of lasting peace and security in a volatile region.



5. IT'S NOT GOING TO BE OK

BY

CHRIS HEDGES



The daily bleeding of thousands of jobs will soon turn our economic crisis into a political crisis. The street protests, strikes and riots that have rattled France, Turkey, Greece, Ukraine, Russia, Latvia, Lithuania, Bulgaria and Iceland will descend on us. It is only a matter of time. And not much time. When things start to go sour, when Barack Obama is exposed as a mortal waving a sword at a tidal wave, the United States could plunge into a long period of precarious social instability.

At no period in American history has our democracy been in such peril or has the possibility of totalitarianism been as real. Our way of life is over. Our profligate consumption is finished. Our children will never have the standard of living we had. And poverty and despair will sweep across the landscape like a plague. This is the bleak future. There is nothing President Obama can do to stop it. It has been decades in the making. It cannot be undone with a trillion or two trillion dollars in bailout money. Our empire is dying. Our economy has collapsed.

How will we cope with our decline? Will we cling to the absurd dreams of a superpower and a glorious tomorrow or will we responsibly face our stark new limitations? Will we heed those who are sober and rational, those who speak of a new simplicity and humility, or will we follow the demagogues and charlatans who rise up out of the slime in moments of crisis to offer fantastic visions? Will we radically transform our system to one that protects the ordinary citizen and fosters the common good, that defies the corporate state, or will we employ the brutality and technology of our internal security and surveillance apparatus to crush all dissent? We won't have to wait long to find out.

There are a few isolated individuals who saw it coming. The political philosophers Sheldon S. Wolin, John Ralston Saul and Andrew Bacevich, as well as writers such as Noam Chomsky, Chalmers Johnson, David Korten and Naomi Klein, along with activists such as Bill McKibben and Ralph Nader, rang the alarm bells. They were largely ignored or ridiculed. Our corporate media and corporate universities proved, when we needed them most, intellectually and morally useless.

Wolin, who taught political philosophy at the University of California in Berkeley and at Princeton, in his book "Democracy Incorporated" uses the phrase inverted totalitarianism to describe our system of power. Inverted totalitarianism, unlike classical totalitarianism, does not revolve around a demagogue or charismatic leader. It finds its expression in the anonymity of the corporate state. It purports to cherish democracy, patriotism and the Constitution while cynically manipulating internal levers to subvert and thwart democratic institutions. Political candidates are elected in popular votes by citizens, but they must raise staggering amounts of corporate funds to compete. They are beholden to armies of corporate lobbyists in Washington or state capitals who write the legislation. A corporate media controls nearly everything we read, watch or hear and imposes a bland uniformity of opinion or diverts us with trivia and celebrity gossip. In classical totalitarian regimes, such as Nazi fascism or Soviet communism, economics was subordinate to politics. "Under inverted totalitarianism the reverse is true," Wolin writes. "Economics dominates politics-and with that domination comes different forms of ruthlessness."

I reached Wolin, 86, by phone at his home about 25 miles north of San Francisco. He was a bombardier in the South Pacific during World War II and went to Harvard after the war to get his doctorate. Wolin has written classics such as "Politics and Vision" and "Tocqueville Between Two Worlds." His newest book is one of the most important and prescient critiques to date of the American political system. He is also the author of a series of remarkable essays on Augustine of Hippo, Richard Hooker, David Hume, Martin Luther, John Calvin, Max Weber, Friedrich Nietzsche, Karl Marx and John Dewey. His voice, however, has faded from public awareness because, as he told me, "it is harder and harder for people like me to get a public hearing." He said that publications, such as The New York Review of Books, which often published his work a couple of decades ago, lost interest in his critiques of American capitalism, his warnings about the subversion of democratic institutions and the emergence of the corporate state. He does not hold out much hope for Obama.

"The basic systems are going to stay in place; they are too powerful to be challenged," Wolin told me when I asked him about the new Obama administration. "This is shown by the financial bailout. It does not bother with the structure at all. I don't think Obama can take on the kind of military establishment we have developed. This is not to say that I do not admire him. He is probably the most intelligent president we have had in decades. I think he is well meaning, but he inherits a system of constraints that make it very difficult to take on these major power configurations. I do not think he has the appetite for it in any ideological sense. The corporate structure is not going to be challenged. There has not been a word from him that would suggest an attempt to rethink the American imperium."

Wolin argues that a failure to dismantle our vast and overextended imperial projects, coupled with the economic collapse, is likely to result in inverted totalitarianism. He said that without "radical and drastic remedies" the response to mounting discontent and social unrest will probably lead to greater state control and repression. There will be, he warned, a huge "expansion of government power."

"Our political culture has remained unhelpful in fostering a democratic consciousness," he said. "The political system and its operatives will not be constrained by popular discontent or uprisings."

Wolin writes that in inverted totalitarianism consumer goods and a comfortable standard of living, along with a vast entertainment industry that provides spectacles and diversions, keep the citizenry politically passive. I asked if the economic collapse and the steady decline in our standard of living might not, in fact, trigger classical totalitarianism. Could widespread frustration and poverty lead the working and middle classes to place their faith in demagogues, especially those from the Christian right?



"I think that's perfectly possible," he answered. "That was the experience of the 1930s. There wasn't just FDR. There was Huey Long and Father Coughlin. There were even more extreme movements including the Klan. The extent to which those forces can be fed by the downturn and bleakness is a very real danger. It could become classical totalitarianism."

He said the widespread political passivity is dangerous. It is often exploited by demagogues who pose as saviors and offer dreams of glory and salvation. He warned that "the apoliticalness, even anti-politicalness, will be very powerful elements in taking us towards a radically dictatorial direction. It testifies to how thin the commitment to democracy is in the present circumstances. Democracy is not ascendant. It is not dominant. It is beleaguered. The extent to which young people have been drawn away from public concerns and given this extraordinary range of diversions makes it very likely they could then rally to a demagogue."

Wolin lamented that the corporate state has successfully blocked any real debate about alternative forms of power. Corporations determine who gets heard and who does not, he said. And those who critique corporate power are given no place in the national dialogue.



"In the 1930s there were all kinds of alternative understandings, from socialism to more extensive governmental involvement," he said. "There was a range of different approaches. But what I am struck by now is the narrow range within which palliatives are being modeled. We are supposed to work with the financial system. So the people who helped create this system are put in charge of the solution. There has to be some major effort to think outside the box."

"The puzzle to me is the lack of social unrest," Wolin said when I asked why we have not yet seen rioting or protests. He said he worried that popular protests will be dismissed and ignored by the corporate media. This, he said, is what happened when tens of thousands protested the war in Iraq. This will permit the state to ruthlessly suppress local protests, as happened during the Democratic and Republic conventions. Anti-war protests in the 1960s gained momentum from their ability to spread across the country, he noted. This, he said, may not happen this time. "The ways they can isolate protests and prevent it from [becoming] a contagion are formidable," he said.

"My greatest fear is that the Obama administration will achieve relatively little in terms of structural change," he added. "They may at best keep the system going. But there is a growing pessimism. Every day we hear how much longer the recession will continue. They are already talking about beyond next year. The economic difficulties are more profound than we had guessed and because of globalization more difficult to deal with. I wish the political establishment, the parties and leadership, would become more aware of the depths of the problem. They can't keep throwing money at this. They have to begin structural changes that involve a very different approach from a market economy. I don't think this will happen."

"I keep asking why and how and when this country became so conservative," he went on. "This country once prided itself on its experimentation and flexibility. It has become rigid. It is probably the most conservative of all the advanced countries."

The American left, he said, has crumbled. It sold out to a bankrupt Democratic Party, abandoned the working class and has no ability to organize. Unions are a spent force. The universities are mills for corporate employees. The press churns out info-entertainment or fatuous pundits. The left, he said, no longer has the capacity to be a counterweight to the corporate state. He said that if an extreme right gains momentum there will probably be very little organized resistance.

"The left is amorphous," he said. "I despair over the left. Left parties may be small in number in Europe but they are a coherent organization that keeps going. Here, except for Nader's efforts, we don't have that. We have a few voices here, a magazine there, and that's about it. It goes nowhere."



6. BUSH'S SHADOW ARMY (Part 1 of 2 parts)

BY

JEREMY SCAHILL

On September 10, 2001, before most Americans had heard of Al Qaeda or imagined the possibility of a "war on terror," Donald Rumsfeld stepped to the podium at the Pentagon to deliver one of his first major addresses as Defense Secretary under President George W. Bush. Standing before the former corporate executives he had tapped as his top deputies overseeing the high-stakes business of military contracting--many of them from firms like Enron, General Dynamics and Aerospace Corporation--Rumsfeld issued a declaration of war.

"The topic today is an adversary that poses a threat, a serious threat, to the security of the United States of America," Rumsfeld thundered. "It disrupts the defense of the United States and places the lives of men and women in uniform at risk." He told his new staff, "You may think I'm describing one of the last decrepit dictators of the world.... [But] the adversary's closer to home," he said. "It's the Pentagon bureaucracy." Rumsfeld called for a wholesale shift in the running of the Pentagon, supplanting the old DOD bureaucracy with a new model, one based on the private sector. Announcing this major overhaul, Rumsfeld told his audience, "I have no desire to attack the Pentagon; I want to liberate it. We need to save it from itself."



The next morning, the Pentagon would be attacked, literally, as a Boeing 757--American Airlines Flight 77--smashed into its western wall. Rumsfeld would famously assist rescue workers in pulling bodies from the rubble. But it didn't take long for Rumsfeld to seize the almost unthinkable opportunity presented by 9/11 to put his personal war--laid out just a day before--on the fast track. The new Pentagon policy would emphasize covert actions, sophisticated weapons systems and greater reliance on private contractors. It became known as the Rumsfeld Doctrine. "We must promote a more entrepreneurial approach: one that encourages people to be proactive, not reactive, and to behave less like bureaucrats and more like venture capitalists," Rumsfeld wrote in the summer of 2002 in an article for Foreign Affairs titled "Transforming the Military."

Although Rumsfeld was later thrown overboard by the Administration in an attempt to placate critics of the Iraq War, his military revolution was here to stay. Bidding farewell to Rumsfeld in November 2006, Bush credited him with overseeing the "most sweeping transformation of America's global force posture since the end of World War II." Indeed, Rumsfeld's trademark "small footprint" approach ushered in one of the most significant developments in modern warfare--the widespread use of private contractors in every aspect of war, including in combat.

The often overlooked subplot of the wars of the post-9/11 period is their unprecedented scale of outsourcing and privatization. From the moment the US troop buildup began in advance of the invasion of Iraq, the Pentagon made private contractors an integral part of the operations. Even as the government gave the public appearance of attempting diplomacy, Halliburton was prepping for a massive operation. When US tanks rolled into Baghdad in March 2003, they brought with them the largest army of private contractors ever deployed in modern war. By the end of Rumsfeld's tenure in late 2006, there were an estimated 100,000 private contractors on the ground in Iraq--an almost one-to-one ratio with active-duty American soldiers.

To the great satisfaction of the war industry, before Rumsfeld resigned he took the extraordinary step of classifying private contractors as an official part of the US war machine. In the Pentagon's 2006 Quadrennial Review, Rumsfeld outlined what he called a "road map for change" at the DOD, which he said had begun to be implemented in 2001. It defined the "Department's Total Force" as "its active and reserve military components, its civil servants, and its contractors--constitut[ing] its war fighting capability and capacity. Members of the Total Force serve in thousands of locations around the world, performing a vast array of duties to accomplish critical missions." This formal designation represented a major triumph for war contractors--conferring on them a legitimacy they had never before enjoyed.

Contractors have provided the Bush Administration with political cover, allowing the government to deploy private forces in a war zone free of public scrutiny, with the deaths, injuries and crimes of those forces shrouded in secrecy. The Administration and the GOP-controlled Congress in turn have shielded the contractors from accountability, oversight and legal constraints. Despite the presence of more than 100,000 private contractors on the ground in Iraq, only one has been indicted for crimes or violations. "We have over 200,000 troops in Iraq and half of them aren't being counted, and the danger is that there's zero accountability," says Democrat Dennis Kucinich, one of the leading Congressional critics of war contracting.

While the past years of Republican monopoly on government have marked a golden era for the industry, those days appear to be ending. Just a month into the new Congressional term, leading Democrats were announcing investigations of runaway war contractors. Representative John Murtha, chair of the Appropriations Committee's Subcommittee on Defense, after returning from a trip to Iraq in late January, said, "We're going to have extensive hearings to find out exactly what's going on with contractors. They don't have a clear mission and they're falling all over each other." Two days later, during confirmation hearings for Gen. George Casey as Army chief of staff, Senator Jim Webb declared, "This is a rent-an-army out there." Webb asked Casey, "Wouldn't it be better for this country if those tasks, particularly the quasi-military gun fighting tasks, were being performed by active-duty military soldiers in terms of cost and accountability?" Casey defended the contracting system but said armed contractors "are the ones that we have to watch very carefully." Senator Joe Biden, chair of the Foreign Relations Committee, has also indicated he will hold hearings on contractors. Parallel to the ongoing investigations, there are several bills gaining steam in Congress aimed at contractor oversight.



Occupying the hot seat through these deliberations is the shadowy mercenary company Blackwater USA. Unbeknownst to many Americans and largely off the Congressional radar, Blackwater has secured a position of remarkable power and protection within the US war apparatus. This company's success represents the realization of the life's work of the conservative officials who formed the core of the Bush Administration's war team, for whom radical privatization has long been a cherished ideological mission. Blackwater has repeatedly cited Rumsfeld's statement that contractors are part of the "Total Force" as evidence that it is a legitimate part of the nation's "war fighting capability and capacity." Invoking Rumsfeld's designation, the company has in effect declared its forces above the law--entitled to the immunity from civilian lawsuits enjoyed by the military, but also not bound by the military's court martial system. While the initial inquiries into Blackwater have focused on the complex labyrinth of secretive subcontracts under which it operates in Iraq, a thorough investigation into the company reveals a frightening picture of a politically connected private army that has become the Bush Administration's Praetorian Guard.

Blackwater Rising

Blackwater was founded in 1996 by conservative Christian multimillionaire and ex-Navy SEAL Erik Prince--the scion of a wealthy Michigan family whose generous political donations helped fuel the rise of the religious right and the Republican revolution of 1994. At its founding, the company largely consisted of Prince's private fortune and a vast 5,000-acre plot of land located near the Great Dismal Swamp in Moyock, North Carolina. Its vision was "to fulfill the anticipated demand for government outsourcing of firearms and related security training." In the following years, Prince, his family and his political allies poured money into Republican campaign coffers, supporting the party's takeover of Congress and the ascension of George W. Bush to the presidency.

While Blackwater won government contracts during the Clinton era, which was friendly to privatization, it was not until the "war on terror" that the company's glory moment arrived. Almost overnight, following September 11, the company would become a central player in a global war. "I've been operating in the training business now for four years and was starting to get a little cynical on how seriously people took security," Prince told Fox News host Bill O'Reilly shortly after 9/11. "The phone is ringing off the hook now."



Among those calls was one from the CIA, which contracted Blackwater to work in Afghanistan in the early stages of US operations there. In the ensuing years the company has become one of the greatest beneficiaries of the "war on terror," winning nearly $1 billion in non-covert government contracts, many of them no-bid arrangements. In just a decade Prince has expanded the Moyock headquarters to 7,000 acres, making it the world's largest private military base. Blackwater currently has 2,300 personnel deployed in nine countries, with 20,000 other contractors at the ready. It has a fleet of more than twenty aircraft, including helicopter gunships and a private intelligence division, and it is manufacturing surveillance blimps and target systems.

In 2005 after Hurricane Katrina its forces deployed in New Orleans, where it billed the federal government $950 per man, per day--at one point raking in more than $240,000 a day. At its peak the company had about 600 contractors deployed from Texas to Mississippi. Since Katrina, it has aggressively pursued domestic contracting, opening a new domestic operations division. Blackwater is marketing its products and services to the Department of Homeland Security, and its representatives have met with California Governor Arnold Schwarzenegger. The company has applied for operating licenses in all US coastal states. Blackwater is also expanding its physical presence inside US borders, opening facilities in Illinois and California.

Its largest obtainable government contract is with the State Department, for providing security to US diplomats and facilities in Iraq. That contract began in 2003 with the company's $21 million no-bid deal to protect Iraq proconsul Paul Bremer. Blackwater has guarded the two subsequent US ambassadors, John Negroponte and Zalmay Khalilzad, as well as other diplomats and occupation offices. Its forces have protected more than ninety Congressional delegations in Iraq, including that of House Speaker Nancy Pelosi. According to the latest government contract records, since June 2004 Blackwater has been awarded $750 million in State Department contracts alone. It is currently engaged in an intensive lobbying campaign to be sent into Darfur as a privatized peacekeeping force. Last October President Bush lifted some sanctions on Christian southern Sudan, paving the way for a potential Blackwater training mission there. In January the Washington, DC, representative for southern Sudan's regional government said he expected Blackwater to begin training the south's security forces soon.

Since 9/11 Blackwater has hired some well-connected officials close to the Bush Administration as senior executives. Among them are J. Cofer Black, former head of counterterrorism at the CIA and the man who led the hunt for Osama bin Laden after 9/11, and Joseph Schmitz, former Pentagon Inspector General, who was responsible for policing contractors like Blackwater during much of the "war on terror"--something he stood accused of not doing effectively. By the end of Schmitz's tenure, powerful Republican Senator Charles Grassley launched a Congressional probe into whether Schmitz had "quashed or redirected two ongoing criminal investigations" of senior Bush Administration officials. Under bipartisan fire, Schmitz resigned and signed up with Blackwater.

Despite its central role, Blackwater had largely operated in the shadows until March 31, 2004, when four of its private soldiers in Iraq were ambushed and killed in Falluja. A mob then burned the bodies and dragged them through the streets, stringing up two from a bridge over the Euphrates. In many ways it was the moment the Iraq War turned. US forces laid siege to Falluja days later, killing hundreds of people and displacing thousands, inflaming the fierce Iraqi resistance that haunts occupation forces to this day. For most Americans, it was the first they had heard of private soldiers. "People began to figure out this is quite a phenomenon," says Representative David Price, a North Carolina Democrat, who said he began monitoring the use of private contractors after Falluja. "I'm probably like most Congress members in kind of coming to this awareness and developing an interest in it" after the incident.

What is not so well-known is that in Washington after Falluja, Blackwater executives kicked into high gear, capitalizing on the company's newfound recognition. The day after the ambush, it hired the Alexander Strategy Group, a K Street lobbying firm run by former senior staffers of then-majority leader Tom DeLay before the firm's meltdown in the wake of the Jack Abramoff scandal. A week to the day after the ambush, Erik Prince was sitting down with at least four senior members of the Senate Armed Services Committee, including its chair, John Warner. Senator Rick Santorum arranged the meeting, which included Warner and two other key Republican senators--Appropriations Committee chair Ted Stevens of Alaska and George Allen of Virginia. This meeting followed an earlier series of face-to-faces Prince had had with powerful House Republicans who oversaw military contracts. Among them: DeLay; Porter Goss, chair of the House Intelligence Committee (and future CIA director); Duncan Hunter, chair of the House Armed Services Committee; and Representative Bill Young, chair of the House Appropriations Committee. What was discussed at these meetings remains a secret. But Blackwater was clearly positioning itself to make the most of its new fame. Indeed, two months later, Blackwater was handed one of the government's most valuable international security contracts, worth more than $300 million.

The firm was also eager to stake out a role in crafting the rules that would govern mercenaries under US contract. "Because of the public events of March 31, [Blackwater's] visibility and need to communicate a consistent message has elevated here in Washington," said Blackwater's new lobbyist Chris Bertelli. "There are now several federal regulations that apply to their activities, but they are generally broad in nature. One thing that's lacking is an industry standard. That's something we definitely want to be engaged in." By May Blackwater was leading a lobbying effort by the private military industry to try to block Congressional or Pentagon efforts to place their forces under the military court martial system.

But while Blackwater enjoyed its new status as a hero in the "war on terror" within the Administration and the GOP-controlled Congress, the families of the four men killed at Falluja say they were being stonewalled by Blackwater as they attempted to understand the circumstances of how their loved ones were killed. After what they allege was months of effort to get straight answers from the company, the families filed a ground-breaking wrongful death lawsuit against Blackwater in January 2005, accusing the company of not providing the men with what they say were contractually guaranteed safeguards. Among the allegations: The company sent them on the Falluja mission that day short two men, with less powerful weapons than they should have had and in Pajero jeeps instead of armored vehicles. This case could have far-reaching reverberations and is being monitored closely by the war-contractor industry--former Halliburton subsidiary KBR has even filed an amicus brief supporting Blackwater. If the lawsuit is successful, it could pave the way for a tobacco litigation-type scenario, where war contractors find themselves besieged by legal claims of workers killed or injured in war zones.

As the case has made its way through the court system, Blackwater has enlisted powerhouse Republican lawyers to defend it, among them Fred Fielding, who was recently named by Bush as White House counsel, replacing Harriet Miers; and Kenneth Starr, former Whitewater prosecutor investigating President Clinton, and the company's current counsel of record. Blackwater has not formally debated the specific allegations in the suit, but what has emerged in its court filings is a series of legal arguments intended to bolster Blackwater's contention that it is essentially above the law. Blackwater claims that if US courts allow the company to be sued for wrongful death, that could threaten the nation's war-fighting capacity: "Nothing could be more destructive of the all-volunteer, Total Force concept underlying U.S. military manpower doctrine than to expose the private components to the tort liability systems of fifty states, transported overseas to foreign battlefields," the company argued in legal papers. In February Blackwater suffered a major defeat when the Supreme Court declined its appeal to hear the Falluja case, paving the way for the state trial--where there would be no cap on damages a jury could award--to proceed.

Congress is beginning to take an interest in this potentially groundbreaking case. On February 7 Representative Henry Waxman chaired hearings of the Oversight and Government Reform Committee. While the hearings were billed as looking at US reliance on military contractors, they largely focused on Blackwater and the Falluja incident. For the first time, Blackwater was forced to share a venue with the families of the men killed at Falluja. "Private contractors like Blackwater work outside the scope of the military's chain of command and can literally do whatever they please without any liability or accountability from the US government," Katy Helvenston, whose son Scott was one of the Blackwater contractors killed, told the committee. "Therefore, Blackwater can continue accepting hundreds of millions of dollars in taxpayer money from the government without having to answer a single question about its security operators."

Citing the pending litigation, Blackwater's general counsel, Andrew Howell, declined to respond to many of the charges levied against his company by the families and asked several times for the committee to go into closed session. "The men who went on the mission on March 31, each had their weapons and they had sufficient ammunition," Howell told the committee, adding that the men were in "appropriate" vehicles. That was sharply disputed by the men's families, who allege that in order to save $1.5 million Blackwater did not provide the four with armored vehicles. "Once the men signed on with Blackwater and were flown to the Middle East, Blackwater treated them as fungible commodities," Helvenston told lawmakers in her emotional testimony, delivered on behalf of all four families.

The issue that put this case on Waxman's radar was the labyrinth of subcontracts underpinning the Falluja mission. Since November 2004 Waxman has been trying to pin down who the Blackwater men were ultimately working for the day of the ambush. "For over eighteen months, the Defense Department wouldn't even respond to my inquiry," says Waxman. "When it finally replied last July, it didn't even supply the breakdown I requested. In fact, it denied that private security contractors did any work at all under the [Pentagon's contracting program]. We now know that isn't true." Waxman's struggle to follow the money on this one contract involving powerful war contractors like KBR provides a graphic illustration of the secretive nature of the whole war contracting industry.

What is not in dispute regarding the Falluja incident is that Blackwater was working with a Kuwaiti business called Regency under a contract with the world's largest food services company, Eurest Support Services. ESS is a subcontractor for KBR and another giant war contractor, Fluor, in Iraq under the Pentagon's LOGCAP contracting program. One contract covering Blackwater's Falluja mission indicated the mission was ultimately a subcontract with KBR. Last summer KBR denied this. Then ESS wrote Waxman to say the mission was conducted under Fluor's contract with ESS. Fluor denied that, and the Pentagon told Waxman it didn't know which company the mission was ultimately linked to. Waxman alleged that Blackwater and the other subcontractors were "adding significant markups" to their subcontracts for the same security services that Waxman believes were then charged to US taxpayers. "It's remarkable that the world of contractors and subcontractors is so murky that we can't even get to the bottom of this, let alone calculate how many millions of dollars taxpayers lose in each step of the subcontracting process," says Waxman.

While it appeared for much of the February 7 hearing that the contract's provenance would remain obscure, that changed when, at the end of the hearing, the Pentagon revealed that the original contractor was, in fact, KBR. In violation of military policy against LOGCAP contractors' using private forces for security instead of US troops, KBR had entered into a subcontract with ESS that was protected by Blackwater; those costs were allegedly passed on to US taxpayers to the tune of $19.6 million. Blackwater said it billed ESS $2.3 million for its services, meaning a markup of more than $17 million was ultimately passed on to the government. Three weeks after the hearing, KBR told shareholders it may be forced to repay up to $400 million to the government as a result of an ongoing Army investigation.

It took more than two years for Waxman to get an answer to a simple question: Whom were US taxpayers paying for services? But, as the Falluja lawsuit shows, it is not just money at issue. It is human life.

A Killing on Christmas Eve

While much of the publicity Blackwater has received stems from Falluja, another, more recent incident is attracting new scrutiny. On Christmas Eve inside Baghdad's heavily fortified Green Zone, an American Blackwater contractor allegedly shot and killed an Iraqi bodyguard protecting a senior Iraqi official. For weeks after the shooting, unconfirmed reports circulated around the Internet that alcohol may have been involved and that the Iraqi was shot ten times in the chest. The story then went that the contractor was spirited out of Iraq before he could be prosecuted. Media inquiries got nowhere--the US Embassy refused to confirm that it was a Blackwater contractor, and the company refused to comment.

Then the incident came up at the February 7 Congressional hearing. As the session was drawing to a close, Representative Kucinich raced back into the room with what he said was a final question. He entered a news report on the incident into the record and asked Blackwater counsel Howell if Blackwater had flown the contractor out of Iraq after the alleged shooting. "That gentleman, on the day the incident occurred, he was off duty," Howell said, in what was the first official confirmation of the incident from Blackwater. "Blackwater did bring him back to the United States."



"Is he going to be extradited back to Iraq for murder, and if not, why not?" Kucinich asked.

"Sir, I am not law enforcement. All I can say is that there's currently an investigation," Howell replied. "We are fully cooperating and supporting that investigation."



Kucinich then said, "I just want to point out that there's a question that could actually make [Blackwater's] corporate officers accessories here in helping to create a flight from justice for someone who's committed a murder."



The War on the Hill



Several bills are now making their way through Congress aimed at oversight and transparency of the private forces that have emerged as major players in the wars of the post-9/11 period. In mid-February Senators Byron Dorgan, Patrick Leahy and John Kerry introduced legislation aimed at cracking down on no-bid contracts and cronyism, providing for penalties of up to twenty years in prison and fines of up to $1 million for what they called "war profiteering." It is part of what Democrats describe as a multi-pronged approach. "I think there's a critical mass of us now who are working on it," says Congressman Price, who represents Blackwater's home state. In January Price introduced legislation that would expand the Military Extraterritorial Jurisdiction Act of 2000 (MEJA) to include all contractors in a war zone, not just those working for or alongside the armed forces. Most of Blackwater's work in Iraq, for instance, is contracted by the State Department. Price indicated that the alleged Christmas Eve shooting could be a test case of sorts under his legislation. "I will be following this and I'll be calling for a full investigation," he said.

But there's at least one reason to be wary of this approach: Price's office consulted with the private military lobby as it crafted the legislation, which has the industry's strong endorsement. Perhaps that's because MEJA has been for the most part unenforced. "Even in situations when US civilian law could potentially have been applied to contractor crimes, it wasn't," observed P.W. Singer, a leading scholar on contractors. American prosecutors are already strapped for resources in their home districts--how could they be expected to conduct complex investigations in Iraq?

Who will protect the investigators and prosecutors? How will they interview Iraqi victims? How could they effectively oversee 100,000 individuals spread across a dangerous war zone? "It's a good question," concedes Price. "I'm not saying that it would be a simple matter." He argues his legislation is an attempt to "put the whole contracting enterprise on a new accountable footing."

This past fall, taking a different tack--much to the dismay of the industry--Republican Senator Lindsey Graham, an Air Force reserve lawyer and former reserve judge, quietly inserted language into the 2007 Defense Authorization, which Bush signed into law, that places contractors under the Uniform Code of Military Justice (UCMJ), commonly known as the court martial system. Graham implemented the change with no public debate and with almost no awareness among the broader Congress, but war contractors immediately questioned its constitutionality. Indeed, this could be a rare moment when mercenaries and civil libertarians are on the same side. Many contractors are not armed combatants; they work in food, laundry and other support services. While the argument could be made that armed contractors like those working for Blackwater should be placed under the UCMJ, Graham's change could result in a dishwasher from Nepal working for KBR being prosecuted like a US soldier. On top of all this, the military has enough trouble policing its own massive force and could scarcely be expected to monitor an additional 100,000 private personnel. Besides, many contractors in Iraq are there under the auspices of the State Department and other civilian agencies, not the military.

In an attempt to clarify these matters, Senator Barack Obama introduced comprehensive new legislation in February. It requires clear rules of engagement for armed contractors, expands MEJA and provides for the DOD to "arrest and detain" contractors suspected of crimes and then turn them over to civilian authorities for prosecution. It also requires the Justice Department to submit a comprehensive report on current investigations of contractor abuses, the number of complaints received about contractors and criminal cases opened. In a statement to The Nation, Obama said contractors are "operating with unclear lines of authority, out-of-control costs and virtually no oversight by Congress. This black hole of accountability increases the danger to our troops and American civilians serving as contractors." He said his legislation would "re-establish control over these companies," while "bringing contractors under the rule of law."

Democratic Representative Jan Schakowsky, a member of the House intelligence committee, has been a leading critic of the war contracting system. Her Iraq and Afghanistan Contractor Sunshine Act, introduced in February, which bolsters Obama's, boils down to what Schakowsky sees as a long overdue fact-finding mission through the secretive contracting bureaucracy. Among other provisions, it requires the government to determine and make public the number of contractors and subcontractors (at any tier) that are employed in Iraq and Afghanistan; any host country's, international or US laws that have been broken by contractors; disciplinary actions taken against contractors; and the total number of dead and wounded contractors. Schakowsky says she has tried repeatedly over the past several years to get this information and has been stonewalled or ignored. "We're talking about billions and billions of dollars--some have estimated forty cents of every dollar [spent on the occupation] goes to these contractors, and we couldn't get any information on casualties, on deaths," says Schakowsky. "It has been virtually impossible to shine the light on this aspect of the war and so when we discuss the war, its scope, its costs, its risks, they have not been part of this whatsoever. This whole shadow force that's been operating in Iraq, we know almost nothing about. I think it keeps at arm's length from the American people what this war is all about."

While not by any means a comprehensive total of the number of contractor casualties, 770 contractor deaths and 7,761 injured in Iraq as of December 31, 2006, were confirmed by the Labor Department. But that only counts those contractors whose families applied for benefits under the government's Defense Base Act insurance. Independent analysts say the number is likely much higher. Blackwater alone has lost at least twenty-seven men in Iraq. And then there's the financial cost: Almost $4 billion in taxpayer funds have been paid for private security forces in Iraq, according to Waxman. Yet even with all these additional forces, the military is struggling to meet the demands of a White House bent on military adventurism.

A week after Donald Rumsfeld's rule at the Pentagon ended, US forces had been stretched so thin by the "war on terror" that former Secretary of State Colin Powell declared "the active Army is about broken." Rather than rethinking its foreign policies, the Administration forged ahead with plans for a troop "surge" in Iraq, and Bush floated a plan to supplement the military with a Civilian Reserve Corps in his January State of the Union address. "Such a corps would function much like our military Reserve. It would ease the burden on the armed forces by allowing us to hire civilians with critical skills to serve on missions abroad when America needs them," Bush said. The President, it seemed, was just giving a fancy new title to something the Administration has already done with its "revolution" in military affairs and unprecedented reliance on contractors. Yet while Bush's proposed surge has sparked a fierce debate in Congress and among the public, the Administration's increasing reliance on private military contractors has gone largely undebated and underreported.

"The increasing use of contractors, private forces or as some would say 'mercenaries' makes wars easier to begin and to fight--it just takes money and not the citizenry," says Michael Ratner, president of the Center for Constitutional Rights, which has sued contractors for alleged abuses in Iraq. "To the extent a population is called upon to go to war, there is resistance, a necessary resistance to prevent wars of self-aggrandizement, foolish wars and in the case of the United States, hegemonic imperialist wars. Private forces are almost a necessity for a United States bent on retaining its declining empire."

With talk of a Civilian Reserve Corps and Blackwater promoting the idea of a privatized "contractor brigade" to work with the military, war critics in Congress are homing in on what they see as a sustained, undeclared escalation through the use of private forces. "'Surge' implies a bump that has a beginning and an end," says Schakowsky. "Having a third or a quarter of [the forces] present on the ground not even part of the debate is a very dangerous thing in our democracy, because war is the most critical thing that we do."

Indeed, contractor deaths are not counted in the total US death count, and their crimes and violations go undocumented and unpunished, further masking the true costs of the war. "When you're bringing in contractors whom the law doesn't apply to, the Geneva Conventions, common notions of morality, everything's thrown out the window," says Kucinich. "And what it means is that these private contractors are really an arm of the Administration and its policies."

Kucinich says he plans to investigate the potential involvement of private forces in so-called "black bag," "false flag" or covert operations in Iraq. "What's the difference between covert activities and so-called overt activities which you have no information about? There's no difference," he says. Kucinich also says the problems with contractors are not simply limited to oversight and transparency. "It's the privatization of war," he says. The Administration is "linking private war contractor profits with war making. So we're giving incentives for the contractors to lobby the Administration and the Congress to create more opportunities for profits, and those opportunities are more war. And that's why the role of private contractors should be sharply limited by Congress."