December 12, 2004











  • Posted on Sun, Dec. 12, 2004



    U.S. in precarious spot over weak dollar

    By James K. Galbraith


    Since the election, the value of the dollar has declined more than 3 percent against the euro to an all-time low -- and it continues to fall. Today's dollar jitters are no surprise; the few Keynesians left in the economics profession have long thought them overdue. Here's why:


    We have worn down our trade position in the global economy, becoming dependent for our living standard on the willingness of the rest of the world to accept dollar assets -- stocks, bonds and cash -- in return for real goods and services.


    In the late 1990s, the U.S. position was held up by the glamour of the information-technology boom, which brought capital flooding in from more precarious perches in Russia, Asia and other parts of the world. But that too has turned to dust and ashes.


    The concentration of our manufactured-goods trade on China and Japan means that those two countries now hold preposterous dollar reserves, and their actions substantially determine the dollar's value.


    Chinese and Japanese behavior is constrained by creditors' risk. If they sell too many dollars, the value of the remainder of their portfolio plummets and they inflict losses on themselves. This consideration prompts caution. But if one major player gets wind that others may dump, caution could end. This is exactly analogous to an old-fashioned run on the bank.


    Reducing the budget deficit will not save the dollar, contrary to what many Democrats may think. A bank, hit by a panic, cannot save itself by cutting its advertising budget, raising its fees or firing its staff. And once a rush gets going, jacking up interest rates won't stop it, either.


    So now we hear rumors of Russia trading dollars for euros, of India diversifying its reserves, of China contemplating the same. The Morgan Stanley economist Steven Roach apparently told clients to gird for an ``economic Armageddon.'' The dike, once solid, starts to crack; none can say just where or when it will break. But the little Dutch boy, Alan Greenspan, went to Frankfurt a few days back and plainly stated that he did not have enough fingers.


    The most stunning aspect of these events has been President Bush's insouciance about them. It's almost as if he realizes the awful truth: that the dollar's decline is mainly good for his friends, and bad for those about whom he couldn't care less.


    The dollar's decline immediately boosts the stock market. Multinationals have earnings in the United States and in Europe. When the dollar falls, U.S. earnings stay the same but the European earnings go up when measured in dollars. Oil prices in dollars will stay up -- at least enough to prevent the price in euros from falling. This too helps U.S. oil-company profits, measured in dollars.


    Meanwhile, prices of Chinese imports won't rise much, so Wal-Mart isn't badly hurt.


    The American consumer gets hit, but mainly on the oil price. Few will recognize the political roots of their problem.


    Since the United States owes its debts in dollars, financial losses will fall first on China and Japan. Tough luck. Latin American debtor countries will get hit on their exports, but helped on their debt service. Those (like Mexico) that export almost exclusively to us will get squeezed; others (like Argentina) that market to Europe but pay interest in dollars will be hurt less.


    An unequivocal loser is Europe, which has been hoping for an export-led fix to its own, largely self-inflicted, mass unemployment. The Europeans can forget about that.


    It's possible that Federal Reserve Chairman Greenspan could change his mind, raise interest rates and inflict on us all the monumental folly of a ``dollar defense.'' Sharply rising interest rates could cure both inflation and the weak dollar -- as they did in the early 1980s. But the resulting slump would be even more disastrous than it was then, because debt levels are higher now than they were.


    I don't expect it. I bet Greenspan will take a pass. That means that he will actually sit on his hands while oil and some other import prices rise. Given the alternatives, it's probably the right course of action. But let no one say, afterward and with a straight face, that our central bank takes all that seriously the bunkum it spreads about fighting inflation.


    Thus the dollar could decline smoothly for a while and then, simply, stop declining. The dollar system could stay intact, so long as China and Japan remain willing to add new dollars to their depreciated hoards. A final panic could come later, set off perhaps by some new reckless military action.


    But for the moment, the theater has too few exits, too few spectators. Perhaps God really does look after children, small dogs and the United States.


     


    JAMES K. GALBRAITH is a professor at the LBJ School of Public Affairs at the University of Texas at Austin and a senior scholar at the Levy Economics Institute in New York. This article first appeared in Newsday.


     


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  • December 12, 2004

    Liberal Leader From Ukraine Was Poisoned


    By ELISABETH ROSENTHAL,
    International Herald Tribune





    LONDON, Dec. 11 - Tests done at a hospital in Vienna confirmed that Viktor A. Yushchenko, the Ukrainian opposition candidate, had been poisoned with dioxin, doctors there said Saturday, providing an explanation for a broad array of painful and disfiguring conditions that plagued him during the last three months of the presidential campaign.


    There is "no doubt" that Mr. Yushchenko's disease "has been caused by a case of poisoning by dioxin," Dr. Michael Zimpfer, the head of the Rudolfinerhaus hospital, said at a news conference on Saturday. He said that Mr. Yushchenko's blood dioxin level was "more than 1,000 times" the upper limits of normal and that his initial severe abdominal pain suggested that he had eaten the poison.


    "We have proved the source of his problem, and we clearly suspect third-party involvement," Dr. Zimpfer added in a subsequent interview. But he said law-enforcement authorities would have to determine when and how the poisoning occurred.


    Mr. Yushchenko has long insisted that he had been poisoned, and on Friday, he repeated his suspicions of the motive, saying: "It is my growing conviction that what happened to me was an act of political reprisal against a politician in opposition. The aim, naturally, was to kill me."


    His opponents have ridiculed such claims, saying that the once telegenic candidate had been stricken by bad sushi or too much drink.


    A spokeswoman for Mr. Yushchenko, Irina Gerashchenko, said in a telephone interview that the diagnosis compelled prosecutors to reopen a criminal investigation into his poisoning. "It means that an attempt on the life of a presidential candidate was made," she said.


    Yelena A. Grimnitskaya, a spokeswoman for the departing president, Leonid D. Kuchma, said in a telephone interview that Mr. Kuchma would have no immediate comment.


    The drama of the disputed presidential election in Ukraine had largely overshadowed Mr. Yushchenko's illness. On Dec. 5, the country's Supreme Court threw out the results of last month's vote declaring the departing president's chosen successor, Prime Minister Viktor F. Yanukovich, the winner and ordered a new runoff for Dec. 26.


    Last week, Mr. Kuchma, and parliamentary leaders, including Mr. Yushchenko, reached an agreement on changes to the country's political system and election laws that defused the crisis that had brought tens of thousands of protesters into the street, paralyzed the government and harmed the economy.


    That agreement also appeared to ease the personal tensions between Mr. Yushchenko and Mr. Kuchma, whose government presumably includes "the authorities" that Mr. Yushchenko and his supporters have accused of being behind his illness.


    But Mr. Yushchenko has always remained vague on the topic of who tried to poison him. He fell ill after having dinner on Sept. 5 with the head of Ukraine's successor to the K.G.B., Gen. Ihor P. Smeshko.


    General Smeshko has acknowledged meeting Mr. Yushchenko but dismissed the notion that he might have been involved in poisoning him, as many of Mr. Yushchenko's supporters say they suspect. Mr. Yushchenko's wife, a Ukrainian-American, said this week that when she kissed him after he returned from the dinner, she smelled some kind of medicine on this breath, which she now believed to be the poison.


    In the earlier years of the cold war, the K.G.B. and the Eastern European intelligence services used poison against some political enemies.


    In a famous case, a Bulgarian dissident, Georgi I. Markov, was killed with poison in 1978 by the Bulgarian secret service, apparently to silence his broadcasts on the British Broadcasting Corporation. At a London bus stop, an agent using a spring-loaded umbrella injected into Mr. Markov's leg a platinum pellet that contained a dose of ricin. He died after three days of intense fever and vomiting.


    Trace amounts of dioxin, a highly toxic waste product of various industrial chemical processes, are a common contaminant in soil and foods and are a concern because long-term exposure to even tiny amounts can cause cancer. It remains in the body for years after exposure, so doctors were able to test Mr. Yushchenko on Friday, long after he fell ill. The poison initially produces severe abdominal pains, nausea and vomiting, the symptoms Mr. Yushchenko displayed. In the longer term, very high doses can produce the kind of skin cysts and discoloration that have disfigured him.


    Such cysts can persist for years after the initial dose, as do several other more subtle medical effects. Dioxin causes a strong predisposition toward developing cancer and can also affect the body's fat metabolism. But that is unlikely to affect Mr. Yushchenko's quest for the Ukrainian presidency. "If you survive the initial attempt, you can do all right," Dr. Zimpfer said. "He is in perfect condition, in perfect mental shape."


    Ms. Gerashchenko said Mr. Yushchenko would return to Ukraine - and to the campaign trail - on Sunday or Monday. No further medical treatment has been ordered for him.


    Ukraine's prosecutor general, Gennady A. Vasiliyev, had conducted an investigation but closed it, saying there was no evidence of poisoning. Mr. Vasiliyev became a casualty of last week's agreement between Mr. Kuchma and Mr. Yushchenko, submitting his resignation to meet one of the opposition's demands. On Friday, Mr. Kuchma replaced him with a former prosecutor general, Svyatoslav M. Piskun, though his appointment only remains effective until a new president is elected.


    The Parliament, or Supreme Rada, also conducted an inquiry into Mr. Yushchenko's illness in the heated weeks before the first round of voting on Oct. 31. But that inquiry concluded that while Mr. Yushchenko might have been poisoned, he had no basis for accusing the authorities.


    Dioxin exposure, a rare cause of poisoning, usually comes from industrial accidents where it is inhaled or absorbed through the skin. Mr. Yushchenko had not been tested for it, partly because it is so unusual and because the telltale facial cysts were not prominent during hospital stays in September and October.


    Dr. Zimpfer declined to speculate on exactly how the presidential candidate was poisoned.


    "We weren't there and we will have to leave that to the legal authorities to decide," he said.


    Mr. Yushchenko was admitted to Rudolfinerhaus in September, suffering from severe abdominal pain. His stomach and intestines were covered with small ulcers and his blood tests showed abnormalities of his liver and spleen. From the start, he had small skin rashes, but they were not suggestive of poisoning at the time.


    After five days and only partly recovered, Mr. Yushchenko headed back to Kiev to campaign. Just 10 days later, he was suddenly felled by back pain that was so severe he had to be readmitted to the hospital. He was able to return to the campaign only after doctors inserted a tube into his upper spine to constantly administer painkillers, a risky but effective treatment.


    He returned to Rudolfinerhaus on Friday after his skin cysts worsened, and doctors became more suspicious that dioxin was the cause.



    Steven Lee Myers contributed reporting from Moscow for this article, and James Risen from Washington.



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December 11, 2004


  • December 10, 2004

    OP-ED COLUMNIST


    Borrow, Speculate and Hope


    By PAUL KRUGMAN





    "The National Association of Securities Dealers," The Wall Street Journal reports, "is investigating whether some brokerage houses are inappropriately pushing individuals to borrow large sums on their houses to invest in the stock market." Can we persuade the association to investigate would-be privatizers of Social Security?


    For it is now apparent that the Bush administration's privatization proposal will amount to the same thing: borrow trillions, put the money in the stock market and hope.


    Privatization would begin by diverting payroll taxes, which pay for current Social Security benefits, into personal investment accounts. The government, already deep in deficit, would have to borrow to make up the shortfall.


    This would sharply increase the government's debt. Never mind, privatization advocates say: in the long run, they claim, people would make so much on personal accounts that the government could save money by cutting retirees' benefits. Financial markets won't believe this claim, as I'll explain in a minute, but let's temporarily grant the point.


    Even so, if personal investment accounts were invested in Treasury bonds, this whole process would accomplish precisely nothing. The interest workers would receive on their accounts would exactly match the interest the government would have to pay on its additional debt. To compensate for the initial borrowing, the government would have to cut future benefits so much that workers would gain nothing at all.


    How, then, can privatizers claim that they could secure the future of Social Security without raising taxes or reducing the incomes of future retirees? By assuming that workers would invest most of their accounts in stocks, that these investments would make a lot of money and that, in effect, the government, not the workers, would reap most of those gains, because as personal accounts grew, the government could cut benefits.


    We can argue at length about whether the high stock returns such schemes assume are realistic (they aren't), but let's cut to the chase: in essence, such schemes involve having the government borrow heavily and put the money in the stock market. That's because the government would, in effect, confiscate workers' gains in their personal accounts by cutting those workers' benefits.


    Once you realize that privatization really means government borrowing to speculate on stocks, it doesn't sound too responsible, does it? But the details make it considerably worse.


    First, financial markets would, correctly, treat the reality of huge deficits today as a much more important indicator of the government's fiscal health than the mere promise that government could save money by cutting benefits in the distant future.


    After all, a government bond is a legally binding promise to pay, while a benefits formula that supposedly cuts costs 40 years from now is nothing more than a suggestion to future Congresses. Social Security rules aren't immutable: in the past, Congress has changed things like the retirement age and the tax treatment of benefits. If a privatization plan passed in 2005 called for steep benefit cuts in 2045, what are the odds that those cuts would really happen?


    Second, a system of personal accounts, even though it would mainly be an indirect way for the government to speculate in the stock market, would pay huge brokerage fees. Of course, from Wall Street's point of view that's a benefit, not a cost.


    There is, by the way, a precedent for Bush-style privatization. One major reason for Argentina's rapid debt buildup in the 1990's was a pension reform involving a switch to individual accounts - a switch that President Carlos Menem, like President Bush, decided to finance with borrowing rather than taxes. So Mr. Bush intends to emulate a plan that helped set the stage for Argentina's economic crisis.


    If Mr. Bush were to say in plain English that his plan to solve our fiscal problems is to borrow trillions, put the money into stocks and hope for the best, everyone would denounce that plan as the height of irresponsibility. The fact that this plan has an elaborate disguise, one that would add considerably to its costs, makes it worse.


    And maybe the fact that serious financial experts, the sort qualified to be Treasury secretary, understand all this is the reason why John Snow has just been reappointed.


     


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    December 10, 2004

    EDITORIAL


    Secretary Snow







    As the search for someone to replace Treasury Secretary John Snow dragged on, Republicans close to the White House openly dissed him. Then, on Wednesday, the president reappointed Mr. Snow. To justify the surprise decision, a senior administration official said, "This was no time to send a signal of uncertainty."


    Well, it's no time to send a signal of business as usual, either. The economic legacy of the first Bush term is dauntingly bad. The stock market is lower, despite tax cuts aimed at spurring investment. The dollar is way lower, and fears of a free fall are mounting daily. The federal budget has swung from a surplus to a $412 billion deficit, mainly because of misguided and excessive tax cuts. The deficits in trade and international investment are at never-before-tested levels, nearly triple what most economists consider sustainable. Job creation has been weaker than at any time in modern memory. Incomes are stagnant, failing in most months to even keep pace with inflation. And no - count 'em, zero - policy reversals are on the horizon.


    As if that's not bad enough, Mr. Snow's reappointment also sends a disturbing, though not surprising, message about policy making. Like other secretaries in the Bush administration, Mr. Snow's main job has been to promote policies - not make them. To the extent that this administration has engaged in making economic policies (to wit, "tax cuts above all" and "deficits don't matter"), the policies have come from the president's inner circle.


    Mr. Snow, like so many others around President Bush, is nothing more than a messenger. Congress knows it. The financial markets know it. Our trading partners know it. It strains the imagination that the White House couldn't find a fitting Treasury secretary among the Wall Street mavens, former politicians and other professionals who were considered for the post. It's more likely that none were suited for the real job on offer: cheerleader.


    This all bodes ill for the economy. Domestically, the president is committed to largely replacing Social Security with private retirement accounts - although doing so would require the Treasury to borrow at least $1 trillion. Mr. Snow's reappointment neatly avoids the Senate confirmation hearings that would be required for a new appointment, as would the probable reappointment of Joshua Bolten as the director of the Office of Management and Budget. A major opportunity to vet Mr. Snow's professional opinions and to probe for - dare we suggest? - misgivings, is lost.


    Internationally, the situation is even worse. Mr. Snow is squarely behind the administration's apparent weak-dollar policy. If the dollar's decline sharpens, is Mr. Snow capable of cooperating with our trading partners to manage the downward trajectory? It's kind of hard to be unilateral when you need China, Japan and Europe to accomplish your goals.


    The economy won't really improve unless Mr. Bush starts to listen to people who will tell him things he does not want to hear, like the fact that the only lasting fix for the weak dollar is fiscal discipline to reduce the budget deficit. Mr. Snow is not that person. Most ominously, the right person for that job doesn't exist - and couldn't get hired - in this administration.


     


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December 9, 2004


  • December 9, 2004

    EDITORIAL


    Please, Sir, May I Have Some Armor?







    We're used to hearing Defense Secretary Donald Rumsfeld answer questions about things that went wrong in Iraq by saying they went right. When he does that to reporters, it's annoying. When he does it to troops risking their lives in his failed test of bargain-basement warfare, it's outrageous.


    Yesterday, Mr. Rumsfeld told soldiers at a staging area in Kuwait to ignore "the doubters" who say the escalating war is not going well. Then he invited the troops, some of them headed to their second combat tours, to ask him "tough questions." They evidently thought he meant it.


    A National Guard scout from Tennessee asked why there was still an equipment shortage that forced units to scrounge for "hillbilly armor": "pieces of rusted scrap metal and compromised ballistic glass that's already been shot up, dropped, busted." When the cheering died down, Mr. Rumsfeld said that, really, there was plenty of armor and in any case, "all the armor in the world" might not save you from a roadside bomb.


    "You go to war with the Army you have," Mr. Rumsfeld fumed, "not the Army you might want or wish to have at a later time." He may have forgotten that the timetable for invading Iraq was dictated by politics, not military necessity. The armor shortage was also an outgrowth of his zeal to prove that a country can be invaded and occupied by a small and lightly armed force. A spokesman for the questioner's unit told reporters that 95 percent of its 300 trucks were not sufficiently armored.


    Later, a woman said she and her husband "joined a volunteer army" but were serving extra tours under the "stop loss" program, a forced-duty clause in military contracts. "The 'stop loss' has been used by the military for years and years and years," Mr. Rumsfeld lectured. "It's all well understood when someone volunteers to join the service."


    Mr. Rumsfeld talks a lot about supporting the troops. We wish that someone powerful would explain to him that doing so includes treating them with respect and telling them the truth.


     

     


    December 9, 2004

    OP-ED COLUMNIST


    Lost in a Masquerade


    By MAUREEN DOWD





    WASHINGTON


    Hoooo-rah! Rummy finally got called on the carpet.


    Not by the president, of course, but by troops fighting in Iraq. Some of them are finally fed up enough to rumble about his back-door draft and failure to provide them with the proper armor for their Humvees, leaving them scrambling to improvise with what they call "hillbilly armor."


    The defense secretary had been expected to go to Iraq on this trip but spent the day greeting troops in Kuwait instead. Even though Pentagon officials insist that security wasn't an issue, I bet they had to be worried not to travel the extra 40 miles to Iraq.


    Rummy met with troops at Camp Buehring, named for Chad Buehring, an Army colonel who died last year when insurgents in Baghdad launched a rocket-propelled grenade into Al Rasheed, a Green Zone hotel once frequented by Western journalists and administration officials that is still closed to guests because - despite all the president's sunny bromides about resolutely prevailing - security in Iraq is relentlessly deteriorating.


    As Joe Biden told Aaron Brown of CNN about his visit to Falluja, "They got the biggest hornets' nest, but the hornets have gone up and set up nests other places." He said that a general had run up to him as he was getting into his helicopter to confide, "Senator, anybody who tells you we don't need forces here is a G.D. liar."


    Rummy, however, did not hesitate to give the back of his hand to soldiers about to go risk their lives someplace he didn't trouble to go.


    He treated Thomas Wilson - the gutsy guardsman from Tennessee who asked why soldiers had "to dig through local landfills for pieces of scrap metal and compromised ballistic glass to up-armor our vehicles, and why don't we have those resources readily available to us?" - as if he were a pesky Pentagon reporter. The defense chief used the same coldly cantankerous tone and squint he displays in press briefings, an attitude that long ago wore thin. He did everything but slap the kid in the hospital bed.


    In one of his glib "Nothing's perfect," "Freedom's untidy" and "Stuff happens" maxims, Rummy told the soldier: "As you know, you go to war with the Army you have."


    It wouldn't make a good Army slogan, and it was a lousy answer, especially when our kids are getting blown up every day in a war ginned up on administration lies. Remember when the president promised in the campaign that the troops would have all the body armor they needed?


    These young men and women went to Iraq believing the pap they were told: they'd have a brief battle, chocolate, flowers, gratitude. Instead, they were thrust into a prolonged and savage insurgent war without the troop levels or armor they needed because the Pentagon's neocons had made plans based on their spin - that turning Iraq into a democracy would be a cakewalk. And because Rummy wanted to make his mark by experimenting with a lean, slimmed-down force. And because Rummy kept nattering on about a few "dead-enders," never acknowledging the true force, or true nationalist fervor, of the opposition.


    The dreams of Rummy and the neocons were bound to collide. But it's immoral to trap our troops in a guerrilla war without essential, lifesaving support and matériel just so a bunch of officials who have never been in a war can test their theories.


    How did this dangerous chucklehead keep his job? He must have argued that because of the president's re-election campaign, the military was constrained from doing what it is trained to do, to flatten Falluja and other insurgent strongholds. He must have told W. he deserved a chance to try again after the election.


    He had a willing audience. W. likes officials who feed him swaggering fictions instead of uncomfortable facts.


    The president loves dressing up to play soldier. To rally Camp Pendleton marines facing extended deployments in Iraq, he got gussied up in an Ike D-Day-style jacket, with epaulets and a big presidential seal on one lapel and his name and "Commander in Chief" on the other.


    When he really had a chance to put on a uniform and go someplace where the enemy was invisible and there was no exit strategy and our government was not leveling with us about how bad it was, W. wasn't so high on the idea. But now that it's just a masquerade - giving a morale boost to troops heading off someplace where the enemy's invisible and there's no exit strategy and the government's not leveling with us about how bad it is - hey, man, it's cool.



     


     



    December 9, 2004

    OP-ED COLUMNIST


    The Suicide Supply Chain


    By THOMAS L. FRIEDMAN





    From what I can tell from the new organizational flow chart for U.S. intelligence that Congress adopted yesterday, it is a god-awful combination of new titles and jobs at the top, without clear lines of authority to the people on the ground. One thing I've learned from 25 years in the newspaper business (which is just another form of intelligence gathering) is this: Whenever you add a new layer of editors on top of reporters, and don't get rid of some of the old layer of editors, all you get is trouble. You get less intelligent.


    The right way to improve U.S. intelligence is to get more people on the ground who speak the languages we need and who can think unconventionally. If that sounds blindingly obvious to you, it is, but it is precisely the shortage of such people that explains to me America's greatest intelligence failure in Iraq - a failure we are paying for dearly right now. You see, we didn't invade Iraq too soon. We actually invaded 10 years too late.


    Let me explain: America's greatest intelligence failure in Iraq was not the W.M.D. we thought were there, but weren't. It was the P.M.D. we thought weren't there, but were. P.M.D., in my lexicon, stands for "people of mass destruction." And there were far more of them in Iraq than anyone realized. The failure of U.S. intelligence to understand what was happening inside Iraqi society during the decade-plus of U.N. sanctions that preceded our invasion is the key to many of the problems we've encountered in post-Saddam Iraq.


    The U.N. sanctions pulverized Iraqi society - a society already beaten down by an eight-year Iran-Iraq war, the war over Kuwait and some 30 years of Saddam's tyranny. As Saddamism and sanctions chewed up the Iraqi people during the 1990's, many people of talent left. Before the war, the Bush team told anyone who would listen that Iraq had the most talented secular elite in the Arab world. And it was right. The only problem was that during the 1990's many in that elite moved to Amman, Damascus, Beirut, Abu Dhabi, Bahrain and Cairo, where they worked as professors, music teachers and engineers.


    Meanwhile, back in Iraq, those who had no access to Baath Party privileges got steadily ground down. Many Iraqi youth, unable to connect with the outside world and unable to find jobs at home, turned to religion. Saddam encouraged this with a mosque-building program. By wrapping himself in an aura of Islam, Saddam also hoped to buttress his own waning legitimacy. So Wahhabi religious influence flowed into the Sunni areas from Saudi Arabia, as Iranian religious influence flowed into Shiite regions.


    You know all those masked Iraqi youth you see in the Al Jazeera videos, brandishing weapons and standing over some foreigner whose head they are about saw off? They are the product of the last decade of Saddamism and sanctions. Those youth were 10 years old when the U.N. sanctions began. They are the mushrooms that Saddam and the sanctions were growing in the dark. The Bush team had no clue they were there.


    These deracinated, unemployed, humiliated Sunni Iraqi youth are our biggest problem today. Some clearly have become suicide bombers. We can't say what percentage, because, unlike the Palestinians, the Iraqi suicide bombers don't even bother to tell us their names or do a farewell video for mom. They not only are ready to commit suicide on demand, but they are ready to do it anonymously. That bespeaks a very high level of commitment or psychosis, or both.


    I would estimate that U.S. forces have been hit with over 200 of these human missiles, and we still are not sure how they are recruited and deployed. What we are facing, I think, is a crude underground suicide supply chain - a mutant combination of Wal-Mart and Wahhabism.


    Its organizers appear to use word of mouth, and the Internet, to recruit suicide bombers from Iraq and the wider Muslim world. These bombers are ferried down the supply chain to bomb makers in the field, who get them wired up and deploy them against U.S. and Iraqi targets tactically.


    This is not haphazard. These bombings are timed for maximum effect. That means the insurgents are quite confident about their supply of bombers. It's just like Wal-Mart's supply chain: you buy an item in a Wal-Mart in Arkansas, and another one is immediately made in China. In Iraq, you deploy a suicide bomber in Baghdad, and another one is immediately manufactured in Mosul or Riyadh.


    When we have people in U.S. intelligence who can explain how that organizational flow chart works, I'll feel safer.




     


     


     


     

December 8, 2004

  • The 2004 Quagmire Bowl!
    Iraq vs. Chechnya


    Gary Brecher

    By Gary Brecher    




    You Russians have something in common with us Americans. You might not think so at first. From what I read in the eXile, you guys have a lot wilder lives than we do. More sex, drugs, gangs that white people can join. Then again, you've got a 50-year life expectancy. It's a tradeoff, I guess; in America you get 70 years of being an ant in an office.


    But in one way our countries are totally alike: we're both stuck in quagmires. You're bogged down in Chechnya, and we're hip-deep in the shit in Iraq.


    So whose quagmire is deeper and stickier, yours or ours?


    The Russian quagmire turned France from great power to surrender monkeys

    The Russian quagmire turned France from great power to surrender monkeys


    It's pretty easy to make the case for Iraq as a military disaster. By now, the only people who won't admit it are the ones who think God personally ordered us to invade.


    I'm not sure where in the Bible they get that from. After all those years of sweating through Sunday morning Children's Service, I don't remember anything about how some kid from Oregon has to lose his leg to an IED in Ramadi. Maybe He was speaking in tongues at the time.


    The question is, how big a disaster is Iraq? Just a stubbed toe for us, or a long fall down the cliff? Same question applies to you Russians: is Chechnya a minor border skirmish or a big defeat?


    What really counts when you're rating screwed-up wars is if the war makes a permanent difference or not. For instance, I saw on the History Channel where they listed the top 5 military blunders of all time -- and they had Bay of Pigs and the USS Vincennes shooting down an Iranian airliner in the top 5!


    What a bunch of amateurs! Neither one of those sideshows made any difference. Bay of Pigs: we hated Castro before, during and after. The Iran Air duckshoot: zero difference to us or them. The Iranians have a birthrate curve like the 90s stock market; you'd have to shoot down a planeload of them every ten minutes to make a dent in it.


    We need to focus on military blunders that really made a difference. The clearest cases come from the old days, when losing meant being wiped out as a tribe, forever. I think that we can all agree, whatever our differences, that Carthage lost. The Romans took the city apart brick by brick, killed the men, sold the women and kids into slavery, and plowed the ground with salt so nothing would ever grow there again. That's what you call a major disaster. People meant what they said back then.


    These days it's hard to find total wipeouts like that. Populations are just too big and conquerors are just too squeamish. Back when the Khmer Rouge took over Cambodia, people were saying it was the end, the whole Cambodian people were being wiped out, bla bla bla. I'm not saying Pol Pot was a nice guy, but you can't tell me Cambodia stopped existing or ran out of people. There are plenty of them right here in Fresno, selling noodle soup, and enough left in Cambodia to fleece the tourists just like God meant them to.


    Same thing with Rwanda or Burundi. Sure, lots of people got killed, but don't tell me the Hutus or the Tutsis got wiped out. They're already back at the old stand, hacking each other to death with machetes, little eager beavers dreaming of the next massacre.


    By now the whole "genocide" label is so cheap it gets used every time somebody bumps into a minority in the street. "Genocide! He stepped on my Air Jordans!" You want genocide? Talk to the Carthaginians. If you can find any. What total defeat really means in this half-assed modern world is when one of the combatants loses the will to fight forever, or at least for a few generations. Their country still exists; it just gets castrated.


    And that's where you Russians really come into your own. Russia's been a player, on one side or another, in some of the biggest military geldings in history.


    Deciding to invade Russia is the all-time military blunder. It killed the most powerful armies in Europe two centuries in a row. And the countries that attacked Russia lost so badly that they were never the same again.


    Settling into the Chechen swamp

    Settling into the Chechen swamp.


    Actually you could say Russia destroyed three great powers in a row, if you count Sweden. Believe it or not, Sweden was a great power in the 1600s, one of the biggest players in the Thirty Years War. Then they decided to invade Russia, with the standard result: half their army was dead before they'd fought a real battle, and when the battle came, at Poltava down in Ukraine, the Swedes lost so badly their king had to run off to Turkey. And Sweden, to put it mildly, was never a player again. It's been peace, socialism and exporting blondes ever since. A battalion of armadillos could take Sweden these days.


    In 1812 the French had their turn at the "Invade Russia and Lose Everything!" arcade. Napoleon was riding high. French armies had been kicking ass all over Europe for 20 years. One-on-one, they beat everybody: the Prussians, the Austrians, the Brits.


    Then Bonaparte had the brilliant idea of invading Russia.


    All those victories in a row had made him a little crazy. Victory's a dangerous thing. You can easily learn the wrong lesson from it. Napoleon had beaten everybody in Western Europe, and Russia to him was just a big wasteland full of ignorant serfs. If he could beat the best the civilized world could bring against him, how could he lose against these barbarians? He had the best and biggest army in the history of the world: 500,000 combat-tested men.


    Never mind the tactical brilliance of Napoleon as a commander; just try imagining the sheer logistical skill it took to keep an army that size fed and supplied using early 19th-c. technology. The French managed to take Moscow. But once he was there, Napoleon had this Homer Simpson moment: "Doh! I've just occupied the coldest country in the world at the beginning of winter, and the Russians took every bit of food with them before they bugged out!"


    That night, Russian guerrillas put the finishing touch on the housewarming by setting Moscow on fire. Napoleon looked out at the smoking ruins and told the army, "Guys, sorry, but it was a mistake... we're marching home to Paris. Gee, it's brisk out today! Wish we'd packed some gloves!"


    What his troops should have done was kill him right there. But fragging hadn't been invented yet, so they gulped down their last croissant, shouldered their packs and headed west. A grand total of 10,000 men made it back to France -- two percent of the half million he marched out with. And that was the end of France as a superpower. From then on, France was on the defensive. They fought well in lots of 19th and even 20th century wars -- don't give me that crap about the French being cowards -- but their days as an aggressive, confident country ended once and for all when they marched on Russia.


    One hundred and thirty years later it was the Germans' turn to try their luck on the steppes.


    Hitler was in the same situation: he'd just conquered all of Western Europe, losing only 30,000 men in the process. That's one of the most incredible stats in military history; you can see why it made the Wehrmacht cocky. I'm telling you, victory is one of the worst things that can happen to an army. It makes you stupid.


    The Germans never even made it to Moscow. And they fell much harder than the French. Since 1945 Germany's been nothing but lame hippies in metal-rim glasses skulking around trying not to offend anybody. Pathetic.


    Then there's the two wars that supposedly ruined the superpowers: Vietnam and Afghanistan. Nam's an interesting case. Sure, it bummed the hippies' high and wasn't the nicest thing that ever happened to the Vietnamese, but by the test I'm using here you can't say it was a really disastrous war for either side. Neither side lost the will to fight, and both went on to do well in other wars.


    The Vietnamese recovered fast enough to chop up a Chinese punitive expedition a few years after we left Saigon. And as for the US -- what did this "Vietnam Syndrome" actually cost us?


    If you Russians had had the guts to attack West Germany in the mid-70s, when the US was still bummed over Nam and led by dorks like Ford and Carter -- and you Soviets were at the height of your power -- then maybe our loss in Nam would've turned out to be a strategic disaster. Because we would've wimped out. No question. We'd've moaned and groaned, but by the time we were ready to react, you'd've been sampling the beer in Antwerp.


    You blew it, comrades; you could've had it all.


    Thanks to your big wimpout, all Nam meant was that for 15 years, right through Reagan's terms, we were real careful to only mess with small countries that couldn't hurt us.


    What's so wrong with that? That's the way the Brits did it all through the 19th century. Once France had destroyed itself in Russia, the Brits were on top, and they managed to stay that way right up to 1914 by avoiding big enemies. They specialized in vacuuming up third-world kingdoms whose armed forces consisted of a few dozen goatherders armed with sharpened sticks.


    When they finally did face a modern European army, in 1914, it was the beginning of the end for them. Picking on the weak, if you do it smart, is the best strategy of all. It works in high school, and it works just as well in geopolitics.


    We were lucky another way too in Vietnam: the Vietnamese don't hold grudges. From what I hear, Americans are welcome in Hanoi as long as they spend money. Nobody comes up screaming at you for killing their uncle or whatever. East Asians are like that: cool, businesslike people who don't waste time on the past. America was just one of a long line of empires who tried to mess with Vietnam; they didn't take it personally.


    Besides, they won -- and it's a lot easier to be a good winner than a good loser. Better still, the Vietnamese aren't part of any big international ethnic group, so nobody really identified with them. Even the Chinese don't like Vietnamese people much, and their littler neighbors -- the Thais, Cambodians and Lao -- hate their guts. So no longterm grudges resulted.


    Then Russia and America did something a lot more dangerous: messing with a big, excitable, wacko transnational group: the Muslims. You went into Afghanistan, then Chechnya; we hit Iraq twice.


    If Iraq runs out of suicide bombers before the US runs out of grunts...

    If Iraq runs out of suicide bombers before the US runs out of grunts...


    The Soviet Afghan war cost you Russians less, in lives and money, than Nam cost us. But the USSR collapsed for good right when the Afghan war was ending. That's kind of a bad sign -- it's like, when the patient dies on the table it's hard to say the operation was a success. The truth is that the USSR was dying anyway, and it probably wasn't the Afghan campaign that finished it off. But the timing was real bad luck, not just for Russia but for all of what they like to call "the West."


    I'm not blaming you Russians too much for losing in Afghanistan. That's a tough place. The British, the smartest and most careful Imperialists ever, lost a whole army there in January 1842. Out of 700 British troops, 4000 Indian auxiliaries and 12000 civilians who marched out of Kabul, only a few dozen made it back to India.


    These battles where East beats West make a big, big difference. Take the battle of Adowa (1896), when the Ethiopian Army slaughtered 11,000 Italian troops. Sure, it was only the Italians who can't fight anyway, but to the Africans it was a miracle: we beat the whites!


    And unfortunately, you Russians have a long history of losing to non-Western armies. When you go up against Europe you kick ass, but you don't seem to fight as well facing East. A hundred years ago the Japanese got the Orientals all excited by kicking the Tsar's ass in the Tsushima Straits and Port Arthur. The Japs didn't calm down until we administered the ultimate chill pill at Hiroshima.


    And when you lost in Afghanistan, you went and made the Muslims think they can fight. When you're fighting Muslims, Morale is probably the biggest factor of all, because they're so damn emotional. If you stomp on them instantly, they fold. But just let them get the upper hand once, and you're in trouble.


    And they have this weird Muslim unity deal too. Muslims don't give a damn about each other under normal conditions -- run over a fellow believer in the street without a second thought -- but once an infidel army invades one of Allah's countries, suddenly every mosque from Jakarta to Manchester is screaming about Islamic solidarity.


    A lot of rich, aimless Saudi and Egyptian boys heard the call and drifted up to Afghanistan, to do summer camp with the Mujahedeen. That's where bin Laden got his start, going from a beanpole with cash to Allah's hairy Joan of Arc.


    When the Russians were beaten, these Jihadis all dispersed to their home countries to tell war stories and get the kids excited. In their minds, they defeated one of the Infidel Superpowers and destroyed it. Now they think they can do it again, and again. Americans like to blame Clinton for giving Al Qaeda inspiration, but the fact is, nothing inspired the jihadists more than their victory over the Soviet Union -- a victory that we funded and orchestrated.


    The Chechens got the message and declared themselves independent after the USSR fell apart in 1991.


    They picked the right time. Yeltsin's Russia was so feeble it could barely field a military brass band, never mind an effective army. When the Russian Army got around to attacking Chechnya in 1994, most of the top brass refused to help plan the attack at all. The Russian armored columns stumbled into Grozny with as much enthusiasm as Robert Downey checking into rehab. It was a classic of how NOT to do urban combat.


    The air force wasn't speaking to the Army, the Army wouldn't share intelligence with the security agencies, and nobody bothered to check what the Chechen resistance had planned.


    What they'd planned was to let the armored columns into the city, then blast them in the narrow streets. It worked. Whole columns of tanks and APCs were turned into giant BBQs in the alleys of Grozny.


    But winning is dangerous, if you don't have discipline. The Russians pulled out -- and the Chechens turned into monsters. The biggest industry in the country was kidnapping. They kidnapped more than 3,000 Russians in cross-border raids between 1997-99. To convince the relatives to part with the ransom, they released videos of some hardworking loony sawing off the hostage's head with a sheepgutting knife. Another video I saw shows the Chechen kidnappers shooting off a Russian hostage's finger, then laughing as he cries in pain.


    All these gory hostage videos coming out of Iraq -- it was the Chechens who were the pioneering filmmakers. Not sure there's an Oscar for most innovative Terrorist Film, but if there is the Chechens deserve it.


    Meanwhile Shamil Basaev, sort of a Chechen version of Nathan Bedford Forrest, launched incredible raids deep into Russia, which ended with hundreds of Russian civilians dead. The Chechens were so confident of Russian weakness that they actually tried to invade the Russian republic of Daghestan, take it over, and create an oil-rich independent Muslim country on the Caspian Sea.


    The original quagmire: elephant shown here stuck in mud, awaiting hyenas.

    The original quagmire: elephant shown here stuck in mud, awaiting hyenas.


    All this gore was good for one guy -- a little colonel named Putin. He sent the Army back into Chechnya with better plans and supplies in 1999. They did much better this time around -- wiped out the big rebel units in a few months, and took Grozny the smart way -- by razing it to the ground from afar before sending in Russian soldiers. It made him so popular that Yeltsin stepped aside, and Putin is still just about the most popular leader since, well, Stalin.


    But that just meant that the Chechens switched to guerrilla warfare, where air power and artillery are useless.


    That's exactly what happened to us in Iraq War 2. In the first stage of the war, we wiped out the Iraqi Army, using armor and air power. That left it up to the urban guerrillas. They took over, and they've been kicking our asses ever since.


    So you Russians really are in a weirdly similar kind of mess as us. In some ways your situation looks better. For one thing, there aren't that many Chechens left. There were about 1.3 million people living in Chechnya in 1991, but the population has since shrunk faster than a penis in icewater. First, the Chechens ethnically cleansed the ethnic Russian population, about 200,000 of them. Then, in two Chechen wars, the Russians killed about 200,000 Chechens, while most of the rest have run off to refugee camps or Moscow (where I hear the cops spend most of their time harassing them).


    The UN's best guess is that there are only about 300,000 people left in Chechnya today. That's pretty damn close to a genocide, and yet it hasn't resulted in victory, because there are still 300,000 people, and hundreds of thousands more dispersed, alive to take revenge. The Chechen rebels are betting that by taking the war to Russian civilians and killing as many Russian troops as they can, they'll make the war unbearable for Russia over time.


    That whole strategy, which is basic to guerrilla warfare, is looking less and less effective. It turns out that Russian and US public opinion isn't nearly as sensitive to casualties as people thought.


    I remember a few years ago, snotty military historians from other countries talked about "the Mogadishu rule," which meant that us Americans were too fragile to stand any casualties, since we ran from Somalia after losing 18 men in a streetfight. Well, last time I checked we'd lost over 1200 men in Iraq, and I don't hear much grumbling. I remember columnists saying if US dead totaled more than 1000 by election day, Bush was finished. We had over 1100 KIA by Nov. 2, and he won easily.


    Us Westerners aren't the pussies the "experts" said we were. We can take it. Hell, if you ask me we kinda like it, having a war on TV when we get home from work. Some of that footage from Iraq is so cool to watch -- do we have to pretend we'd rather listen to stories about handicapped kids or new downtown parking?


    A quagmire -- I looked it up -- is just a swamp. And lots of animals love swamps, especially big ones. Elephants will walk miles to roll around in the mud. So maybe we're swamp critters, comfortable in the quagmires. But if you've ever watched those nature documentaries, you know elephants are always getting stuck in their mudholes, sinking deeper and deeper till they're hyena food.


    Of the two quagmires, Iraq's probably the nastier one. Size is part of it. Chechnya's a little chunk of worthless scrub and mountain cliffs with no friends except the Ingush, whereas Iraq is a big country full of oil, with close ties to 500 million Arabs, not to mention 1 billion Muslims.


    The scariest thing about Iraq is that we can't just leave, the way we did in Nam. Vietnam just doesn't matter that much -- it's off the trade routes, doesn't have any oil. Iraq matters. Always did -- the Assyrians and Babylonians and Hittites were fighting for it before Europe was even a rumor. Leaving Iraq now would be like trying to run from a nuclear explosion, the way Schwartzenegger does in that stupid ending to Predator.


    If we leave, the Iranians and Iraqi Shiites take over. We end up with a Greater Khomeini-land stretching from Pakistan to Syria. Nuclear-armed, battle-ready. And convinced that Allah's number one priority is punishing the Great Satan, us.


    There are so many little ironies here, it's not even funny. Like Israel. The Israelis were all for us invading Iraq; they thought they'd be more secure.


    I wonder if they still think so. If we can't handle Iraq -- and that's pretty clear by now -- how the Hell are we going to deal with Iran?


    We need to come up with some kind of counterweight that will keep the Shiites off balance. One simple way is creating an independent Kurdistan. That would keep the Iranians busy for the next hundred years or so, because Kurdistan would cover a lot of Western Iran as well as Northern Iraq. No way Iran would let the Kurds get away with taking that territory, and it would be our turn to sit back and enjoy the game while the Kurds and the Iranians bashed each other. The trouble is, Kurdistan also covers most of Eastern Turkey, and the Turks will go totally insane if we destabilize their borders. If there's anybody I really do feel sorry for in this mess, it's the Turks. They deserve better. They've been our only real ally, and we reward them by turning their neighborhood into Compton.


    The Brits would do it, and not think twice about betraying their allies. They always were smarter and colder than us. But Bush? No way he'll do something as smart and realistic as back the Kurds. The best bet is that it's going to be more of the same for the next four years, a weird soundtrack of car bombs and press conferences. "Kaboom!" "Democracy!" "WhooOOOOM!" "Freedom!" MTV-style videos of some poor sucker getting his throat sawn in half while that skinny PR general in Baghdad talks about elections.


    It's attrition that will decide it. We're betting they run out of suicide bombers before we run out of tame Iraqis. It's hard to say; with the way our Iraqi "allies" are getting slaughtered, the supply has to be running out, but then you have to wonder just how many willing suicide bombers they have left. I mean, I can see becoming a suicide bomber. Hell yes; if I'd grown up in Iraq I'd probably volunteer. There can't be a sweeter feeling than putting the pedal to the metal in a V8 stuffed with fertilizer bomb, heading downtown to blast your country's enemies.


    But I'd feel just a little doubt. Like, am I really going to get 64 virgins in Heaven, when I can't even get the fat girls with acne to look at me down here? What if the virgins up there hate me just as much as the girls in my class did? Maybe I better park this thing somewhere quiet, let somebody else deal with it...leave the motor running and go get a falafel.


    See though, the lesson of Chechnya and Iraq both is that people are a lot crazier and more comfortable with violence than we thought. So I'm betting that they'll never run out of bombers and Jihadis, and we'll never run out of GIs from rust-belt ghost towns. I think the party will just keep going, and going, and going -- killing and killing and killing, like the Energizer bunny on PCP.


    Maybe in four years America will get tired of Iraq, in time for a new president to pull out discreetly, like a date rapist saying goodbye. By that time, we'll be in some very deep shit with the whole Islamic world. You might want to cancel that cruise down the Nile you had planned. And Europe by now is so full of Hajjis that even Paris is going to be a dangerous place for Americans. They're getting uppity over there -- a bunch of Moroccans just killed this Dutch director for badmouthing Allah. They left a note pinned to his chest with a dagger. They're not shy these days. Baja is about as far as it'll be safe for us to go.


    When we do leave, get set for something big and nasty and religious, like your least-favorite relative. Right now we're being like assistant coach for the Jihad, killing off all the Islamic guerrillas who are too dumb or too brave (too brave is a very bad thing for a guerrilla). The guerrillas we killed in Falluja were too brave. The smart ones left. So we're weeding out the insurgents, making sure their best and brightest survive.


    Four years from now these super-Jihadis will have risen to the top, and when we leave they're going to grab power and start sliding toward the Mediterranean like a giant slug.


    By that time, this war will have cost us so many trillions, and I do mean trillions, that we're going to have trouble maintaining the infrastructure in Ohio, never mind Iraq. Whoever takes office in 2008 won't have the option of putting more money down the Iraq toilet. We'll be lucky to afford camera crews to video the Jihad, let alone stopping it. At least it'll make good TV.


    I'm not saying Iraq will bring America down. That's too dramatic. Like I said, countries and tribes just don't disappear any more. We'll be in a big, long lull, a coma. Whether we come out of it or not will be luck. If things heat up somewhere else -- and I'm still praying to Shiva and Allah for a big Indo-Pak nuke war -- then maybe the US can float through and come out fine. If somebody jumps us quick, like you Russians should've done in 1975 if you wanted to take Western Europe ever, then we're in big trouble.


    Meanwhile, back in Chechnya, you Russians are in for the same weather prediction: partly bloody, with no change. You're going to be fighting the Chechens forever. You know that. Even if you leave. You've driven them so crazy by now they'll never let up, even if you get out. They already proved that after Yeltsin pulled out; they just followed you back into Russia, hacking and burning and kidnapping.


    You're in luck, though, because it's not going to be as big or as expensive as our little Iraq adventure. With less than a half million people to draw from, they've got a limited supply of martyrs. And even though Russia has this birthrate lower than the Salton Sea, you're big enough to absorb all the apartment-building and subway bombs they can throw at you. You soaked up the Wehrmacht, after all; you can soak up a little terrorism. There'll be a good living for the mercenaries you send to Chechnya, and a promising career in martydom for young Chechens -- and for the rest of you it won't matter, unless your particular apartment building or subway car gets gexogon-bombed.


    And at least you're not trying to pretend you like the Chechens, or you're only doing it for their own good. That means you'll only be spending money on killing them, not killing them and then trying to turn them into Americans, dumping hundreds of billions on them to buy them off, like we are in Iraq. You won't go bankrupt from Chechnya as soon as we will from Iraq.


    So ha ha, you poor Russians, we win the Quagmire Bowl. Our Iraqi quag turns out to be bigger and suckier than your pitiful little Chechen mudhole.


    But like I said, winning's a tricky thing. This is one competition you're better off losing.


     


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  • California wage gap an issue of gender


    Professionals say increase in equality is still not good enough


    By DAVID ASEN / Aggie News Writer


    Posted 12/08/2004



     



       Working in a public defense law office during the early years of her career, Bette Racki observed the unfair treatment of women in the workplace through male superiors' frequent discriminatory questioning of why a female should receive equal pay since she "[has] a husband."


       Now, as city clerk for Davis, she said such bias would not be tolerated.


       "I'm seeing a change," Racki said. "Companies are looking [more so] for the best qualified person."


       According to national polls, women today who work full-time and full-year earn roughly 77 percent of their male counterparts' wages.


       Although this statistic seems overwhelmingly progressive when compared to the 59 percent wage gap of 1965, it is, in this way, misleading. When compared with men, women are more likely to work part-time in more genderized roles that prohibit skill-oriented upward mobility, while perpetuating the pervasive gender inequality that plagues the American workplace, according to the Institute for Women's Policy Research.


       "There is still a lot of segregation in labor markets," said Matt Huffman, UC Irvine associate professor of sociology. "And jobs that are typically done by women just pay less."


       The Institute further argued that gender segregation of this kind derives from a social phenomenon wherein the "tiered schema" of jobs in America is divided into elite, good and less-skilled jobs. Each of these tiers is then subdivided into specific roles tacitly deemed appropriate for women and men, respectively.


       Sexism is discovered in each of these tiers as "women's jobs" pay significantly less though require an equal, and sometimes higher, degree of education. Simultaneously, throughout all of these tiers the patriarchal nature of the "good ol' boys club" ideology impedes women's efforts to simply make ends meet.


       Public Relations Director Rachel Allen for the California branch of the National Organization for Women cautioned that in the workplace "many elements still make it difficult for women to navigate."


       Navigation refers to encouraging women to realize their full potential in the workplace through NOW's analogy of "on and off ramps" such as flexible work hours, available childcare, stricter sexual harassment policy and mentorship.


       "Having a good mentor is the best way to advance women and minorities," Allen said.


       Still, many believe that equality is just within reach for women in the workplace. Local professionals like Racki and Davis Downtown Business Association Executive Director Laura Cole-Rowe confirm that today's women are more of a protected class, and thus face far less discrimination than ever before.


       However, California is unlike many other states, according to Huffman. Here in the Golden State, women earn 81 percent of what men earn, and 36 percent of employed women are in managerial positions.


       "In my industry…things have gotten a lot better," Cole-Rowe said. "Pay is better now, [but discrimination] has not completely gone away."


       Efforts by California NOW's Women in the Workplace Taskforce to provide public education on these issues of inequality and discrimination also help to quicken the pace at which the wage gap narrows.


       With a projected 50 years before the gender wage gap is conceivably eliminated, these efforts have focused substantially on reforming state and national law.


       As for how these 50 years should be spent, Allen is hopeful "to see federal legislation that requires equal pay for equal work."


     


    DAVID ASEN can be reached at city@californiaaggie.com.


     


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  • December 8, 2004

    OP-ED CONTRIBUTOR


    Can You Hear Us Now?


    By GARY LOCKE





    Olympia, Wash.


    THERE has been a lot of talk lately about "starting over" with the Democratic National Committee. As a Democratic governor, co-chairman of the committee's Asian Pacific Islander Leadership Council, and former chairman of the Democratic Governors' Association, I believe it's about starting with a unified vision.


    The next generation of leaders at the committee must take the initiative to begin a dialogue with, and perhaps more important, listen to what governors and state and local elected officials have to say. We know our states and the concerns and hopes of the people who elected us. We can provide the fundamental ingredients for moving forward with a collective agenda and cohesive messages that reflect voters' priorities from state to state .


    The Democratic Party has long been the champion of working people everywhere. We are the party that fights for economic, educational and social opportunities and fairness for everyone, whether farmers, blue-collar workers, the elderly, women or minorities. We have always embraced rural values - family, community, hard work, love of country, respect and trust.


    Our next committee chairman must reach out and reconnect on those core values. The Democratic Party must continue to invest resources in rural communities and talk with, and listen to, the people who live there. We must involve them in discussions about the policy decisions that affect their lives - families, jobs, environment, health care and the economy.


    The next leaders of the Democratic Party must be stewards of the values and principles that made our nation strong and prosperous. We need to articulate this message, state to state, city to city, so that it has real meaning for the people of this country.



    Gary Locke is the governor ofWashington.




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  • December 7, 2004

    OP-ED COLUMNIST


    Inventing a Crisis


    By PAUL KRUGMAN





    Privatizing Social Security - replacing the current system, in whole or in part, with personal investment accounts - won't do anything to strengthen the system's finances. If anything, it will make things worse. Nonetheless, the politics of privatization depend crucially on convincing the public that the system is in imminent danger of collapse, that we must destroy Social Security in order to save it.


    I'll have a lot to say about all this when I return to my regular schedule in January. But right now it seems important to take a break from my break, and debunk the hype about a Social Security crisis.


    There's nothing strange or mysterious about how Social Security works: it's just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline.


    Right now the revenues from the payroll tax exceed the amount paid out in benefits. This is deliberate, the result of a payroll tax increase - recommended by none other than Alan Greenspan - two decades ago. His justification at the time for raising a tax that falls mainly on lower- and middle-income families, even though Ronald Reagan had just cut the taxes that fall mainly on the very well-off, was that the extra revenue was needed to build up a trust fund. This could be drawn on to pay benefits once the baby boomers began to retire.


    The grain of truth in claims of a Social Security crisis is that this tax increase wasn't quite big enough. Projections in a recent report by the Congressional Budget Office (which are probably more realistic than the very cautious projections of the Social Security Administration) say that the trust fund will run out in 2052. The system won't become "bankrupt" at that point; even after the trust fund is gone, Social Security revenues will cover 81 percent of the promised benefits. Still, there is a long-run financing problem.


    But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year.


    Given these numbers, it's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come.


    It's true that the federal government as a whole faces a very large financial shortfall. That shortfall, however, has much more to do with tax cuts - cuts that Mr. Bush nonetheless insists on making permanent - than it does with Social Security.


    But since the politics of privatization depend on convincing the public that there is a Social Security crisis, the privatizers have done their best to invent one.


    My favorite example of their three-card-monte logic goes like this: first, they insist that the Social Security system's current surplus and the trust fund it has been accumulating with that surplus are meaningless. Social Security, they say, isn't really an independent entity - it's just part of the federal government.


    If the trust fund is meaningless, by the way, that Greenspan-sponsored tax increase in the 1980's was nothing but an exercise in class warfare: taxes on working-class Americans went up, taxes on the affluent went down, and the workers have nothing to show for their sacrifice.


    But never mind: the same people who claim that Social Security isn't an independent entity when it runs surpluses also insist that late next decade, when the benefit payments start to exceed the payroll tax receipts, this will represent a crisis - you see, Social Security has its own dedicated financing, and therefore must stand on its own.


    There's no honest way anyone can hold both these positions, but very little about the privatizers' position is honest. They come to bury Social Security, not to save it. They aren't sincerely concerned about the possibility that the system will someday fail; they're disturbed by the system's historic success.


    For Social Security is a government program that works, a demonstration that a modest amount of taxing and spending can make people's lives better and more secure. And that's why the right wants to destroy it.


     


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    December 7, 2004

    OP-ED CONTRIBUTOR


    Don't Let the Dollar Take the Fall


    By JEFFREY E. GARTEN





    New Haven — AS the dollar continues to sink against the euro, the yen and other currencies, the conventional wisdom is that there is little choice but to allow it to continue to fall.


    America's trade imbalance can be corrected, the current reasoning goes, with a much cheaper dollar - perhaps 30 percent cheaper than it is today. The idea - supported by Treasury Secretary John Snow and Alan Greenspan, the Federal Reserve chairman - is that this would raise the price of imports for Americans, who would thus buy less from abroad. A cheaper dollar would also supposedly allow us to sell more to the world by making our exports less expensive.


    Here is what's wrong with this analysis.


    A falling dollar is unlikely to curtail imports as much as hoped. It is more likely instead to act as a consumption tax. About one-quarter of the United States import bill arises from oil purchases, which are priced in dollars. A rapidly depreciating dollar thus means lower earnings for OPEC producers. In response, the cartel might well raise prices. Goods from Asia, especially China, account for at least another 25 percent of our import bill. Because these computers, machine tools, TV's and toys are essential to our work and lifestyle, chances are that we will still buy them, even at higher prices.


    Nor will a cheaper dollar encourage domestic production that can replace imports, as some argue. Auto parts, for instance, are increasingly produced in Mexico and other developing nations. These plants, part of a highly specialized global supply line, are not likely to be replaced by suppliers in the United States just because of temporary currency movements.


    American exports, meanwhile, will not be spurred as much as most forecasters hope. Because currencies' values are relative to one another, the lower the dollar gets, the higher the euro and yen rise. As the currencies of Europe and Japan strengthen, the exports of these nations will become more expensive. That could easily translate into slower growth in those already slow-growing regions - and less money to buy our exports.


    What's more, with the exception of agriculture, fewer American products are sold from our shores. Increasingly, they are sold by American subsidiaries overseas. While big American companies still export billions of dollars' worth of goods across the Atlantic, they sell three to five times as much from their European-based operations - to countries in Europe. A lower dollar won't have much effect on those sales.


    The problem with the administration's devaluation policy is that it doesn't treat the root causes of America's economic imbalances. Our need to borrow so much from abroad is caused by our enormous consumption and our anemic savings. Today, Americans save just 0.2 percent of their disposable income, practically the lowest level in 45 years. Since we have so little savings to finance capital investment, we borrow from savings pools abroad. Our government, too, needs foreign creditors to invest in Treasury securities, to finance its escalating budget deficits.


    Another trade issue not addressed by dollar devaluation: the need to sharpen our global competitiveness. In an advanced economy like ours, price should be less of a selling point than the quality and sophistication of a product. This isn't going to happen unless we improve the fundamentals underlying competitiveness - our education system and labor-force skills. A devalued dollar also does not lower health-care costs - costs so high that they encourage American employers to move operations to countries where governments often pick up the insurance tab.


    Traders churning $2 trillion daily in currency markets know that if the United States relies on a cheap dollar alone to correct its trade imbalance it will push the currency down fast and for a long time - because the benefits will never quite match the predicted expectations.


    This is a one-way bet for speculators. Already, rumors are rampant that several central banks with significant dollar holdings may diversify into other currencies. Hedge funds and other speculators may be moving in. If momentum to sell dollars gathers steam, it could lead to a dollar plunge, a global financial crisis and deep worldwide recession.


    The dollar may well be overvalued now. But rather than just talking the currency down, Washington should try to pursue a formal agreement with Europe, Japan and China that addresses not only currency realignments but also the domestic policy changes needed to back them up.


    A model for this is the so-called Plaza Accord negotiated by the Reagan administration with Germany and Japan in 1985. Then, as now, the United States was running large trade deficits and wanted to devalue the dollar. But rather than talking down the currency or letting it fall on its own, President Reagan's team got key trading partners to share the burden of adjusting policies to correct the imbalance. It worked. America's trade gap slowly narrowed, and foreign lenders did not demand significantly higher interest rates on Treasuries. If Washington negotiated a similar accord today, countries like China and Japan could slow the dollar's slide by revaluing their currencies. The pact could also involve policy commitments to support the currency realignments.


    For example, rather than just assert that economic growth will reduce our budget deficits, the Bush administration might postpone or trim permanent tax cuts. It could also agree to partly privatize Social Security only after creating a plan to finance the $1 trillion to $2 trillion in transition costs without deepening the deficit. It could announce measures to improve our export performance - starting, perhaps, with more support for certain research and development programs and a plan to lower health-care premiums for employers by offering reinsurance for catastrophic-illness costs.


    For their part, European nations could pledge to accelerate deregulation to further open their economies and become bigger importers. And key countries could agree to intervene in currency markets to keep the dollar's decline gradual and orderly.


    A great power does not debase its currency - a currency around which most global commerce revolves. It does not take its hand off the tiller, as if the market bears all responsibility for global financial stability. To fix the problems that underlie huge trade imbalances, it uses statesmanship - at home and abroad.



    Jeffrey E. Garten, dean of the Yale School of Management, held economic and foreign policy posts in the Nixon, Ford, Carter and Clinton administrations.


     


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December 7, 2004









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    Editor's Note: To read more articles on the Environment, please visit the t r u t h o u t environment page.

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    Editor's Note | This week the Center for Health and the Global Environment at Harvard Medical School presented its fourth annual Global Environment Citizen Award to Bill Moyers. In presenting the award, Meryl Streep, a member of the Center board, said, "Through resourceful, intrepid reportage and perceptive voices from the forward edge of the debate, Moyers has examined an environment under siege with the aim of engaging citizens." Here is the text of his response to Ms. Streep's presentation of the award.

        On Receiving Harvard Med's Global Environment Citizen Award
        By Bill Moyers
        t r u t h o u t | Perspective

        Wednesday 01 December 2004

        I accept this award on behalf of all the people behind the camera whom you never see. And for all those scientists, advocates, activists, and just plain citizens whose stories we have covered in reporting on how environmental change affects our daily lives. We journalists are simply beachcombers on the shores of other people's knowledge, other people's experience, and other people's wisdom. We tell their stories.

        The journalist who truly deserves this award is my friend, Bill McKibben. He enjoys the most conspicuous place in my own pantheon of journalistic heroes for his pioneer work in writing about the environment. His bestseller "The End of Nature" carried on where Rachel Carson's "Silent Spring" left off.

        Writing in Mother Jones recently, Bill described how the problems we journalists routinely cover - conventional, manageable programs like budget shortfalls and pollution - may be about to convert to chaotic, unpredictable, unmanageable situations. The most unmanageable of all, he writes, could be the accelerating deterioration of the environment, creating perils with huge momentum like the greenhouse effect that is causing the melt of the artic to release so much freshwater into the North Atlantic that even the Pentagon is growing alarmed that a weakening gulf stream could yield abrupt and overwhelming changes, the kind of changes that could radically alter civilizations.

        That's one challenge we journalists face - how to tell such a story without coming across as Cassandras, without turning off the people we most want to understand what's happening, who must act on what they read and hear.

        As difficult as it is, however, for journalists to fashion a readable narrative for complex issues without depressing our readers and viewers, there is an even harder challenge - to pierce the ideology that governs official policy today. One of the biggest changes in politics in my lifetime is that the delusional is no longer marginal. It has come in from the fringe, to sit in the seat of power in the oval office and in Congress. For the first time in our history, ideology and theology hold a monopoly of power in Washington. Theology asserts propositions that cannot be proven true; ideologues hold stoutly to a world view despite being contradicted by what is generally accepted as reality. When ideology and theology couple, their offspring are not always bad but they are always blind. And there is the danger: voters and politicians alike, oblivious to the facts.

        Remember James Watt, President Reagan's first Secretary of the Interior? My favorite online environmental journal, the ever engaging Grist, reminded us recently of how James Watt told the U.S. Congress that protecting natural resources was unimportant in light of the imminent return of Jesus Christ. In public testimony he said, "after the last tree is felled, Christ will come back."

        Beltway elites snickered. The press corps didn't know what he was talking about. But James Watt was serious. So were his compatriots out across the country. They are the people who believe the bible is literally true - one-third of the American electorate, if a recent Gallup poll is accurate. In this past election several million good and decent citizens went to the polls believing in the rapture index. That's right - the rapture index. Google it and you will find that the best-selling books in America today are the twelve volumes of the left-behind series written by the Christian fundamentalist and religious right warrior, Timothy LaHaye. These true believers subscribe to a fantastical theology concocted in the 19th century by a couple of immigrant preachers who took disparate passages from the Bible and wove them into a narrative that has captivated the imagination of millions of Americans.

        Its outline is rather simple, if bizarre (the British writer George Monbiot recently did a brilliant dissection of it and I am indebted to him for adding to my own understanding): once Israel has occupied the rest of its 'biblical lands,' legions of the anti-Christ will attack it, triggering a final showdown in the valley of Armageddon. As the Jews who have not been converted are burned, the messiah will return for the rapture. True believers will be lifted out of their clothes and transported to heaven, where, seated next to the right hand of God, they will watch their political and religious opponents suffer plagues of boils, sores, locusts, and frogs during the several years of tribulation that follow.

        I'm not making this up. Like Monbiot, I've read the literature. I've reported on these people, following some of them from Texas to the West Bank. They are sincere, serious, and polite as they tell you they feel called to help bring the rapture on as fulfillment of biblical prophecy. That's why they have declared solidarity with Israel and the Jewish settlements and backed up their support with money and volunteers. It's why the invasion of Iraq for them was a warm-up act, predicted in the Book of Revelations where four angels 'which are bound in the great river Euphrates will be released to slay the third part of man.' A war with Islam in the Middle East is not something to be feared but welcomed - an essential conflagration on the road to redemption. The last time I Googled it, the rapture index stood at 144-just one point below the critical threshold when the whole thing will blow, the son of god will return, the righteous will enter heaven, and sinners will be condemned to eternal hellfire.

        So what does this mean for public policy and the environment? Go to Grist to read a remarkable work of reporting by the journalist, Glenn Scherer - "The Road to Environmental Apocalypse." Read it and you will see how millions of Christian fundamentalists may believe that environmental destruction is not only to be disregarded but actually welcomed - even hastened - as a sign of the coming apocalypse.

        As Grist makes clear, we're not talking about a handful of fringe lawmakers who hold or are beholden to these beliefs. Nearly half the U.S. Congress before the recent election - 231 legislators in total - more since the election - are backed by the religious right. Forty-five senators and 186 members of the 108th congress earned 80 to 100 percent approval ratings from the three most influential Christian right advocacy groups. They include Senate Majority Leader Bill Frist, Assistant Majority Leader Mitch McConnell, Conference Chair Rick Santorum of Pennsylvania, Policy Chair Jon Kyl of Arizona, House Speaker Dennis Hastert, and Majority Whip Roy Blunt. The only Democrat to score 100 percent with the Christian coalition was Senator Zell Miller of Georgia, who recently quoted from the biblical book of Amos on the senate floor: "the days will come, sayeth the Lord God, that i will send a famine in the land." he seemed to be relishing the thought.

        And why not? There's a constituency for it. A 2002 TIME/CNN poll found that 59 percent of Americans believe that the prophecies found in the book of Revelations are going to come true. Nearly one-quarter think the Bible predicted the 9/11 attacks. Drive across the country with your radio tuned to the more than 1,600 Christian radio stations or in the motel turn some of the 250 Christian TV stations and you can hear some of this end-time gospel. And you will come to understand why people under the spell of such potent prophecies cannot be expected, as Grist puts it, "to worry about the environment. Why care about the earth when the droughts, floods, famine and pestilence brought by ecological collapse are signs of the apocalypse foretold in the bible? Why care about global climate change when you and yours will be rescued in the rapture? And why care about converting from oil to solar when the same god who performed the miracle of the loaves and fishes can whip up a few billion barrels of light crude with a word?"

        Because these people believe that until Christ does return, the lord will provide. One of their texts is a high school history book, America's providential history. You'll find there these words: "the secular or socialist has a limited resource mentality and views the world as a pie...that needs to be cut up so everyone can get a piece.' however, "[t]he Christian knows that the potential in god is unlimited and that there is no shortage of resources in god's earth......while many secularists view the world as overpopulated, Christians know that god has made the earth sufficiently large with plenty of resources to accommodate all of the people." No wonder Karl Rove goes around the White House whistling that militant hymn, "Onward Christian Soldiers." He turned out millions of the foot soldiers on November 2, including many who have made the apocalypse a powerful driving force in modern American politics.

        I can see in the look on your faces just how had it is for the journalist to report a story like this with any credibility. So let me put it on a personal level. I myself don't know how to be in this world without expecting a confident future and getting up every morning to do what I can to bring it about. So I have always been an optimist. Now, however, I think of my friend on Wall Street whom I once asked: "What do you think of the market?" "I'm optimistic," he answered. "Then why do you look so worried?" And he answered: "Because I am not sure my optimism is justified."

        I'm not, either. Once upon a time I agreed with the Eric Chivian and the Center for Health and the Global Environment that people will protect the natural environment when they realize its importance to their health and to the health and lives of their children. Now I am not so sure. It's not that I don't want to believe that - it's just that I read the news and connect the dots:

        I read that the administrator of the U.S. Environmental Protection Agency has declared the election a mandate for President Bush on the environment. This for an administration that wants to rewrite the Clean Air Act, the Clean Water Act and the Endangered Species Act protecting rare plant and animal species and their habitats, as well as the National Environmental Policy Act that requires the government to judge beforehand if actions might damage natural resources.

        That wants to relax pollution limits for ozone; eliminate vehicle tailpipe inspections; and ease pollution standards for cars, sports utility vehicles and diesel-powered big trucks and heavy equipment.

        That wants a new international audit law to allow corporations to keep certain information about environmental problems secret from the public.

        That wants to drop all its new-source review suits against polluting coal-fired power plans and weaken consent decrees reached earlier with coal companies.

        That wants to open the artic wildlife refuge to drilling and increase drilling in Padre Island National Seashore, the longest stretch of undeveloped barrier island in the world and the last great coastal wild land in America.

        I read the news just this week and learned how the Environmental Protection Agency had planned to spend nine million dollars - $2 million of it from the administration's friends at the American Chemistry Council - to pay poor families to continue to use pesticides in their homes. These pesticides have been linked to neurological damage in children, but instead of ordering an end to their use, the government and the industry were going to offer the families $970 each, as well as a camcorder and children's clothing, to serve as guinea pigs for the study.

        I read all this in the news.

        I read the news just last night and learned that the administration's friends at the international policy network, which is supported by Exxon Mobile and others of like mind, have issued a new report that climate change is 'a myth,' sea levels are not rising, scientists who believe catastrophe is possible are 'an embarrassment.'

        I not only read the news but the fine print of the recent appropriations bill passed by Congress, with the obscure (and obscene) riders attached to it: a clause removing all endangered species protections from pesticides; language prohibiting judicial review for a forest in Oregon; a waiver of environmental review for grazing permits on public lands; a rider pressed by developers to weaken protection for crucial habitats in California.

        I read all this and look up at the pictures on my desk, next to the computer - pictures of my grandchildren: Henry, age 12; of Thomas, age 10; of Nancy, 7; Jassie, 3; Sara Jane, nine months. I see the future looking back at me from those photographs and I say, "Father, forgive us, for we know now what we do." And then I am stopped short by the thought: "That's not right. We do know what we are doing. We are stealing their future. Betraying their trust. Despoiling their world."

        And I ask myself: Why? Is it because we don't care? Because we are greedy? Because we have lost our capacity for outrage, our ability to sustain indignation at injustice?

        What has happened to out moral imagination?

        On the heath Lear asks Gloucester: "'How do you see the world?" And Gloucester, who is blind, answers: "I see it feelingly."

        I see it feelingly.

        The news is not good these days. I can tell you, though, that as a journalist I know the news is never the end of the story. The news can be the truth that sets us free - not only to feel but to fight for the future we want. And the will to fight is the antidote to despair, the cure for cynicism, and the answer to those faces looking back at me from those photographs on my desk. What we need to match the science of human health is what the ancient Israelites called 'hocma' - the science of the heart.....the capacity to see....to feel....and then to act...as if the future depended on you.

        Believe me, it does.


      -------

December 6, 2004


  • December 6, 2004

    The Two Faces of China


    By KEITH BRADSHER





    GUANGZHOU, China


    FEW business executives watch the growth of the Chinese economy as closely as Michael R. P. Smith, the chief executive of the Hongkong and Shanghai Banking Corporation.


    Yet even Mr. Smith was startled when his staff recently projected that in 2034, bank assets in China would surpass those in the United States.


    "When I saw that, I said, 'That can't be right,' and I went back to the economics guys," who confirmed the projection, Mr. Smith recalled.


    Much the same surprise is cropping up in industry after industry and in country after country. From steel to oil to cars to credit cards, China is poised to become the world's biggest producer and market for many goods and services.


    Along the way, China has come to terrify many foreign business executives and attract others - and sometimes both at the same time, depending on whether they see the country as a competitor, a cheap source of supply, a market, or all three.


    Companies across many industries are facing enormous pressure to match prices that are available in China or lose their customers. That can mean deep price cuts of 25 to 50 percent, leading in some cases to job losses, cutbacks and even closings. At the same time, American and European companies are taking advantage of China's vast and inexpensive labor force by moving some of their operations there - and by offering their products to a country whose role as a consumer continues to grow.


    China is already the largest user of steel and cement and is poised to overtake the United States in consumption of everything from copper to soybeans. These goods are needed in a fast-growing economy with many highways, factories and office towers to build - and with 1.3 billion mouths to feed.


    China has become the world's largest market for cellphones, and it is catching up with Germany and Japan as a market for cars, although it considerably trails the United States in its appetite for new vehicles.


    Businesses reaping the biggest rewards include companies that supply China's need for infrastructure, like the General Electric Company, which sells large turbines and aircraft engines. G.E. currently ships roughly $3.5 billion worth of goods each year to China from other countries, mainly the United States, while exporting $2 billion of merchandise from China, mainly to the United States.


    But companies like G.E. are the exception. American imports from China exceed exports by more than five to one, as retailers like Wal-Mart Stores buy immense and growing quantities of goods from China. With as many people as the entire industrialized world combined, China has tens of millions of unskilled workers willing to work for less than $100 a month.


    During the Democratic primaries this year, Senator John Kerry repeatedly denounced "Benedict Arnold C.E.O.'s" who moved jobs overseas. Those statements drew strong objections from the business community, including Democratic business leaders, and Mr. Kerry's comments about trade were relatively tame during the general election campaign.


    YET many corporate executives wonder how much longer a big American trade deficit and the moving of jobs overseas can persist without becoming the subject of strong protests by Americans who say that foreign workers are taking away their jobs


    "China kind of got a pass in this campaign; that may not always be the case," said Benjamin W. Heineman Jr., G.E.'s senior vice president for law and public affairs.


    Even trickier could be the Chinese relationship with the European Union, another big market for exports. Powerful European labor unions could force limits on Chinese exports, much as they forced tighter restrictions on Japanese automobile exports in the 1980's and 1990's.


    "I'm quite gloomy about Europe - the big industrial countries like Germany, Italy and France," said Frank-Jürgen Richter, the president of Horasis, a consulting company in Geneva. "How do you keep growth in these countries if everything is moving to China?"


    Like Japan from the 1950's through the 1980's, China has shown that a country can sustain high growth rates for many years by combining hard work with a closed financial system that channels very high household savings into countless industrial projects and other ventures selected partly by government bureaucrats.


    Japan's stagnation since the early 1990's suggests that such policies may have limitations. Predicting when China might hit such a wall has become something of a cottage industry. This has been particularly true in the last year, as Beijing has imposed fairly strict controls on bank lending. The government has raised bank reserve requirements three times and increased the benchmark interest rates for bank loans and deposits once, in response to evidence that the economy may be overheating.


    Climbing prices for industrial commodities like steel, bid up around the world mainly because of China's rapid growth, have alarmed manufacturers across China. Xin Yumei, an export manager at Yangquan Metals and Minerals in China's north central Shanxi Province, said the price of steel for the company's scissors and pocketknives had jumped close to 20 percent in the last year.


    "The price is going up, and I have to raise our prices soon," she said.


    Overhanging every assessment is the question of how much more competitive China can become globally if its domestic economy slows, freeing even more goods for export at ever cheaper prices while trimming China's demand for imports.


    Most executives say they see no sign of this yet, but they are still cautious. "We don't see the danger of a huge collapse that would cause them to export huge tonnage," said Nicholas Tolerico, the president of ThyssenKrupp Steel Services, the trading and distribution arm of the German giant. Still, he warned, "If there were even a slight downturn, probably the first thing that would be adjusted is the amount they import."


    Worries that the recent boom in the Chinese economy might be followed by a sharp bust have receded considerably since last spring, when ships were waiting up to a month to unload at clogged Chinese ports, and many Western economists were predicting that Beijing would have to impose draconian measures to prevent an inflationary spiral.


    But some experts point out that the biggest imbalance in China's economy - the fact that most of its growth depends on often-speculative construction spending - may not be sustainable. Morris Goldstein and Nicholas R. Lardy, two experts at the International Institute for International Economics, contend in a new paper that instead of a "hard landing" or a "soft landing," China may be due for a "long landing" of slower economic growth that could last for years, as few additional apartment buildings and office towers are built until recently erected ones are fully occupied.


    China experienced slower growth in the mid-1990's, as it struggled with the effects of a frenzy of construction that reached its peak in 1993. But China did fully recover from that episode. Optimists point to a flourishing of entrepreneurial energy that has long been part of the culture of overseas Chinese communities and has now emerged with full force in mainland China, with productivity improvements that are still being felt.


    One such entrepreneur is Chen Chenmei, who started making shoelaces in her home a decade ago in Wenzhou using a machine that cost $50, and delivered them on her bicycle to shoe factories. Now, she and her family own a small shoelace factory, rent a car and employ a driver to make deliveries to factories and have their own stall at a wholesale shoe market here.


    Laces in many hues and lengths, from brown bootlaces to pink laces for tennis shoes, filled the stall up to the rafters on a recent morning. Yet Ms. Chen was wearing cheap tennis shoes that had scruffy white laces with the tips broken off.


    Savings are important to keep the factory growing, and sometimes for loans to family members who want to start their own businesses, Ms. Chen said, adding that "money flows all around among relatives."


    The biggest question hanging over China is its political stability. Historians point out that the prosperity in China now has coincided with nearly three decades of the greatest social and political stability that China has seen in more than a century.


    How long that will endure is anyone's guess. A big problem for China is how to address the wide gap in incomes between urban and rural residents. In countries across Asia this year, voters have shown considerable concern not just over expanding economic output but over how the gains are distributed.


    "In all these countries, the verdict the electorates have given is: strengthen the inclusiveness of growth," said Ifzal Ali, the chief economist of the Asian Development Bank.


    While China, a one-party state, does not allow free elections, public opinion still counts for something. Hu Jintao, the leader of the Communist Party for the last two years and China's president since early last year, has taken some steps to improve the lives of China's poor.


    Letting food prices rise steeply has helped considerably, as farmers have taken in more money for their crops. The Chinese government has also tried to improve worker safety. Many small protests have bubbled up in numerous Chinese cities, often over unpaid wages, but there has been no sign of their spreading to become a national problem.


    Corporate executives, politicians and economists generally agree that if China does suffer a sharp economic reversal, the results will be severe - both within China and far beyond its borders. A downturn could lead to severe unemployment, social and political unrest and large-scale emigration. The effects could also include plunges in financial and commodity markets if China's demand for foreign goods dried up and it unloaded unneeded items on world markets.


    Western Europe helped maintain Russia's stability in the mid-1990's with big infusions of financial assistance, but China's larger economy and much greater population make it impossible for the outside world to offer nearly as much aid, said P. Christian Hauswedell, Germany's top diplomat for Asian and Pacific affairs.


    "The thought of a failure of this modernization just makes us all shiver," he said. "We would not be able to support China if it failed."


     


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    December 6, 2004

    The Successor to Greenspan Has a Very Tough Act to Follow


    By EDMUND L. ANDREWS





    WASHINGTON


    WHEN Alan Greenspan finally retires from the Federal Reserve, will he leave behind any of his DNA?


    Now in his 18th remarkable year as Fed chairman, the owlish and idiosyncratic Mr. Greenspan is required by law to step down in January 2006.


    Nominating a successor could be President Bush's biggest economic decision next year, given Mr. Greenspan's mythic reputation as the guardian of price stability and economic growth. A big uncertainty is how any successor will extend Mr. Greenspan's approach to monetary policy, which has been as much an art as a science.


    Though he is famous for poring over reams of often obscure data, Mr. Greenspan, 78, has been outspoken in his skepticism over econometric models. "Rules by their nature are simple," he said at a Fed symposium in August 2003. "Our problem is not the complexity of our models but the far greater complexity of a world economy whose underlying linkages appear to be in a continual state of flux."


    A devout believer in anomalies - trends that conflict with what standard models predict - he has defied conventional wisdom about the natural level of unemployment, the growth of productivity and the likelihood of inflation. And most of the time, he has been right.


    "He is very idiosyncratic," said Allen H. Meltzer, professor of economics at Carnegie Mellon University and longtime historian of the Federal Reserve. "His greatest weakness is at this point. He had a very successful way of running the Fed, but he doesn't leave a method that somebody else can pick up and carry on."


    Mr. Greenspan disagrees. Rather than rely on one economic model or another, he told a conference last January, his approach involves risk management - allowing for a range of economic developments and trying to assess their relative probabilities.


    His authority has become so outsized that any successor may well encounter more market turbulence and more dissent from other members of the policy-setting Federal Open Market Committee. "It's going to have to be less of a one-man show," said John H. Makin, a senior fellow at the American Enterprise Institute.


    Speculation on who will succeed Mr. Greenspan has focused on Martin S. Feldstein, a prolific author and former adviser to President Reagan who is now a professor at Harvard University and president of the National Bureau of Economic Research in Cambridge, Mass.


    But a growing number of Republicans say that the top candidate may be R. Glenn Hubbard, 46, who was a chief architect of President Bush's tax cutting packages of 2001 and 2003 and is the dean of Columbia University's School of Business.


    Mr. Feldstein, 65, has a formidable reputation as an economist. But he has also displayed a fierce streak of independence that may not sit well with Mr. Bush, who places top value on unflinching loyalty.


    As chairman of President Reagan's Council of Economic Advisers from 1982 to 1984, Mr. Feldstein angered many White House officials by criticizing the soaring budget deficits that followed the Reagan tax cuts. Mr. Feldstein has refrained from criticizing the deficits under President Bush, and has been an outspoken defender of his tax cuts.


    Mr. Hubbard was chairman of Mr. Bush's Council of Economic Advisers in 2001 and 2002. An advocate of bold tax cuts and a longtime student of tax overhauls, Mr. Hubbard's views mesh with those of Mr. Bush, and he was a relentless advocate for Mr. Bush's proposal in 2003 to eliminate taxes on stock dividends. Congress ultimately cut dividend taxes but did not end them. Mr. Bush is expected to seek their elimination next year.


    The Fed chairman plays a major role in the public debate on tax cuts and Social Security. Mr. Feldstein and Mr. Hubbard support the president's two big domestic priorities: to overhaul the tax code and to let people divert some Social Security payroll taxes to private accounts.


    But the next Fed chairman could easily clash with Mr. Bush, as Mr. Greenspan did with Mr. Bush's father. Fed officials are worried about the nation's huge foreign debt and soaring deficits, and a possible sharp drop in the dollar's value. The central bank might feel compelled to raise interest rates faster than expected to attract foreign capital and cool inflationary pressures.


    But because inflation expectations have declined to almost negligible levels under Mr. Greenspan, his successor will inherit the central bank's credibility, and hence its maneuvering room with investors.


    Mr. Greenspan's legacy will include some permanent changes in how the Fed operates. For one, he has made it far more open than it once was. Under Paul A. Volcker, Mr. Greenspan's predecessor, the Fed never told the public whether it had raised the overnight lending rate, leaving it for traders to figure out themselves.


    Today, officials not only announce their decisions on interest rates; they also hint strongly about their plans for the near future.


    "There has been a tremendous increase in transparency," said Laurence H. Meyer, a former Fed governor and author of "A Term at the Fed." "You can argue that that has contributed to good monetary policy."


    Edward M. Gramlich, a Fed governor since 1997, said: "Compared to what the situation was before Greenspan started here, there is much more of a structure today."


    Mr. Greenspan has also brought changes to the way the Fed crunches its numbers. He has introduced dozens of analytical techniques for teasing out ever more subtle insights from the mass of economic data available.


    The essence of Mr. Greenspan's approach has been to look for exceptions rather than rules. His intuition became the accepted wisdom, but there is no accepted wisdom on how to summon that intuition in the future.


     


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    December 6, 2004

    OP-ED COLUMNIST


    Putin's 'Chicken Kiev'


    By WILLIAM SAFIRE





    The elder President Bush's most memorable foreign-policy blunder took place in Kiev in 1991, then under Communist rule. With the Soviet Union coming apart, the U.S. president - badly advised by the stability-obsessed "realist" Brent Scowcroft - made a speech urging Ukrainians yearning for independence to beware of "suicidal nationalism." His speech, which he now insists meant only "not so fast," was widely taken as advice to remain loyal to Moscow's empire.


    I dubbed this the "Chicken Kiev" speech. That so infuriated Bush, who mistakenly saw the phrase as imputing cowardice rather than charging colossal misjudgment, that he has not spoken to me since.


    Contrariwise, the reaction of President Vladimir Putin of Russia to the latest manifestation of the desire of the majority of the Ukrainian people for independence from Moscow is that of a dictator gripped by fear.


    Putin's "Chicken Kiev" moment came when his plan to put in a Ukrainian puppet backfired. He put the Putin system of a phony election, so successful in Russia, in place: central control of major media, lavish government spending on its candidate, harassment of the opposition and, most of all, overt embrace by the powers that be in Moscow.


    But Putin's Ukrainian puppets were sucked into the undercurrent called "people power." This unexpected democratic force manifests itself when dissenters are willing to defy authority in the streets and on the Internet; when troops and police are unwilling to fire on demonstrating compatriots; and when worldwide disapproval makes the costs of a crackdown prohibitive.


    People power failed in Tiananmen Square because workers were not involved and China's rulers called in troops from outlying areas. But in this generation, peaceful uprisings have succeeded in Poland, Czechoslovakia, South Korea and Indonesia - and Russia.


    Putin remembers all too well how people power worked in Moscow for Boris Yeltsin, overturning 70-year Communist rule; that is why he panicked this month. The K.G.B. alumnus hailed the fraudulent victory of his puppet prematurely; as protests rose, he summoned to Moscow the Ukrainian president, ostentatiously to give him marching orders; and with all else failing, he stooped to standard anti-Americanism.


    The U.S. sought the "dictatorship of international affairs," Putin charged, deriding Bush's "beautiful pseudo-democratic phraseology." His spin-niks called attention to the opposition candidate's American wife, and hinted at danger ahead in case the stolen election did not stay stolen: Putin's fallback position is to encourage the division of Ukraine, absorbing the pro-Russian east and rejecting the pro-European west - a breakup plan he also has in mind for the "near abroad" people of independent Georgia.


    This is the reaction of a man who fears the contagion of people power. Up to now, conventional wisdom has been that - with some brave exceptions - most Russians long for an authority figure like Putin, embrace his takeover of parliament and provincial government, believe all they see and hear from obedient state-controlled media and befog Russia's declining population with vodka.


    It could be, however, that Putin sees in his Ukrainian setback the handwriting on the Berlin Wall. He knows how many Ukrainians welcomed Hitler's army as a lesser evil than Stalin. He senses the danger to his rule of a Ukraine that turns westward to join the European Union. He fears that the outbreak of people power in his huge neighbor could abort his plan to change the Russian constitution to make himself president for life.


    As an unreconstructed idealist (and, as the global mushrooming of democracy proves, idealists are the real realists), I believe people power will be unstoppable. But new democracies will not be our clones, and newly liberated peoples will irritate the superpower.


    The pockmarked fresh face in Ukraine has already promised to withdraw that nation's 1,600 troops from Iraq. The repressed youth of Iran, when they overthrow the repressive theocracy, will still press for a nuclear bomb. The free federalists of Iraq will cut shadowy deals with post-Chirac France and post-Putin Russia. The young lion of a democratic Palestine will lie down most grudgingly with the lamb of Israel.


    Thorns in tomorrow's rose garden? You bet. But it is America's calling, as well as in our self-interest, to foster the flowering of freedom.




     



    December 6, 2004

    EDITORIAL


    Talk About Scrooge







    In November, wages grew a whopping 1 cent an hour. But that was clawed back by a six-minute decline in the average workweek, producing a $1.25 drop in weekly earnings. Coming on the heels of a sluggish start to the holiday shopping season, the Labor Department's latest employment report, released Friday, doesn't presage a particularly merry Christmas or happy New Year for millions of working Americans.


    In what is becoming a dismally predictable occurrence, the economy produced far fewer jobs than expected last month - 112,000 new slots versus an expectation of 200,000 - for the worst new-job total since last July, which was widely characterized as an economic "soft patch." Moreover, job growth in October and September was not as good as once believed. Those monthly numbers, disappointing on their own, reinforce what is now an unmistakable pattern in which the economy grows at a decent pace and corporate profits surge, while wages lag inflation and job creation barely keeps pace with the growth in the labor market.


    We know how we got here. Tax cuts were misdirected at investment rather than consumption, resulting in an economic recovery weaker than it might have been. The budget deficit portends higher interest rates and a weaker dollar, both of which impair business confidence and, in turn, inhibit hiring. And then there's the lack of affirmative policy on jobs, such as a targeted credit that would make hiring more attractive or, at the least, an increase in the minimum wage to help the working poor and put money in the economy, fueling consumption that is critical for job growth.


    Persistent subpar job creation might cause some leaders to question their policies. Yet, more high-end tax cuts and higher deficits are the template for President Bush's second term. And flush with a victory, the president is unlikely to undertake any policy reversals. It will be up to Congress to break out of its lockstep with Mr. Bush and take steps to address the real problems of constituents, rather than the intransigent aspirations of the administration.